When an important negotiation is looming, “winging it” is never the answer. The best negotiators engage in thorough negotiation preparation. That means taking plenty of time to analyze what you want, your bargaining position, and the other side’s likely wants and alternatives.
In her book The Mind and Heart of the Negotiator, Northwestern University professor Leigh Thompson recommends that negotiators engage in a careful self-assessment prior to negotiating. In particular, she recommends asking two main questions as part of your negotiation preparation:
- What do I want?
- What is my alternative to reaching agreement?
What Do I Want?
Thompson’s first question requires us to set an ambitious but realistic target. When setting a target, there are three traps to watch out for, Thompson notes.
First, avoid being an under-aspiring negotiator who sets a target that’s too low. If you do, you may end up feeling like the victim of the “winner’s curse,” which describes the disappointment we feel when the other party immediately accepts our first offer in a negotiation. The fact that the other party is eager to accept your first offer suggests that you aimed too low and failed to engage in adequate negotiation preparation.
On the other hand, you don’t want to be an over-aspiring negotiator, either. When you aim too high and refuse to make significant concessions, you will be left without a deal.
A third problem arises when you engage in so little negotiation preparation that you don’t know what you want. In this case, negotiators often view the other party’s good-faith proposals with suspicion or disappointment.
What Is My Alternative to Reaching Agreement?
To improve your odds of meeting a realistic but ambitious target, you will need to determine your best alternative to a negotiated agreement, or BATNA, as recommended by Roger Fisher, William Ury, and Bruce Patton in Getting to Yes: Negotiating Agreement Without Giving In.
Determining your BATNA will help you know when it’s time to walk away and pursue your best alternative. In their book Negotiation Genius, Harvard Business School professors Deepak Malhotra and Max H. Bazerman note that BATNA assessment involves the following three steps:
- Identify all of the plausible alternatives you might pursue if you can’t reach a deal with the current party.
- Estimate the value associated with each alternative.
- Select the best alternative, which is your BATNA.
For a job seeker who is engaged in negotiation preparation for a particular hiring negotiation, the first step would involve identifying other possible job opportunities as well as other alternatives, such as staying at her current job or applying to graduate school. The second step would involve assessing the monetary and non-monetary value of each alternative, including likely salary, benefits, responsibilities, engagement with one’s work, quality of life, and so on. This type of analysis should lead the job seeker to identify the alternative that she prefers.
Calculate Your Reservation Value
Once your negotiation preparation has helped you identify your BATNA, you are in a position to calculate your reservation value, or reservation price, which is your walk-away point in the upcoming negotiation. In a price negotiation, this might be a particular number. In an integrative negotiation where multiple issues are at stake, your reservation value might be expressed as a package, such as the lowest salary, benefits, and responsibilities you’d accept to take a certain job.
Your knowledge of your reservation value will help you avoid two mistakes: (1) accepting a deal that’s worse than your BATNA or (2) rejecting a deal that’s better than your BATNA.
Assess Your Counterpart’s BATNA
When engaging in negotiation preparation, it’s not sufficient to only look at your own needs and wants. To improve the odds of a mutually beneficial deal, you also need to figure out how much the other party may be willing to give. To do so, you need to analyze their BATNA.
Ask yourself, “What will they do if our negotiation ends in impasse?” This will lead you to contemplate the other side’s reservation value. For instance, a job seeker might conclude that the hiring organization is likely to have other qualified candidates waiting to take the job for a relatively low salary. If so, the job seeker might recognize that he won’t be able to push the hiring manager very far in a salary negotiation. Conversely, a job seeker might be aware that she is one of the only appealing candidates for the open position—in which case, she may be able to drive a tough bargain.
Negotiation preparation needs to be conducted with a clear-eyed view of the playing field. The more rational and methodical your negotiation preparation process is, the better your negotiation results are likely to be.
What other steps do you recommend when engaging in negotiation preparation?