This is the first in a series of blog posts that I am doing that will form a basis for a negotiations presentation I gave at HUB Soma.
A BATNA is a common negotiating concept that was coined and popularized by the book Getting To Yes, which came out of the Harvard Business Negotiation Project. It stands for “Best Alternative To A Negotiated Agreement.”
The concept is to know what the next best thing is if an agreement can’t be reached in a negotiation. Visualizing that alternative, or going out and seeking it if necessary, can make a big difference in knowing how a negotiation proceeds. For example, if you just graduated and only have one job offer, your BATNA is to be unemployed. Accordingly, you are likely to accept any terms that an employer gives to you. If you had two job offers, though, your BATNA for each job offer is to choose the other one.
Having a good BATNA implicitly helps you negotiate, because you will be more confident and less needy. Usually most people negotiate better with an ace in the hole or another way out — and that’s what your BATNA is. In other cases determining what your BATNA is can be more complicated. Depending on the negotiation, it may be that your BATNA is to go with another vendor, or foregoing a client and looking for other work. If you can determine what your counterparty’s BATNA is, it also can help you determine what you can demand from them before they walk away.
What’s implied from each party’s BATNA is its leverage in the negotiation. For a Fortune 100 company looking for a commodity supplier, its BATNA is to choose the next in line of a thousand suppliers willing to offer almost identical goods. On the flip side, each of those suppliers is likely much smaller, and their BATNA is to lose a giant chunk of revenue that might not be replaceable. And so the larger company will often dictate the terms. The party with more money, or more size, is often the company with more leverage because large, well-financed clients/vendors are fewer in number and so it is hard for small parties to find an alternative. And the converse is also often true.
Just because you are smaller, though, does not always mean that you have less leverage. It may be that you have unique skills, or a better product, or a contact inside supporting you that means even a large and well-financed company doesn’t have a great BATNA, and it will concede some contract or business points to get a deal closed. In other cases, it may be that the counterparty is too lazy to find a BATNA (or the cost of searching for a BATNA too high), and instead of coming up with one, gives you what you want.