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Negotiation Blog - BATNA
Do you talk about your other negotiation options, or BATNAs?
By Thomas Wood
There is almost always a time and a place to talk about your other options if this agreement can’t be reached on mutually beneficial terms. Sometimes disclosure of your options pushes the parties to find agreement. But when and how to disclose your other options?
“It depends” is the most comprehensive response, but not a very helpful one. To make this posting easier to read, let’s refer to your Plan B, or other options, as BATNAs – best alternative to a negotiated agreement. Here are a few thoughts:
Never do this: Never reveal a weak BATNA
- Assess the relative strengths of each side’s BATNAs. Yours may be strong, but is theirs stronger?
- Weak BATNAs are not taken seriously, thus eroding your credibility.
- Revealing a weak BATNA gives the other side confidence to negotiate for even better terms.
Timing: Pick a good time; don’t worry about the best time.
- Regardless of the strength of your BATNA, it’s not usually wise to reveal it too early in negotiations. Why? It can be interpreted as a threat. This often brings out a more aggressive nature in your counter-part, and in a tense negotiation, can easily escalate conflict.
- Once a major or difficult issue has been resolved to the parties’ mutual satisfaction, it is usually safe to refer to your BATNA. Your counterpart already knows you are investing the same effort and time to reach agreement.
- When asked directly. But don’t feel that full disclosure is necessary to maintain trust. Acknowledging that you have other options (assuming you do) is appropriate, and noting a name, type, can leverage the power of your BATNA.
How to reveal a BATNA in Negotiations
- Referring or hinting at a BATNA is often appropriate and rarely harmful
- It’s ok to be vague. If pressed, it’s ok to say that you’re not here to talk about your other options, but to see if agreement can be reached.
- A conversational tone helps to ensure you don’t sound threatening. The idea is to demonstrate your power without damaging a good relationship.
- And it's almost never a good idea to reveal the details of your BATNA! If your counterpart knows those details, he/she is likely to offer you something just a bit better -- your Least Acceptable Agreement (LAA), and you are likely to take it.
- Your BATNA is only as good as your willingness and ability to execute!
- BATNA bluffing is very risky, lest the other side backs off entirely, or discovers your ploy and loses trust in you.
- And if you don’t have a BATNA, start building options for next time.
3 Common Mistakes in Negotiations with Neighbors
By Thomas Wood
Are you “on the fence” about your neighbors? I train seasoned business professionals to negotiate in a wide range of industries and professions, and it never fails that I get asked to help with someone’s latest negotiation problem -- not with a key customer or difficult supplier -- but with a neighbor. Everyone has a story to tell! Learn from the mistakes even I succumbed to in neighbor negotiations.
You don’t get to choose your neighbors, and you don’t have to like your neighbors. But unless you are a billionaire like Mark Zuckerberg and can purchase your neighbors' properties in order to protect your own privacy and view, you will have to deal with your neighbors. Here's my tale of hard lessons learned.
My wife and I bought a house next door to a sophisticated widow of considerable wealth - we called her "Lady H." Lady H had previously owned our adjoining lot, with her house being grand and ours being, well, quaint - a more modest guest-house. Lady H lived alone in her old age and wealth, and barely recognized the existence of my family despite our attempts to win her over with fresh picked blue berries and smiles across the lawn.
Years earlier when Lady H owned both parcels, she had a fence placed near our joint property lines but located squarely on my parcel – a chain link fence that was now in disrepair and unsightly. My wife and I were ready to upgrade our property, and assumed that Lady H would appreciate the investment, as it would add to the value of her property as well. We decided to tackle the thing most unbefitting to our properties – the rusted chain link fence on our parcel.
As an expert negotiator who coaches others, I knew exactly what to do – prepare my options and strategies before negotiating a deal with Lady H. We did our research and formed our strategy, and then dropped by to see Lady H. I told her we were taking the old chain link fence down, and handed her a brochure that showed fences with the same open air view as her chain link fence, but added sophistication befitting her estate. While my wife and I were ok with all the options, I didn’t share that with her, as I wanted to see what Lady H wanted first. I had planned to then reluctantly accept her fence preference in exchange for several other things we wanted, like for her to have a dead tree on her property taken down that posed a threat to our safety.
I was ready to discuss options and begin some give and take, but she cut the conversation short. Pointing to the most expensive option, a decorative iron fence, Lady H nicely said, “I like this one. Do what you need to do,” and thanked me for coming by. I was surprised, but pleased at least with the efficiency of our “negotiation."
When our new and very expensive iron fence was installed, I was thrilled. We could see each other’s lovely gardens but without having to look through the eye sore of that rusted chain link fence. My satisfaction was short lived.
A week later, Lady H installed a taller, builder-grade, wood privacy fence on her property, abutting and completely overshadowing the new iron fence. What had I done wrong? Everything, pretty much!
First, know your neighbor's true interests.
I didn't bother to learn Lady H's interests - why she wants what she wants. It turned out that Lady H regretted having sold the adjoining property because she now had a young noisy family that liked to spend time laughing and playing outside - ours. Lady H had grown older since the days when she had installed that chain link fence, and her interests had changed; she now wanted quiet and privacy.
Second, understand who you are dealing with.
Lady H could have simply proposed a privacy fence, and not had to spend her own money to get the privacy she wanted. Why didn’t she? Easy to see why in retrospect:
- Lady H didn’t share her interest with us because we had no relationship (see the 2nd article in this series coming soon), and I didn’t bother to ask her what mattered to her. My assumptions about what mattered to Lady H proved entirely wrong.
- I underestimated Lady H’s ego need to control her surroundings. I opened with our decision to take the chain link fence down, when I could have just as easily met her outside and, while not invading her side of the fence, showed her that time had taken its toll on that fence and simply asked if she'd like to see it in better shape again. I could have begun a conversation rather than take control. My ego bruising led Lady H to take revenge rather than discuss a solution.
- And last, Lady H’s plan B (BATNA) was very strong (and I didn't bother to think she had one since the fence was on our property); she had resources to out maneuver us. From her side Lady H would now see the nice side of her privacy fence. And she didn't really care that from our side we saw our investment erode, with the ugly side of her privacy fence pressed against our new iron fence.
Third, to negotiate a solution requires collaboration.
I did not trade value to reach a mutually beneficial solution, which is how you capture value in collaborative negotiations. When the other party says “Yes” right away, you can be sure that either you did a great job of convincing them, or like in my situation, you are being outmaneuvered. Maybe you unwittingly offered them more than they ever thought they could get, so they jump at your offer, or maybe like Lady H, they have a strong plan B that they are ready and willing to implement. A quick and easy win in negotiations usually turns out not to be a win at all.
With neighbors and in business, knowing the other party's ego needs, interests and BATNAs, engaging in a collaborative conversation to solve your interests and theirs by trading for value – determines whether you actually get what you want. Robert Frost's famous line - Good Fences Make Good Neighbors -- perhaps should have been Good Negotiators Make Good Neighbors.
4 Ways to Use Negotiating Power Wisely
By Thomas Wood
Fortune 500 companies exert power in the marketplace, and by extension in negotiations. It's easy to exert power in negotiations, but not as easy to use it wisely. Seeing the new Fortune 500 list just released, and how many of our clients are in it, made me think of the many discussions with those clients, and their customers and suppliers, about the perils of being powerful.
This week Fortune released it's 61st Fortune 500 list. Fortune 500 companies are ranked for FY revenue reported, together totaling $12.5 trillion. They reported a combined profit of $945 billion, and employ almost 27 million people around the world. To say they have power at the negotiating table is an understatement.
Watershed Associates has served many of the Fortune 500 with negotiation training, including three of the top 5. We advise many negotiators in these Fortune 500 companies about their real world challenges. The negotiators on the front lines know that power from size can be real or perceived, but it can also shift easily. Revenue and profitability giants don't always hold all the power; many factors influence who holds the power in a negotiation:
- Which of you is a customer or supplier the other can't afford to lose.
- Which company has the available cash flow to weather a downturn.
- Your position in the industry matters - You can be a Fortune 500 company, but if your market position is lowest among your industry competitors, you might not have power in your negotiations.
- Your company’s agility – how fast can it change direction to adapt or respond to external market forces?
- Expertise – which company forecasts weather, economics, access to natural resources, or consumer mood better?
- How quickly you need a deal in relation to how quickly (or not) your counterpart needs a deal.
- And of course, the relative strength of your Best Alternative to a Negotiating Agreement (BATNA), or plan B, as compared to your counterpart's BATNA. BATNA is all about Who stands to lose the most if there is no deal. Sometimes, it's the party with perceived power.
But when you do have the power in a negotiations, you still have challenges:
Others are trying to shift the power balance; bet on it!
Power holders are often less diligent and thus more oblivious to the growing power of the powerless; they don’t assess the situation accurately and don’t change to suit it. This arrogance can leave you oblivious to a growing source of power.
Your behavior reveals much to the other side and can drive defensive behavior.
For example, when a customer or supplier feels they get unfair deals from a powerful company, they might shift power by building coalitions, give better deals to the competitors at your back door, and strengthen relationships with your next generation decision makers. Or if they feel the deal struck was one-sided, there is always potential for you to be blindsided or receive less during execution of the contract, and the party who feels they got less at the bargaining table will be the one looking for ways to recapture that value during the contract period. Remember, the powerless go on the offensive if they perceive unfairness.
The powerful are not always liked.
Let's face it, we can love a company on its way up -- think Amazon or Google or Microsoft -- but once those companies became giants, we started rooting for the new players. There is greater focus on showcasing failings of the powerful, so they are actually more vulnerable to downfall than the smaller companies.
With power in hand, what can you do to keep that power from working against you? Try these 4 strategies to use your inherent negotiating power wisely:
1. Be Likeable.
Being likeable is highly underrated in life and in negotiations. There is lots of advice on how to be likeable. And being likeable doesn't mean you give away value at the negotiating table. It does mean that you:
- Invest time into building relationships; Get to know your counterpart's company and the individual negotiator(s). Use rapport, find affiliations (common interests), and keep committments.
- Demonstrate that you are working as much on this deal as your less powerful counterpart.
- Reveal your humanity; Share stories about volunteer work, injuries, mistakes you learned from, etc. Smile and laugh when appropriate as they share their stories. Enjoy them!
- Like them! Even if they aren't very likeable, think about what you do like or admire -- their sense of humor, their recall of detail, their interesting analogies, etc. But be sincere and don't overdo it. Let the other side earn your respect and professional friendship over time.
Remember, companies don't negotiate. People negotiate. And people extend the most consideration to people they respect and trust.
2. Ask for Collaboration
Articulate your company’s interest in mutually beneficial negotiations with smaller players. Literally, ASK them to engage in a collaborative discussion with you. Persuade your less powerful counterpart why you want this deal (because they may be assuming you don't really care, and thus they have nothing to lose by playing hardball). They will be surprised to hear you ask them to be collaborative, when that is exactly what they thought was not attainable.
3. Demonstrate You Are a Collaborator
The less powerful counterpart comes to the table expecting to have to grab whatever value they can and hide any weaknesses. If they find you are collaborative from the start, they become less guarded. When they are less guarded, you will be able to identify their interests and find alignment with yours in a way that builds value rather than simply dividing it.
To show you are collaborative:
- Show empathy -- care about what matters to your counterpart.
- Use objective criteria and standards of fairness to explain offers -- don't just assert positions. Explain your position with data, industry standards, expert analysis, etc.
- Early on, the offer of a small "free gift" may be in order.
- Plan at least one concession they need or want and let them earn it along the way.
- Allow yourself to be nibbled (gently), giving a little more at the close of negotiations.
4. Never Threaten Your BATNA.
If you have the power, your less powerful counterpart knows you have BATNAs, or alternatives to this deal. No need to talk about your BATNAs. When the powerful talk about their leverage and alternatives, it is perceived as a threat. People react to threats with every possible counter offense.
Being a collaborative power holder pays dividends now and later.
You want the other side to expose their true interests, propose ideas and creative solutions, so that more value can be created and a sustainable agreement results. You want to be known as a fair negotiator who creates value at the bargaining table. Flaunt your power, and you will not achieve this. And one day, the power will shift!
Shifting Power in Negotiations: Taylor Swift vs. Spotify
By Leslie Mulligan
Taylor Swift made a big splash this week when she removed her album, 1989, from Spotify, one of the world’s largest digital music companies – calling Spotify a “grand experiment” that was under-valuing the beloved music created by her and many other artists. Her attempt to gain leverage in negotiations is a strategic move, but will it work?
Taylor Swift took a stand by pulling her music catalogue away from Spotify, a growing digital music service that provides a two-tiered model to “lure listeners away from piracy.” Her stand calls attention to a growing power imbalance: amazingly, Spotify only launched in 2008, but now has over 50M users worldwide. Spotify’s growth, mirroring the rest of the digital music industry, has been astronomical, but many musicians feel they are now being unfairly compensated in the new “streaming” era.
So far, Swift’s “negotiation” with Spotify has played out more in the public domain than in the well-heeled hallways of NYC, Spotify’s US HQ. Swift is adeptly following many of the principles that expert negotiators advocate when confronted with an imbalance of power – what to do when power has shifted out of your favor:
Have a strong BATNA and be ready to execute it –Taylor Swift is in the enviable position of having pretty deep pockets herself, and she will still make serious money on 1989 and the rest of her music as she has myriad other outlets for the sale of her music, but firing the first salvo like this certainly got the attention of the digital streaming music industry. Rolling Stone magazine quotes Swift’s record label President, Scott Borchetta, as describing this move as a “big fist in the air”.
Paint a picture of what will happen if a “deal” falls through – When Swift followed her first move by then yanking her entire musical catalogue, the vision of the future without Taylor Swift was crystal clear, and not a pretty picture for Spotify. Can Spotify hold off other artists who may feel the same way?
Create coalitions: Taylor Swift is the darling of Pop music, and the biggest name to call out Spotify, but she is only one in a growing group of well-known but disgruntled artists: Jason Aldean of the Country music fame has also pulled his most recent album, Old Boots, New Dirt. But it is not just the Pop/Country worlds that are vocal: the Black Keys and Radiohead of the Rock world have also expressed concern, if not fear, of the changing landscape. David Byrne, lead singer of the Talking Heads of rock infamy, criticized streaming services just last year. Even informal alliances, if not formal coalitions, can impact the balance of power in your favor.
Attack the source of their power – Spotify’s success has come from the rapid growth in its user base. But if the fans are unhappy with the musical selection, or even just concerned that their favorite artists are unhappy, who knows what may come next – a fan revolt? Well, Spotify is already trying to shift the balance of power back, with their recent blog posted Nov 11th, making sure that the fans know that we are the center of the Spotify universe, but not to the detriment of their artists.
Reveal some of your interests -Using the media mouthpiece, Borchetta hinted at what Swift really wants – more control. Borchetta criticized Spotify for its lack of flexibility: "They take [the music], and they say, 'We're going to put it everywhere we want to put it, and we really don't care about what you want to do. Give us everything that you have and we're going to do what we want with it.' And that doesn’t work for us. . . . They just need to be a better partner.” It’s not unusual for a negotiator to demonstrate their plan B with a left punch while reaching out their right hand for a future deal.
Most of us do not have the resources or fame of Taylor Swift, but we can address power shifts in our own negotiations by following these tried and true principles. These strategies should level the playing field if not improve your position outright. But taking these steps may not mean success – the pundits at Harvard assert that Taylor Swift’s moves are an anomaly and she may be the proverbial lone wolf. Only time will tell how the power shakes out, but hopefully fans around the world will still enjoy the music.
Hagglers in Paradise
By Marianne Eby
There are many places in the world where consumers haggle and would never pay asking price – like the souks of Marrakech and the Beijing Silk Street Market. But nowadays even the US retail stores are fertile haggling territory. Know how to extend your holiday haggling into the January 2014 retail sales bonanza.
Haggling is a cousin to serious negotiations. Haggling is the back and forth that is used to get a quick deal from someone you aren't likely to deal with again, like in the souks and flea markets. A 2009 Consumer Reports survey found that only 28% of Americans say they haggle often. But by 2011, talk of negotiating price tags at retail stores became a common sport of savvy consumers who read Kiplinger advice columns. And now it’s so common that one click on wikihow teaches us how to do it.
As reported in the New York Times, what’s more interesting in this last holiday season is that retailers are both training their floor sales managers to haggle, and inviting the public to do so. This may be an attempt to turn the tide from consumers who use brick and mortar stores for looking, only to return home and search the Web for the best price on the same item. The retail stores are fighting back. One has trained its managers not only to meet competitors’ prices, but given them authority to beat them. And they’re not just focused on price, but are creative in offering you add ons (that may or may not meet your needs).
As consumers, our job is to answer this call to action. You don’t need to be someone who negotiates deals at your day job; you just need to follow a few simple guidelines -- the fundamentals all master negotiators hone:
- Prepare: get information so that you know why they should lower their price for you or what else they can offer you (or you them). It’s never been easier to do research on the price and quality of what you want before entering a store, or just use your smart device while browsing.
- Plan your positions: Determine your opening request (what would be the most awesome deal, but one that you can defend), and know at what point you will walk away. Write those two positions down to prevent yourself from asking for less, or settling for less.
- Have a planB, whether it’s foregoing the purchase, waiting for a big sales day, or going elsewhere. Having a back-up plan (referred to by business negotiators as a Best Alternative to a Negotiated Agreement, or BATNA) will give you the confidence to ask for what you want, and to engage in a conversation about the possibilities.
- Do engage! Friendliness wins every time, not arrogance. Every master negotiator knows that people give the best deals to people they like. But don’t waste the retail staff’s time on lots of small talk about the weather and yourself; use sincere curiosity to ask themquestions about the company, the job, their long day, the product or service, the other customers, the market this year. Show an interest in them and they will show an interest in you.
- Don’t make assumptions that prices and terms are set in stone. At a clearance sale at a high-end retailer the other day, I asked for help with the down coats (facing our first cold winter in years). I fretted over the high price which showed a markdown of only 20%. I then asked the sales person if she could try the coat on so I could see how it looked on someone else. I added in some flattery when I saw the coat on her, and only then asked if a further reduction was coming. She whispered that that there will be a pre-sale in 3 days with another 40% off, where shoppers can purchase then and pick the item up a few days later once the actual sale begins. Knowing I would risk losing the perfect down coat, I asked if I could do a pre-pre-sale – getting the extra 40% off now, but willing to wait to pick up the coat with all the other shoppers in a week. I’ve been nice and warm ever since!
- Be creative: offer them something (like cash, buying in bulk, taking the odd size off their hands, a comliment to their manager). This is where your creativity can pay off, as you give something of value that costs you little or nothing but that they value, in exchange for something you want. What value can you find, beyond the price and the profit margin, to bring into the negotiation? Would using cash save them money? Will it go on sale soon anyway? Do they work on commission and would rather you buy from the now than from their colleague on another day? Would a referral, or a positive “Yelp” review be valuable PR?
- Above all, respect your counterpart as a person making a living. Haggling over a retail price, if you engage in it, is a game which involves a short-term relationship. Insulting your counterpart or being a jerk will ruin the game and most likely, your chances of a good deal.
Want more advice? Here's 10 Tricks for Haggling Over Price at Any Store.
One more reason to haggle in this January's retail sales?
Negotiation takes practice. The more you practice, the better you become at building rapport, asking for what you want, seeing possibilities, asking questions, and leveraging your willingness to walk away. The more you do it, the better negotiator you will become.
Have fun haggling in and out of your vacation paradise!
Top 5 Negotiation Lessons from Summer Vacation
By Marianne Eby
Like me, many of you are returning from summer vacation. You relaxed, explored, and played. But you didn’t sharpen your negotiation saw. Or did you? Without realizing, you likely practiced your negotiation skills, and upped our negotiation quotient. Here’s my Top 5 negotiation lessons from summer vacation:
- Have confidence in the process.
Almost two thirds of Americans work during summer vacation, as reported by the Los Angeles Times. . We know we have to work, at least some, while we’re gone. And yet, we go, with confidence in the value of vacation -- expecting we will come back refreshed for a positive impact on our lives. We should go into negotiations the same -- confident that if we follow a disciplined process, we will achieve predictable and repeatable results that create value for both parties.
- Be creative.
Vacation presented us opportunities to play outside the sandbox. In a new place our personality wasn’t known, so we experimented with our approach or style to get the results we wanted. We experienced new things: different foods, new ways of taking photos, other cultures. Being creative with our choices allowed us to discover new things. Being creative in a negotiation allows us to find new solutions to difficult issues.
- Adjust your style and build rapport.
People we had to deal with on vacation were unfamiliar -- hotel desk clerks, beach patrol, waiters, tour guides, friends of friends. Naturally we wanted a pleasant experience, so we explored common areas of interest to build rapport. And because so much was new and different on vacation, we asked lots of questions. Because we were sincerely curious, we listened well to the answers. Some of these people even made it into our virtual rolodex. Think of your negotiation counterpart similarly. Adjusting your style to the situation or person, and making a personal connection, builds trust. And as we all know, building trust allows both parties to share their true interests, and find hidden value in negotiations.
- Plan, Propose options, and develop alternatives.
Most of us planned our vacations more thoroughly than we plan most negotiations – hotel reservations, addresses to enter into our GPS, must-go concert tickets. We knew the budget we wanted to keep and the money and time limits we could not exceed. When different members of our family were unhappy with the offering, we proposed options. We suggested a willingness to hike the long trail today if everyone would get up early for kayaking tomorrow. Indeed, one of the best negotiation practices is to offer options. People stay involved when they have to respond to options. And on vacation we thought of backup plans if rain stole a beach day. Our vacation /learning-center-item/batna.htmlBATNA! Without knowing it, we practiced our negotiations skills on vacation!
- Take breaks.
We took breaks to relax – mini-vacations within a vacation. Relaxing gave us time to reflect and rethink our needs and priorities, or to calm friction from too much time with family and friends. Taking breaks during negotiations is equally beneficial. Time away allows issue clarification, a chance to reset the emotional climate, and check in with stakeholders. Taking a breather is rarely a step back; more often it provides a renewed vigor to work toward common goals.
We’re refreshed upon our return from vacation. And without realizing it, we honed our negotiation skills in the process. Be sure to apply those summer lesson to your next negotiation.
Prevent An Ambush: Five Tips
By Marianne Eby
In a recent seminar, a client described a negotiation crisis he'd had: at a meeting he believed was going to be an information exchange with his wholesaler, he was ambushed: without warning, the other side brought a team of eight from his company, made a lowball offer, and then announced that they no longer needed our client's business. What to do?
Our client was less stunned than he might have been -- the same person had pulled the same stunt two years before. Why was our client still doing business with him? A surprise attack is for competitive, not collaborative negotiations, since it tends to sacrifice the relationship to the outcome. And indeed, our client had avoided contact with the bully after the last deal, believing he would be gone by the time the contract needed renegotiation. Ending the relationship was difficult, because the bully's company had become our client's sole source of distribution.
When you have to negotiate with a bully, here are five tips for preventing and defending against a surprise attack:
- Keep Working on Relationships. Like nasty neighbors, hostage-takers, dictators, oligopolies, and sole-source suppliers, a wholesaler who is has a large portion of your market is difficult because you can't avoid them -- you have to find a way to have a relationship with them. Prior to bargaining, work harder than you otherwise might to find affiliations, make gestures of friendliness, and get to know other people on the team and in the company. Even if you find the "bully" difficult to deal with, you will get to know him or her better, which will help you anticipate tactics and resist the angry reaction that a surprise attack can trigger.
- Build a Strong BATNA. Your BATNA is very important in this kind of negotiation, because it is more difficult with a sole distributor. Finding alternatives to a deal with your main distributor requires a lot of probing, conversation, and relationship-development with other potential wholesalers and retailers. You may be able to negotiate with second-tier wholesalers, or plan an "end-run" around the bully and offer a deal directly to retailers. Do this legwork before an information exchange.
- Develop a joint agenda. Get the other party to agree ahead of time on what will be discussed in a meeting. If an ultimatum or something comes up that you didn’t discuss when you negotiated the agenda, remind the other side that their new item is not on the agenda both parties agreed to and will have to wait for the next session.
- Focus on Interests. One way to help distract from the hostility or negativity created by a tactic like a surprise attack is to focus on your own interests, and on the legitimate interests of the other side. What is the real reason for the hardball tactic? What do you really need out of the deal? Consider your BATNAs and the possible BATNAs for the other side.
- Manage emotions. If you find yourself faced with a surprise attack despite your attempts to prevent it, it will be critical to keep your cool. Anger blurs thinking. Our client wisely did not respond to his counterpart's ambush and mostly kept his cool -- then went to gather intelligence about the other side. He found that the bully had treated a number of other companies to a similar tactic, but had not met with most of them. Thus our client discovered he had more bargaining power than he realized.
Our client's plan after our discussion was to circle back to other retailers and wholesalers and explore his options and strengthen his BATNA before returning to the bully. Stay tuned for an update!
Negotiator's Keys to a Powerful BATNA
By Marianne Eby
Never enter a serious negotiation without knowing your Best Alternative To A Negotiated Agreement, or BATNA: a plan that you are willing to execute if there is no agreement.
The value of your BATNA is not just that you'll know what to do if a negotiation falls through (your Plan B) -- it's that your BATNA gives you power while you are negotiating.
On one hand, a BATNA is just another piece of important information you prepare. It is one element of your "negotiating envelope" that you must define before engaging with the other party -- along with your Goal, your Most Desirable Outcome (MDO), and your Least Acceptable Agreement (LAA). Although negotiation is a fluid process and you will continually revise your parameters in response to the other party's, this negotiation envelope guides your concessions in Bargaining.
The BATNA differs from the other defining decisions because its execution stands outside the negotiating process—by definition, it’s what you do when negotiation is not working. So while other parameters help you steer the negotiations, it is your BATNA that makes you a stronger negotiator -- because you don't need the other party’s permission or involvement to execute it.
Recently the Chicago Teachers' Union (CTU) demonstrated the power of every union's BATNA: the ability to strike. Although recent decades have seen a decline in union bargaining power, teachers unions are increasingly vulnerable, and the union leader in Chicago lacked influence with the Mayor, Chicago's teachers were able to force 300,000 students out of the classroom, shut down the third largest school system in the country, and win some key compromises from the Mayor.
Under US law, a union's potential BATNA is always to strike. Yet, many a union’s strike BATNA doesn't always have the power that the CTU's did, because some organizations will counter with their own BATNA: the use of "scabs," or non-union workers who can take the place of the striking workers. The NFL, for example, prepared for its recent referee strike by preparing substitute officials to run its games.
Of course, the implementation of a BATNA isn't always preferable (Chicago students lost instructional time) and if it's not well-planned, it can backfire as a means to more power in your negotiation. The NFL's use of replacement referees certainly backfired, causing several weeks of outrage, greater esteem for the regular referees, and ultimately some damage to the NFL "brand."
The ideal way to use a BATNA is to let the other side know you have one. Though an executed BATNA can mark the end (at least temporarily) of the negotiating process, that doesn’t mean that a contemplated BATNA shouldn’t be an integral part of that process. Letting your counterparts know—in an advisory rather than threatening way—that you have other options is an important part of your negotiating stance.
Despite the word "Best" in BATNA, you can have more than one—in fact, you should have more than one, because the more you have, the greater your flexibility and power. BATNAs can vary from a move as simple as finding a new supplier of goods or services, to one as radical as dropping a project altogether. The better conceived and more numerous your BATNAs, the less likely you’ll need them. The other side will know you have viable alternatives, which will make them more willing to deal.
Here are the main things to remember as you develop your BATNA:
- The more BATNAs you have and the more willing and ready you are to execute one, the less likely you will need a BATNA.
- Consider short-term and long-term BATNAs. Sometimes you don’t have a BATNA and must reach agreement. Be sure to continue working on a long-term BATNA for future use.
- Find a graceful way to ensure the other side knows you have BATNAs and you are willing to execute them. Reveal this information during the Exchange stage. In the Bargaining stage, you will decide if and when to reveal your BATNAs.
- BATNAs can be used as an advisory or a threat. Threats damage relationships; advisories strengthen them.
- If you are not willing and able to execute your BATNA, it's not a BATNA -- it's a bluff.
- You don't need your negotiating counterpart's agreement to develop or execute your BATNAs; these decisions are yours and your organizations.
- Any BATNA should be a solid, viable alternative to an agreement, and one the other party will recognize as such. The NFL learned from experience that a poorly conceived BATNA will backfire, often costing more than the originally requested concessions.
Politicians' Negotiations -- What Can We Learn?
By Thomas Wood
Whatever the nature of our negotiations (commercial, legal, regulatory, internal, etc) we can learn from the ups and downs of some of the most prominent public negotiations. With the Euro in serious trouble and economies worldwide shaken, government negotiations over economic strategies are around the clock and very public. The US negotiations over federal budgets, taxes and spending are a prime example.
With several US significant tax and spending provisions set to kick in (or lapse) in December and January, official Washington will be furiously bargaining at year’s end. And the stakes couldn’t be higher: the fate of the US national economy, the credit rating of the U.S. government, and the confidence of the American people in their elected representatives’ ability to tackle big problems.
In last summer’s negotiations, President Obama and the Congress' House Speaker John Boehner came close to striking a “grand bargain” on long-term debt reduction. It combined restrictions on the growth of entitlement programs (which are trades dear to the Democrat party) with increased taxes on the wealthy (which is anathema to the Republican party). But at the last minute the deal fell apart. Examining elements of this failed negotiation through the prism of Best Negotiating Practices may well provide insight into what could happen at the end of this year, as well as provide guidance for our daily bargaining.
The 2011 budget talks were prompted by a deadline—namely, the need to raise the US government’s debt ceiling so it could borrow more money to pay its bills. Congressional Republicans used this deadline to try to force concessions: they refused to increase the government’s borrowing authority without obtaining agreement by the Administration to substantial budget cuts. While absolute deadlines can be helpful in focusing energy and avoiding unnecessary delay, skilled negotiators can also use arbitrary deadlines as tactic to gain advantage.
The Republicans took a position opposed to any tax increases. The President’s position was that he would not accept the level of cuts in entitlement programs sought by the Republicans without an increase in taxes on the wealthy. For both sides, the interest was to achieve debt reduction while maintaining the support of each party’s political base. Negotiators sought a solution—as good negotiators should—that served the two parties’ interests, even if it seemed to violate their positions (raising taxes by closing loopholes rather than raising rates, for example).
When the deal collapsed, Democrats charged that Boehner had lacked sufficient authority to bargain, and had been overruled by his Republican colleagues in the House. Negotiators should always have sufficient authority to strike a deal, but not absolute authority: carrying limited authority allows them to postpone or deflect unwelcome proposals. In the end, both sides decided that no deal was better than what they viewed as a bad one. They could both revert to the same, ready-made Best Alternative to a Negotiated Agreement (BATNA): elections, in which each side might achieve at the polling place what it couldn’t at the bargaining table.
While political negotiators in each country and all governments have special advantages and restrictions, everyone involved in negotiation can benefit from studying their successes and failures. It will be interesting to see if the US federal budget negotiators busy later this year are among those who have learned anything.
Not All Greek To Us: Multi-level Multi-party EU Debt Crisis Negotiations
By Marianne Eby
Few negotiations are more complicated than the multi-party wrangling going on now in Europe over the Greek debt crisis: it involves not only the Greek government and its creditors, but the European Union and public creditors like the International Monetary Fund. There are even negotiations going on within these separate entities, such as between France and Germany over the proper EU response. But it’s still possible to see within this tangled process familiar issues the parties would be well-advised to address through Best Negotiating Practices.
When assessing a multi-party negotiation, you should break it down into its constituent parts; multi-party bargaining is actually a group of connected but still distinct one-on-one negotiations. In the case of Greece, the government is conducting one set of negotiations with its bondholders and a second with the European Union, its source of bailout money. The two are connected, since the EU is demanding certain outcomes from the first negotiation before discussing more emergency aid. But practiced negotiators can often exploit such multiplicity of parties, and therefore interests, to craft a creative solution.
While conditions often vary in the course of a negotiation, occasionally it’s the parties themselves that change. In a business negotiation, the change might come about as a result of a merger or acquisition. In political negotiation, the switch can be triggered by an election. Smart negotiators invest time and effort in preparation for their new counterparts by learning as much as possible about their motivations, tendencies and style. Greece held national elections in early May, and while the results were inconclusive, one of the leading contenders to form the next government is the leftist party Syriza. It’s made clear it will take a more aggressive approach to EU negotiations.
“Greece needs a leadership that can go abroad and not just say what foreign leaders are prepared to hear but say what the Greek people wants to be said,” declared Syriza leader Alexis Tsipras recently. “It has to draw red lines, to plan a strategy and to stand up for the rights of Greeks. Only a government of the left can do this.”
Meanwhile, negotiations between France and Germany about the right cure for Greece’s and Europe’s ills—fiscal austerity or economic stimulus—seemed to hit an impasse. But in his remarks following a five-hour bargaining session reported in today's L.A. Times, the EU president wisely aimed to avoid the impression of a deadlock. After describing the talks as “focused and frank,” Herman Van Rompuy explained, “Tonight's meeting was about putting pressure, focusing minds and clearing the air.” This well describes the information exchange that precedes actual bargaining, which he anticipated would begin in earnest at a meeting the following month.
As negotiators always should, the parties have devised Best Alternatives to a Negotiated Agreement (BATNA’s). In this case, everyone’s BATNA is a departure of Greece from the Eurozone common monetary system. This would reduce the obligation on the rest of Europe to save the Greek economy, while allowing Greece to pay off its debts with a national currency it alone controls. Even the creditor bankers might make out better from such an arrangement than they would in accepting too large a write-down on their Euro-denominated loans.
But the long-term ramifications of such an unprecedented event are impossible to predict with any certainty. So you should expect all parties to continue to try to avoid this dramatic step through more negotiation. And we should all take advantage of this very public display of bargaining to improve our own negotiating skills.