Negotiation Blog

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. 

Remember

  • 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. 

Negotiating Tip

Keep things positive. When they attack, hold your fire. Create positive emotions as you negotiate.


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Negotiation Blog

Negotiators Do Judge a Book by Its Cover

By Marianne Eby

To really understand why something so superficial matters, we are going to think out of the negotiation box. Let's think restaurant menu, think Apple products, think Erin Brokovich, and before we finish, think Mao Zedong. Then we'll better be able to think negotiations.

Think restaurant menu
A restaurant with a well-designed menu invites you to try something new rather than rely on a habitual choice. The menu may list drinks first and separate from the courses to guide you to spend more on high profit libations. When the choices for foods are more limited, with clear titles, and information about each option below the dish, and a price, most of us feel comfortable that we are making an informed choice and can decide more quickly. This helps the restaurant with throughput (seating more diners). When the pictures of food or other people/places on the menu are not enticing, or the information is overwhelming or confusing, diners may walk-out or order a cheaper item so as not to risk as much.
 
Think Apple products
Apple’s core philosophy imbedded by its founder Steve Jobs is that great products come at the intersection of arts and technology. These products make us want to hold them, use them, brag about them, and but of course, spend money on them. Back in 2005 Jobs demonstrated the simplicity of an Apple remote versus the typical peanut shaped remote with dozens of keys on it. Year after year he and Apple have proven that while functioning is critical, the look and feel also matter. 
 
It’s as if the well designed menu or techno gadget (or the poorly designed one), negotiates with consumers on behalf of the company. Forget how good the food really is, or how fabulous the functions of the techno gadget, we will pay more for it when it presents itself well.
 
Think Erin Brokovich
I can’t help but think of the famous scene from the Academy Award winning movie Erin Brokovich (2000). Julia Roberts won Best Actress for her portrayal of Erin Brokovich, a sassy paralegal who helps bring down a chemical company in a class action suit. The real Erin Brokovich admits to dressing and talking “potty mouth” and vents
 
“I was taught never to judge a book by its cover.”
 
The instructive negotiating scene that comes to my mind is when the chemical company sends over an inexperienced attorney to get a quick settlement, and he is slouched in the plaintiffs’ attorney’s waiting room. His posture and facial expression send a message: either the chemical company doesn’t consider this litigation a threat, or this is a tactic to make the plaintiffs think the lawsuit will go nowhere and they should settle for nuisance value.
 
The image of the attorney representing the chemical company mattered greatly in terms of the message that plaintiffs received and thus influenced their next move in the litigation. 
  
Think Mao Zedong
On the other end of the spectrum I envision Mao Zedong, the Chinese leader who led the nation’s communist revolution to become Chairman of the People’s Republic of China from 1949-59. This charismatic leader had such an aura of power that he chose to carry a small book in his hand in order to send a message of approachability. You can read more about his rise to power and expert messaging in Private Life of Chairman Mao by his personal physician, Dr. Li Zhisui.
 
Think Negotiation
Our clothed appearance, body language and facial expressions send a message about how we feel about the negotiations and the other parties. Similarly, like the design of a restaurant menu, the layout of our proposal or response can speak volumes about our approach to our customer, supplier or partner.
 
We don’t always think about how we look and sound and pose at the negotiating table, especially after long hours of preparation on substance or difficult bargaining sessions. We’re certainly not in favor of a cadre of same suited minions arriving at the negotiating table with shoulders held back and strong handshakes. The key is not to be one style, but to intend that the message your negotiating counterpart receives is the one you intended to send, because we often do judge a book by its cover.

 

Negotiating Tip

Take a negotiating risk today: Ask, "Is there any flexibility on that?" where you usually don’t negotiate. Try at it work, at home, and in the mall. You will be surprised at how effective it is. What do you have to lose?

 


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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

"In one of our concert grand pianos, 243 taut strings exert a pull of 40,000 pounds on an iron frame. It is proof that out of great tension may come great harmony."  Theodore E. Steinway


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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

Take a negotiating risk today: Ask, "Is there any flexibility on that?" where you usually don’t negotiate. Try at it work, at home, and in the mall. You will be surprised at how effective it is. What do you have to lose?

 


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