BATNA – 5 Tips to Master the Art of the Deal
What is BATNA?
It’s an abbreviation for “Best alternative to no agreement”. It’s your backup plan if your negotiation doesn’t lead to a deal. By determining a BATNA you’ll have more confidence because you have a backup plan if the negotiation doesn’t work out. Because of this, you won’t feel forced to make a bad deal.
Going into any negotiation, it’s important to have a clear understanding of your BATNA. If you’re negotiating with a supplier, be sure about the pricing of alternative suppliers. If you’re negotiating over salary, your alternatives might be a different job offer.
The BATNA is your point of departure. Anything you can ‘win’ in your negotiation makes your BATNA less attractive.
Mark, a procurement manager of a large supermarket is negotiating with a supplier of canned food. The supplier offers to deliver 100,000 pieces for a price of $1.50 within two weeks. The procurement manager knows that a different supplier offers the same product for $1.40, therefore Mark knows this offer is worse than his BATNA and he shouldn’t agree.
Of course, there are other variables that Mark will consider. Is the BATNA able to deliver the same volume? How long will it take the BATNA to deliver?
The Data-Driven Procurement Certificate program teaches you the skills needed to drive better, fact-based decisions that ultimately benefit both organizations and its employees. As a data-driven procurement manager, you will have a comprehensive analytics skill set that will enable you to replace gut feeling with crystal clear analysis and help to achieve deals with results you have been dreaming of.
How to determine your BATNA
Finding alternatives to your current negotiation can be difficult. Sometimes it will take time to identify the alternatives and even more time to make them attractive. You have to establish a concrete value for your alternatives. For example, what is the value of a supplier who is able to deliver within 2 weeks, compared to a supplier who delivers in 2 months, but at a lower price?
However, exploring your BATNA is always a good time investment as having a strong alternative improves your ability to negotiate a good deal in the current negotiation.
Here’s how you find your own BATNA:
- What are your 5 best alternatives to a negotiated agreement?
- Review the list. What alternatives would be the best?
- How can you improve this BATNA?
- Can you make a better arrangement with another partner?
- Is there a way to change the terms of your BATNA?
- Can you remove some of the constraints of your BATNA?
- Can you leverage your current negotiation to improve your BATNA?
- After improving your best alternative, write your new BATNA.
How to use BATNA
One of the greatest dangers in a negotiation is being too committed to coming to an agreement. Your negotiation partner will immediately sense this and will get the upper hand in the negotiation.
Before you begin a negotiation, know your options. Are you able to walk away? What are the pros and cons of each alternative? However, don’t stop here. Let’s determine your opponent’s BATNA.
How to determine your opponent’s BATNA
Here’s how you find your opponent’s BATNA:
- What are their 5 best alternatives to a negotiated agreement?
- Review the list. What alternatives would be the best for them?
- How can they improve this BATNA?
- Can they make a better arrangement with another partner?
- Is there a way to change the terms of their BATNA?
- Can they remove some of the constraints of your BATNA?
- Can they leverage your current negotiation to improve their BATNA?
- After improving their best alternative, write their new BATNA.
After determining your opponent’s BATNA it’s time to reflect on the results and how they impact your negotiation. Are you able to influence your opponent’s BATNA? Experienced negotiators frequently try to convince their opponent their BATNA isn’t a great alternative as they think it is.
Now you know their BATNA, you should consider the following things:
- What will be their main goal in this negotiation?
- What will be their strategy?
- What competitive pressure do they experience?
- Are they on a tight deadline?
Final thoughts on BATNA
In most negotiation situations you will have a continuing relationship with the other person. That’s why it’s important to come to a mutual feeling of ‘winning’ for both parties. If the other person feels like he lost, he might lack commitment in the execution phase of the deal. Or even worse, he will be after retaliation.
"Very useful course, many actionable strategies"
Start using the right preparation to drive better, fact-based, procurement-decisions that ultimately benefit both the organization and your career. As a Data-Driven Procurement Specialist, you have a full analytics skillset that will enable you to drive data-driven decision-making throughout procurement.
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