BATNA

by Paul Cutler | Aug 29, 2024 | ADR

BATNA is a negotiating term which was coined by  Roger Fisher and William Ury in their book “Getting to Yes,” (which I have previously blogged about).

What’s a BATNA?

Let’s start with the definition of BATNA. BATNA stands for Best Alternative to a Negotiated Agreement. BATNA is a term,  It is a very important concept in negotiation theory and emphasizes the importance of having a strong, viable alternative when negotiating.

There are a number of reasons why understanding your BATNA is very important. When negotiating, parties often present proposals or concessions. By comparing these offers to your BATNA, you can better determine whether the terms are advantageous or not. It can also be useful for assessing any alternatives that might exist. A BATNA can also serve as a “walk away point,” helping negotiators decide when to continue discussions or not.

A strong BATNA can also enhance negotiating power. The challenge for those with weak alternatives is to attempt to improve their own BATNA or to weaken the opponent’s BATNA.

Negotiating power

Power is one of the factors that influences the way parties negotiate and the outcomes achieved.  There is a considerable volume of academic literature concerning power and its role in negotiation.

Generally, negotiators with attractive BATNAs are powerful. It is also the case that negotiators who have more choice alternatives are also generally more powerful. There is a greater chance of matching preferences with alternatives. It can also be a powerful factor if a party has the ability to exit one negotiation and commence negotiation with a different party.

Power has both positive and negative effects on negotiations. It is well known that powerful people initiate negotiations and often move first in making the first offer. However, if both parties believe they have strong BATNA both may refuse to yield to the other. Hence, it has been said that  “…lawsuits go to trial, labour strikes drag on, and ethnic warfare continues, even when agreements that would make both sides better off are feasible”.

Inequality of bargaining power

On the other side, when power imbalances exist, the BATNA becomes particularly important for the less powerful party. It sets the limits of what advantage can be taken. Power imbalances may also lead to rigidity on part of both parties. The only perceived source of power for the weaker party is to refuse to agree to anything. It may also lead to “ultimatum bargaining” which has been described as “the less powerful party might resent the sense of coercion or inequity inherent in the more powerful negotiator’s demands and refuse to yield, even knowing that this course of action will cause harm to both sides.”

Taken to its extreme, inequality of bargaining power may be the ‘single thread’ which runs through the common law doctrines of unconscionability, undue influence and duress. It is unclear whether this unifying thread is accepted as the jurisprudential basis in Australia. In any event that’s definitely a topic for further discussion at another time.

Creative commons acknowledgment for the photograph.

Getting to Yes

by Paul Cutler | Aug 1, 2024 | ADR

When I started working as a commercial litigation solicitor in a small firm in 1996, the partner suggested that I read “Getting to Yes: Negotiating Agreement Without Giving In” by two Harvard academics Roger Fisher and William Ury. It was first published in 1981.

Even as a young lawyer I certainly understood the power of negotiation and certainly understood that most litigious matters settle before they are determined by a court. I now know (but probably didn’t fully appreciate at the time) that I was a traditional adversarial negotiator. Sure, there was compromise and terms were negotiated but really one party effectively won at the expense of the other.

Principled negotiation

Fisher and Ury introduce the concept of principled negotiation which is a more collaborative approach to resolving disputes. They set out four key principles of effective negotiation:

1. Focus on interests, not positions: Instead of getting stuck on rigid demands, explore the underlying needs and concerns of all parties. This approach opens up more possibilities for creative solutions that satisfy everyone’s core interests. 

 One story often told is about two children arguing over a chocolate bar. The first inclination is for an adult to cut it in half and distribute it. However, if anyone asked the children they would discover that one wanted the wrapper (which contained details of a competition that they wanted to enter), the other wanted the snack. It was possible for both children to get precisely what they wanted.

2. Separate the people from the problem: Recognise that emotions, egos and personal dynamics can interfere with finding solutions. Relationship issues should be addressed directly, respectfully and separately from substantive ones. Negotiators can maintain a productive focus and avoid personal conflicts from obstructing the process.

3. Invent options for mutual gain: Negotiation shouldn’t be a zero-sum game where one party’s gain is another party’s loss. Brainstorm a wide range of potential creative solutions before deciding on one. This expands the “pie” of available resources and increases the likelihood of finding win-win outcomes. 

4. Insist on using objective criteria: When interests conflict, use fair standards and impartial procedures to resolve differences. This helps avoid a destructive battle of wills and produces outcomes that both sides can accept as legitimate.

What’s a BATNA?

Another thing in Getting to Yes which took me a long time to understand was the concept of a party’s Best Alternative to a Negotiated Agreement (BATNA). In preparing for a negotiation if a party can identify their BATNA it gives them a clear sense of when to accept a deal and when to walk away. There is no point in accepting any offer which leaves someone worse off than their BATNA.

Getting to yes

Getting to Yes is easy to read and not very long. It has lots of real world examples and practical advice. It also emphases the importance of active listening, effective communication and empathy, all of which help to build trust and encourage constructive interactions.

As I have gained more experience as a lawyer and now as a mediator, I have become more committed to principled negotiation. 

If you only ever read one dispute resolution book in your lifetime, my recommendation is that it should be this one.

Creative commons acknowledgment for the cartoon.