If your current negotiation reaches an impasse, what’s your best outside option?
Most seasoned negotiators understand the value of evaluating their BATNA, or best alternative to a negotiated agreement, a concept that Roger Fisher, William Ury, and Bruce Patton introduced in their seminal book Getting to Yes: Negotiating Agreement Without Giving In.
Here’s a classic illustration of the BATNA concept:
While haggling over a rug in a bazaar, you’re aware that you can purchase an identical rug at a nearby stall for $100. Assuming that you want only one rug, you won’t pay more than $100 in the negotiation at hand. Such clear-cut BATNAs tend to exist more in theory than in reality. In truth, your best alternative to a negotiated agreement is rarely, if ever, apples-to-apples comparable with the deal at hand.
When negotiating, take time out for an explicit translation process to ensure that you aren’t giving up a good deal in hand for a BATNA in the bush.
For example, as the renewal deadline for Sam’s homeowner’s insurance policy approached, he decided to do a “market check” to compare prices. Sam’s existing insurer – let’s call it Acme – had been raising rates by 7% and 10% annually for the past three years, and Sam wasn’t sure he was getting the best deal. He then found a carrier that offered a policy for 30% less than Acme’s renewal rate.
Delighted, Sam cam very close to switching to the new insurer. But after doing some digging (and receiving some self-interested guidance from Acme), Sam identified important coverage and term definitions buried deep in the legalese of the two policies. After going through a translation process to make the prices comparable, Sam realized that Acme, his current insurer, was offering him a better deal.
The lesson: Rather than assuming that the deal on the table matches your BATNA point by point, translate your BATNA to fully understand what it means for the current negotiation.
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