BATNA Analysis Can Help You Avoid the Agreement Trap

BATNA analysis—the process of carefully comparing your best alternative to a negotiated agreement to the deal on the table—should be an important part of negotiation. But in their rush to get to yes, negotiators often overlook this critical step.

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BATNA Analysis

In both our personal and our business negotiations, “getting to yes” is typically the ultimate goal. Negotiation research and advice tend to focus on identifying the conditions that can help people overcome their differences, relax firm positions, and reach harmonious terms that could lead to a mutually fulfilling long-term relationship.

This mindset risks downplaying the fact that many business deals simply aren’t worth doing. Business partnerships and mergers have notoriously high failure rates. Purchasing deals and employment contracts often end in disappointment.

Wise negotiators engage in BATNA analysis, or a careful examination of their best alternative to a negotiated agreement, when determining whether to accept a proposed deal. If the agreement doesn’t meet or exceed the value they could gain from their BATNA, they should move on. Yet negotiators often fail to engage in a thorough and accurate BATNA analysis. As a consequence, they may close a deal for reasons that are far from practical.

In a study published in the journal Negotiation and Conflict Management Research, researchers Taya R. Cohen (Carnegie Mellon University), Geoffrey J. Leonardelli (University of Toronto), and Leigh Thompson (Northwestern University) explain why it can be so hard to walk away from a subpar agreement and offer a possible antidote.

BATNA Basics

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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.

Equating Agreement with Success

Negotiators can fall victim to the agreement trap—the common tendency to consent to a deal inferior to one’s BATNA—for several reasons, according to Cohen and her colleagues.

First, one party may successfully conceal the fact that the proposed agreement is disadvantageous to the other party. For example, in negotiations for an unpaid internship, a candidate might assume that the position could lead to a paying job. If the hiring manager doesn’t mention that is not the case, the burden falls on the candidate to figure this out. If they don’t, they could agree to an internship that’s inferior to other positions they are considering.

Second, parties may be reluctant to walk away from a subpar deal because of the significant time, money, and energy they’ve invested in the negotiation, a phenomenon known as escalation of commitment. Basic economic principles tell us that because such resources are sunk costs that can never be recovered, we shouldn’t consider them when deciding whether to commit further in a negotiation. However, abundant research suggests that we will try to recoup our losses by continuing to negotiate. This trap can be especially pernicious in highly competitive negotiations.

Third, negotiations often foster a sense of interdependence that leaves parties feeling beholden to each other. A desire to gain acceptance from the other party may prevent us from engaging in BATNA analysis and recognizing that it’s time to walk away.

Fourth, negotiators may irrationally pursue agreement for fear of harming their reputation as dealmakers. After all, “the common expressions ‘failure to reach agreement’ and ‘failed to come to terms’ smack of personal and social shortcomings,” write Cohen and her team.

The Benefits of Teamwork

You may be able to avoid the agreement trap simply by choosing to negotiate as part of a team rather than on your own, Cohen and her colleagues find in two experiments.

In one of them, more than 1,000 MBA students engaged in a simulated real estate negotiation between a seller and a buyer in which the parties’ interests were incompatible—that is, impasse would have been the most rational outcome for both parties. The students negotiated either one-on-one, two-on-two, or three-on-three. Teams were more likely to reach impasse than solo negotiators, the results showed. Two- and three-person teams were equally skilled at knowing when to walk away. A second experiment found that teams are better than solos at avoiding the agreement trap because of their greater judgment capabilities.

The findings align with other research pointing to the benefits of team negotiation. Teams have been found to be more effective than solos at crafting win-win agreements, particularly in complex deals with a lot of information that can be shared. Teams ask more questions and reach more accurate judgments of their counterparts’ interests and preferences. And when doing BATNA analysis, teams may feel less bound to a disappointing agreement than solos do because their relationships with other team members trump their bonds with their counterparts.

Toward More Accurate BATNA Analysis

The following recommendations, derived from Cohen, Leonardelli, and Thompson’s research and the work of other negotiation experts, can help us conduct more accurate BATNA analysis and overcome our fear of impasse:

  1. Don’t go it alone. Because two (or more) heads can be better than one in negotiation, think about recruiting a trusted colleague or friend as your teammate. One of you might explicitly play the role of devil’s advocate when deciding whether to do a deal.
  2. Keep your BATNA at the forefront. In the thick of a negotiation, outside alternatives often fade into the background. That’s why it’s important to regularly conduct BATNA analysis, weighing the current deal against your BATNA. And because BATNAs fluctuate, be sure to monitor your best alternative and work to improve it.
  3. Ignore sunk costs. Don’t accept a deal simply because you feel that you’ve invested too much in it to walk away.
  4. Change attitudes toward impasse. In your own and your organization’s negotiations, break the habit of equating impasse with failure. Require negotiators to conduct BATNA analysis when deciding whether to close a deal. Reward them based on the quality of their decision process rather than on whether they reach agreement.

What benefits have you achieved through BATNA analysis in negotiation?

BATNA Basics

Claim your FREE copy: BATNA Basics

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.

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