BATNA Basics: Boost Your Power at the Bargaining Table

BATNA Basics: Boost Your Power at the Bargaining Table

Program on Negotiation

HARVARD LAW SCHOOL

1. Assess your BATNA using a four-step process.
Adapted from “Accept or Reject? Sometimes the Hardest Part of Negotiation Is Knowing When to Walk
Away,” by Deepak Malhotra (professor, Harvard Business School), first published in the Negotiation
newsletter, August 2004.

It was a classic case of a business partnership gone awry. After building a profitable
construction company together over several decades, Larry Stevenson and
Jim Shapiro recognized that their differences had become irreconcilable. Stevenson
wanted to buy out Shapiro, who was willing to sell for the right price. After
months of haggling and legal maneuvering, Stevenson made his final offer: $8.5
million for Shapiro’s shares in the company.

The company is worth about $20 million, Shapiro thought to himself. I own
49% of the shares. Heck, I helped build this company. I’m not going to accept
anything less than my fair share—$10 million. I’d rather fight in court than accept
$8.5 million. Shapiro rejected the offer, and each party prepared for a trial.
Shapiro’s rationale for rejecting Stevenson’s offer seemed reasonable enough.
Furthermore, Shapiro’s lawyers assured him, a court ruling very likely would be
in his favor.

Yet Shapiro made the wrong choice. He could have figured this out if he had
assessed his BATNA—his best alternative to a negotiated agreement. A negotiator’s
BATNA is the course of action he will pursue if the current negotiation
results in an impasse. An evaluation of your best alternative to a deal is critical if
you are to establish the threshold at which you will reject an offer.
Effective negotiators determine their BATNAs before talks begin. When you
fail to do so, you’re liable to make a costly mistake—rejecting a deal you should
have accepted or accepting one you’d have been wise to reject. In negotiation, it’s
important to have high aspirations and to fight hard for a good outcome. But it’s
just as critical to establish a walkaway point that is firmly grounded in reality.

BATNA Basics Boost Your Power at the Bargaining Table

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