On June 18, 2015 the board of retailer American Apparel informed the company’s controversial founder, Dov Charney, that it was ousting him from his roles as chairman and CEO. For years, Charney had fended off sexual-harrassment lawsuits and rumors of inappropriate behavior. But only when the company’s creditors grew anxious about its long-term liability did … Read More
In negotiation, BATNA refers to your “best alternative to a negotiated agreement,” or the best outcome you can expect if you fail to reach agreement at the bargaining table with your counterpart. An evaluation of your BATNA is critical if you are to establish the threshold at which you will reject an offer. Effective negotiators determine their BATNAs before talks begin.
When you fail to determine your alternative, you’re liable to make a costly mistake—rejecting a deal you should have accepted or accepting one you’d have been wise to reject. In negotiation, it’s important to have high aspirations and to fight hard for a good outcome. But it’s just as critical to establish a walkaway point that is firmly grounded in reality.
There are four steps to assessing your BATNA: List your alternatives; evaluate these alternatives; establish your BATNA based on these alternatives; and calculate your reservation value, which is the lowest-valued deal you are willing to accept. If the value of the deal proposed to you is lower than your reservation value, you’ll be better off rejecting the offer and pursuing your BATNA. If the final offer is higher than your reservation value, you should accept it.
One drawback to exploring your best alternative is in spending too much time and money in researching it. This can lead to a feeling of entitlement in negotiation, which may cause the negotiator to expect too much from the bargaining process.
Articles offer numerous BATNA examples and explore the concept of one’s BATNA, as well as how to effectively identify your BATNA in negotiations and how to use this knowledge effectively in any type of negotiation, whether in business, international, or personal negotiations.
Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.