Meet BATNA, Harvard’s Advanced Negotiation Method
Answer quickly: how many times have you left a meeting with a client or supplier with the feeling that the agreement reached was not ideal for your business? If this happened more times than you would like to admit, the time has come to meet BATNA, an advanced negotiation method developed by Harvard Business School that will change this outlook. Learn more!
What is BATNA, anyway?
Developed by professors Bruce Patton, Roger Fisher and Willian L. Ury, the BATNA method was first described in the bestseller “Getting to Yes”, launched in 1981 and considered by executives around the world as one of the most important negotiation guides in the corporate environment.
BATNA (Best Alternative to a Negotiated Agreement), in general terms defines its “plan B”, or what needs to be done to get around an unfavorable situation and reach the best possible result, if there is no chance of reaching the agreement initially imagined for the negotiation.
Why is it important to have a well-defined BATNA?
Arriving at a negotiation with a customer or supplier without a clear notion of your BATNA can bring serious harm to your business.
This is because ignoring this advanced negotiation technique increases exponentially the chances that you expose the company to unnecessary financial risk, either by rejecting an agreement that should have been accepted or, on the contrary, by signing a contract that should have been rejected due to the anxiety of closing a deal.
To prevent this from happening, it is essential to go to the meeting with a clear vision not only of your aspirations regarding the results of what is being negotiated – that is, what you consider your best result – but also of the limit of concessions you can make and, above which, you will need to reject an offer.
Advanced negotiation: how to evaluate my BATNA?
The definition of your business’ BATNA goes through 3 fundamental stages:
1. Evaluate your options
Gather your team, evaluate the situation that will be negotiated and think about all possible scenarios: which points will be easily negotiated, which items can lead to an impasse, which ones will hardly be accepted by the other side?
Then build the possible solutions, because it is important to have a clear notion of your alternatives beyond what was initially thought.
Making an honest assessment of the possible options in case you don’t achieve the expected terms, besides taking a huge pressure off that moment, prevents you from making decisions on an emotional basis and that may represent little advantageous solutions for your business. [link to article Using emotion for better trading after publication]
2. Establish your BATNA
With the available options in mind, it is possible to establish your BATNA, that is, the one that would be your best option if it is not possible to obtain the performance initially expected.
When establishing your BATNA, it is important to also consider the other side of the negotiation and think about the BATNA of your interlocutor. In other words, you may wonder if, in case the client or supplier does not close the contract with you, what would be his best option?
Obviously, it is important not to answer this question based on assumptions about the other side. One of the fundamental premises of this advanced negotiation technique is to do an in-depth research about your interlocutor and the scenario in which they are inserted, so that your BATNA can be established on a safer basis.
Pro Tip: In addition to information about the other party, it is essential to update in relation to the global market. Therefore, we indicate 3 important readings on the subject:
- How Slowbalisation affects the Supply Chain
- The second wave of Industry 4.0
- Incoterms 2020 – for buyers.
3. Calculate your reserve value
With BATNA established, you can also define your reserve value, that is, the limit where the negotiation is no longer interesting for your company and that it is not possible to cross.
This is the value that defines the deal breaker, the issue (or a set of issues) that one of the parties to a transaction considers essential to its interests and, therefore, cannot be abdicated. These points are usually left until the end of discussions, when other items are already advanced.
In simple words, you can establish the exact moment when you need to leave the negotiating table, since advancing would mean signing a contract that is disadvantageous to your company.
It is important to understand, however, that defining your reserve value in a negotiation is quite different from setting a target. This is because, as you already know, the first is the minimum acceptable value for that to be a viable deal, while the second is the value you are willing to arrive at for the transaction to be considered a success.
Would you like to better understand what BATNA is and how it can help you improve your performance in dealing with customers and suppliers? Then take the opportunity to read other articles on advanced negotiation techniques on our blog and learn more about the subject!
After reading, if you would like to continue the conversation, we are at your service!