BATNA: What it means and how to get the most out of negotiations

In 1981, William Ury and Roger Fisher published their bestseller Getting to Yes: Negotiating Agreement Without Giving In, a book about negotiating that spawned the technique known as BATNA. This technique helps you to identify a good Plan B and keep it up your sleeve and ready to use, in case the main goal of your negotiations turns out to be impossible to achieve.

Want to find out the meaning of BATNA and to learn about its main features, as well as how to make the most of any negotiation?

What is the meaning of BATNA?

BATNA is an acronym for Best Alternative to a Negotiated Agreement. This is a technique that helps us determine and secure the best alternatives in a negotiation, with the aim of being prepared to face any scenario and reach the most profitable agreement possible. 

Thus, by reviewing all of the options in advance, we can pick the best alternative in the case of not reaching the desired results in the first round of negotiations. Having a good BATNA means you have a stronger safety net and more negotiating power.

As noted by James Sevenius, a Harvard professor specialised in negotiations and the creator of the negotiating in 3D concept, good negotiation techniques and designs are not enough, preparation away from the negotiating table also adds a third dimension, essential in this field. In his book he posits the importance of ensuring the correct parties are involved and explains this as follows:

The owner of a restaurant wants to expand his business, so he negotiates the purchase of the yoga studio next door. However, its owner was asking for too high a sum and he was forced to bargain if he didn’t want to miss out on this chance to grow his business. 

When he thought outside of the box, he realised that the same building housed other businesses that, although not right next door, were connected by a rear corridor. So he was able to ditch his initial idea to instead negotiate with the owner of one of these properties. Specifically, a cosmetics business that was pretty quiet but which the owner refused to close. 

They decided to build a new partition wall to redistribute the space, for which the restaurant owner would pay rent. In this way, both parties were winners: one business survived, and the other grew.

How to determine a good BATNA

Now that you know the meaning of BATNA, it’s time to determine the best BATNA and secure a yes in your negotiations. It’s important to follow this process:

• Make a list of all the alternatives that may arise during negotiations, without neglecting any, no matter how weird or unfavourable they may seem at first glance.
• Evaluate each possibility individually, taking all of the pros and cons into account.
• Go for the most profitable option. This will be the position you fall back on if you can’t reach an agreement on your main goal. 

Other tips to determine the best BATNA

• When identifying a good BATNA, you should never forget that there are two sides to any negotiation, and both parties are likely to have weighed up the best possible outcomes. To determine your BATNA, it’s highly recommended that you put yourself in the shoes of the other person you’ll be negotiating with. That will give you valuable insight to help build a better strategy and reach an agreement.
• Don’t reveal your BATNA until you’ve exhausted all the options to close the negotiation in favour of your first goal. If you play the BATNA card too early, it will be impossible to wind back, and you will be in a weaker negotiating position.
• Don’t confuse your BATNA with your lower limit, because this negotiating technique is designed to achieve the best profitability possible, not the lowest offer you’re willing to accept. In any case, it’s a good idea to establish what that limit actually is, and understand how low you’re willing to go. 
• It’s important to be realistic and be aware of where each party stands in the negotiation in order to reach an agreement, because if your perspective is unrealistic, it will be difficult to achieve.
• List the possible alternatives you are willing to accept in order from most to least profitable. In this way, you can sufficiently prepare for any scenario and increase the chances of securing increased profitability. 

What is the meaning of BATNA: 2 examples

In the following examples, you can see how important it is to have a good, solid BATNA. 

Example 1: insurance policy

The Harvard article Negotiation Tactics, BATNA and Examples for Creating Value in Business Negotiations highlights the importance of being able to translate your BATNA to understand its implications for the current negotiation. Let’s look at an example:

Sam has to decide whether to renew his insurance policy, but he has noticed that his insurance company has increased his policy by 7 - 10 % in recent years and doesn’t think it is offering the best deal. After doing market research, he has found a different company offering him a policy for 30% cheaper and is considering not renewing his current policy. 

However, after digging a bit deeper, he has found several important differences in the policy cover, terms and conditions hidden in the legal jargon. Sam has compared the prices and realised his current company is actually offering the better deal.

Example 2: selling a business

Besides translating the other party’s BATNA, it’s vital to understand your own BATNA in every negotiation. Let’s look at an example:

Lucy wants to sell her bakery business for the sum of €450,000. She knows the market well and is sure that this is a good starting price, as the business is located in a good area, has recently been renovated, and is being sold with all of the equipment and machinery necessary to operate the business from day 1. However, she needs to make an urgent sale due to a financial situation, so she sets her BATNA at €420,000.

Michael is looking for a similar business and is interested in buying this one, but he’s not ready to pay as much: his limit is €350,000, although his BATNA is €380,000. Their positions seem to be too far apart and it looks too difficult to reach an agreement. However, Laura, who has prepared the negotiation, has come up with another alternative: sell for €380,000 without machinery included, renting this out instead of selling it. Laura’s BATNA helps her reach an agreement suitable for both parties. 

Learning negotiation skills: vital in the world of work

As shown, it’s vital to know the meaning of BATNA, since it is an extremely valuable negotiating technique. Improvising is one of our worst enemies when it comes to negotiations, because without a good plan it’s difficult to reach the best possible outcome in line with our interests.

With the aim of boosting, empowering and promoting talent, Banco Santander, in collaboration with The London School of Economics and Political Science, one of the world’s most prestigious educational institutions in the fields of economics and business, launches 1,000 seats for the Santander Course | MBA Essentials 2024 – LSE.

In this ten-week, 100% online certificate course, designed so that you can complete it at your own pace, you will quickly and practically learn the essential business skills to make better decisions and achieve greater impact within your organisation. The programme is offered in English, Spanish and Brazilian Portuguese.

This is a unique opportunity to take an in-depth look at the three pillars of business management and leadership taught in an MBA: strategy, finance and leading teams. Additionally, you will be supported by the best mentors and facilitators from the LSE and you will be able to interact with your peers via weekly forums and group dynamics. The course has no cost for the beneficiaries and it is not necessary to have a university degree, nor to be a Banco Santander customer.

Do you want to play a more relevant role in decision-making in your professional environment? Sign up for the Santander Course | MBA Essentials 2024 – LSE and whether you get it or not, never stop learning.