Is your BATNA really a sure thing?

In negotiation, a smart way to determine whether to accept or reject a deal is to compare it to your best alternative to a negotiated agreement. But when our no-deal alternative is uncertain, our decisions are often flawed, new research shows.

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On March 12, federal prosecutors revealed they had charged 50 people in a conspiracy to influence college admissions decisions at several top U.S. universities. Thirty-three parents were accused of conspiring with college consultant William Singer to fraudulently boost their children’s entrance-exam scores or bribe college coaches to designate the children as recruited athletes.

In pre-indictment negotiations, U.S. federal prosecutors tried to convince the parents to plead guilty to a single charge of mail fraud and honest-services mail fraud. Prosecutors were considering imposing an additional money-laundering charge on some of the parents, the Wall Street Journal reported. “They are definitely incentivizing parents to plead now and get a better deal than if they are indicted,” Patric Hooper, a lawyer for two of the parents, told the Journal.

In the face of phone recordings and emails implicating them in the conspiracy, any parents who refused to plead guilty seemed to face an uphill court battle. Appearing to recognize that and hoping for light sentences, 14 of the parents pled guilty on April 8 to the mail- fraud charge. One of them, actress Felicity Huffman, expressed contrition for paying Singer $15,000 to arrange for cheating on her daughter’s college entrance exam. Prosecutors reportedly promised Huffman a prison sentence “at the low end” of the 20-year maximum for mail fraud in exchange for the guilty plea, according to USA Today.

But 16 other parents rejected plea deals. Actress Lori Loughlin and her husband, fashion designer J. Mossimo Giannulli, who are accused of paying $500,000 in bribes to get their two daughters admitted to the University of Southern California, reportedly refused to take a deal that would have required them to spend up to two years in jail, according to People magazine.

On April 9, authorities announced that Loughlin, Giannulli, and the 14 other parents who rejected plea deals had been indicted by a federal grand jury not only for mail fraud but also for money laundering, which carries an additional 20-year maximum prison sentence. The parents could still plead guilty, but any plea deals reached are now more likely to require more jail time, Fordham University law professor James Cohen told USA Today.


In negotiation, how should you decide whether to accept or reject the deal that’s on the table? Negotiation experts, beginning with the authors of the seminal negotiation text Getting to Yes: Negotiating Agreement Without Giving In (Penguin, 1991), often advise us to compare the deal to our BATNA, or best alternative to a negotiated agreement. If the deal is better than the best outside option available to you, then you should take the deal on the table. If it isn’t, then you should declare impasse and pursue your BATNA.

In Getting to Yes, Roger Fisher, William Ury, and Bruce Patton introduced the BATNA concept as “the standard against which any proposed agreement should be measured.” A strong BATNA can also enhance your power in negotiation. That’s because when you have a good alternative, you will be less likely to agree to a deal that doesn’t meet your needs.

Unfortunately, because BATNAs are often uncertain rather than guaranteed, this clear-cut advice is sometimes difficult to apply in the real world. Returning to the college admissions scandal, one group of parents (including Huffman) appeared to calculate that the plea agreement offered by the authorities would be preferable to declaring impasse. Why? Probably at least in part because their BATNA would likely include an additional serious charge (money laundering) and then a choice between an even worse plea deal or a stressful trial that could end in an even more severe sentence.

By contrast, Loughlin and Giannulli (and perhaps other parents who were charged) reportedly rejected a plea deal in the hope of securing a BATNA that would not require prison time, whether by somehow negotiating a better deal with prosecutors or winning in court. Given the compelling evidence against them, rejecting the mail-fraud plea deal was a huge risk that many expert observers believe has a low probability of paying off.

In new research published in the journal Organizational Behavior and Human Decision Processes, Southern Methodist University professor Robin L. Pinkley and her colleagues find that most people have difficulty assessing uncertain BATNAs, or so-called phantom BATNAs, and make subpar decisions as a result. For example, ask any real estate agent, and you’ll likely hear that it’s common for homeowners to turn down decent offers in the hope of getting a better one that never materializes. This new research highlights how we can think through no-deal alternatives more precisely—and reach better outcomes.

Those who believed they might have another offer. . . felt more powerful and consequently negotiated more aggressively and successfully on salary as compared to participants who were told they had no other offer.

A BATNA in the hand…

In their experiments, Pinkley and her colleagues had participants play the role of job candidates negotiating their starting salary. Depending on the experiment and the condition to which they were assigned, participants were told before negotiating that they definitely had another job offer, possibly had another offer (a “phantom BATNA”), or had no other offer.

First, the good news: Those who believed they might have another offer—regardless of whether they were told it was highly likely to materialize, highly unlikely, or somewhere in between—felt more powerful and consequently negotiated more aggressively and successfully on salary as compared to participants who were told they had no other offer. Thus, an uncertain BATNA appears to boost our sense of power and leads us to do better than when we know we have a weak no-deal alternative.

However, the researchers also identified several mistakes people frequently make when assessing their BATNAs. First, many participants who were told they had a strong BATNA that was certain or likely failed to tell their counterpart about it. Telling a counterpart that you have a strong alternative to doing business with him can motivate him to compromise to keep you from walking away. When we fail to reveal a strong outside alternative, we may end up claiming less value than we could.

Second, the experimenters found evidence that negotiators are often overconfident that their uncertain BATNAs will materialize. As a result, they frequently turn down offers they should accept in pursuit of their BATNA. This is especially true when negotiators have enticing but low-probability BATNAs—such as a tempting job offer that is unlikely to pan out. In the college admissions scandal, Loughlin and Giannulli may have succumbed to overconfidence when they rejected mail-fraud plea deals in the apparent hope of securing the highly desirable but seemingly low-probability BATNA of avoiding prison entirely.

Third, and conversely, people facing highly likely phantom BATNAs tend to be overly pessimistic that the BATNA will actually pan out. Consequently, they often take the “safe” offer on the table, not recognizing that they had a very good chance of securing a better BATNA. If you have ever feared that an exciting job opportunity will fall apart at the last moment, then you are familiar with this cognitive phenomenon.

“Rather than exhibiting consistent optimism or overconfidence, our negotiators seemed to make judgments that ‘regress to the mean’ by being overconfident when likelihoods are low, and underconfident when likelihoods are high,” Pinkley and her colleagues conclude. Such contorted thinking has been adaptive in human history: “Strategic optimism” in the face of long odds motivates persistence and resilience, while “strategic pessimism” protects us from disappointment if our hopes fail to materialize. In negotiation, however, such biases can lead us to reject offers we should accept and accept offers we should decline.

Toward better BATNA analysis

The following five guidelines can help you make more of your BATNA and assess it more accurately:

1. Beef up your BATNA. Because negotiators with strong BATNAs tend to reach better outcomes than those with weaker ones, it’s always wise to do whatever you can to improve your BATNA. Depending on the context, that might mean pursuing numerous job leads, interviewing multiple suppliers, or negotiating for several houses rather than one.

2. Assess your BATNA’s value and likelihood. While it’s crucial to calculate the value you place on your BATNA, it’s just as important to accurately assess its likelihood of being available to you if the deal on the table falls through. In particular, beware the opposing risks of being overly optimistic about unlikely alternatives and overly pessimistic about highly likely ones. To temper your hopes and fears, gather objective information about your BATNA’s likelihood. Then determine if there are steps you can take to improve the likelihood that your BATNA will be available if you need it. That might mean conveying to sellers of your second-choice home that you remain very interested in it, for example.

3. Be explicit about your BATNA. When you have determined that you have a strong BATNA, even if it’s not yet a sure thing, it’s often wise to let your counterpart know about it. “Another organization that’s considering me for a similar job is offering about $10,000 more,” a job candidate might say. Your counterpart is likely to perceive you as powerful even when your BATNA is uncertain, Pinkley and her team found in their research.

4. Take their BATNA threats seriously. In the college admissions scandal, prosecutors warned parents that they could be hit with more serious charges if they refused to take plea deals. In essence, the prosecutors threatened to worsen the parents’ BATNAs—and then followed through on those threats for the 16 parents who didn’t plead guilty. Even in business dealmaking, there are times when a counterpart might threaten to make things worse for you if you don’t reach agreement. Don’t take such threats lightly; confront them head-on, and try to talk through the differences that divide you.

5. Assess the value and likelihood of the other side’s BATNA. If your counterpart tells you about her own phantom BATNA, you might gently remind her of the old adage, “A bird in the hand is worth two in the bush,” advise Pinkley and colleagues. When you call attention to the risk or uncertainty associated with your counterpart’s BATNA, you might be able to reduce her overconfidence, avoid impasse, and get a better deal.

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