Negotiation Blog

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:

  1. The more BATNAs you have and the more willing and ready you are to execute one, the less likely you will need a BATNA.
  2. 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.
  3. 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.
  4. BATNAs can be used as an advisory or a threat. Threats damage relationships; advisories strengthen them.
  5. If you are not willing and able to execute your BATNA, it's not a BATNA -- it's a bluff.
  6. You don't need your negotiating counterpart's agreement to develop or execute your BATNAs; these decisions are yours and your organizations.
  7. 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.

Negotiating Tip

Research and know the people, not just the organization, issues, history, and objectives.


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Negotiation Blog

Spending Time on Relationships is Never Wasted: Negotiation Lessons from Enron in India

By Thomas Wood

Everywhere I consult and teach on negotiations, people love hearing stories of the negotiations that didn't go well, and especially stories of the now infamous former US behemoth, Enron. Everyone remembers Enron’s meteoric rise to power in the 1990s – as well as its shocking fall into bankruptcy in 2001. Fewer people remember that the Houston-based energy giant had tasted defeat at least once before, when negotiations over a planned $20 billion power plant broke down with the Government of India. Why did this high-profile, lucrative deal fall through? One major reason harkens back to the most fundamental of all negotiation principles - spending time on relationships is never wasted.

In the late 1990s, Enron seemed to be on top of the world. The Houston-based energy company, named “America’s Most Innovative Company” six years running by Fortune magazine, claimed over $100 billion in revenues during 2000 alone. By December 2001, however, widespread accounting fraud and corruption had brought Enron crashing down in a stunning turn of events.

Although it seemed as though Enron could do no wrong, the company had in fact experienced a serious setback in the mid-1990s, when negotiations over the massive 2,015 megawatt Dabhol Power Plant – the first part of a planned $20 billion effort – broke down with the Maharashtra State Electricity Board and the Government of India.

Why did this high-profile, lucrative deal fall through?  Despite their business acumen, Enron committed two key mistakes during the negotiation process that sowed the seeds of the deal’s demise.

First, by pushing to sign a contract as quickly as possible, Enron negotiators failed to build a longer-term relationship with their Indian counterparts. As reported in Business Week, although Rebecca Mark, head of Enron International, justified their strategy by stating “time is money for us,” for instance, the speed of the arrangement looked suspicious to many key Indian powerbrokers. Influential local leaders immediately began criticizing Enron’s negotiation strategy as an affront to Indian sovereignty and argued that corruption must have been used to speed up the process.

Enron’s failure to cultivate a long-term business relationship with any local partners – (it also rejected the advice of many experts and refused to take on a local Indian partner as a minority equity holder) – meant that Enron possessed no trusted local partners to help navigate the pressures that inevitably accompany such endeavors. This made it virtually impossible for either side to capture valuable trades – and increased the likelihood that India would execute its BATNA.

Second, rather than thinking creatively in search of mutual gain, both sides resorted to positional-based, competitive negotiation strategies that manifested themselves in bitter criticisms and veiled threats. As reported by the BBC News, after local Indian officials characterized the power plant agreement as a “betrayal” and suspended payments, for example, then Enron CEO Kenneth Lay implied that his allies in the US government might cut off aid to the Indian government. Threatening India's relationship with the US crossed the line and sealed the end of Enron's power play.

In high stakes and complex negotiations, all the great financial analysis will not change the need for trust and strong relationships. We can all learn from Enron's missteps.

Negotiating Tip

Does your mood matter? Yes. Those in a good mood capture more value. Get in a good mood before sitting at the negotiating table.


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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:

  1. 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. 
     
  2. 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.
     
  3. 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.
     
  4. 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!
     
  5. 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.

Negotiating Tip

When negotiating, give good news in small chunks. Give bad news all at once.


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