Thursday, June 7, 2007

Negotiation Part 1 - The BATNA

Of all the classes I've taken, the one I consider the most useful is one on Negotiations. I find myself using the principles on a near-daily basis and interpreting a lot of the actions I see in others as negotiation tactics. If anyone out there is taking business classes at DePaul, I recommend it highly.

One of the core principles in negotiation is the Best Alternative To a Negotiated Agreement, or BATNA. This term was coined by Robert Fisher and Bill Ury and used in their book Getting to Yes: Negotiating Agreement Without Giving In. The concept is straightforward, your BATNA is your best outcome if you do not come to an agreement in this negotiation, or rather, what you get if you walk away.

Knowing your BATNA and your opponent's BATNA (I use the term loosely, the person you are negotiating with shouldn't normally be considered a foe to be conquered) lets you know the best and worst acceptable outcomes.

For example, If you are selling your house and you have an offer from another buyer for $150K, that is your BATNA. If the buyer offers less than that, you should turn them down because you know you can do better. In contrast, if you know the house you want to buy has multiple offers on it, you would expect the seller's BATNA to be pretty close to their asking price, if not higher.

Of course, most BATNA calculations are not this simple. There are usually more variables involved than price, and even the price and costs aren't always as transparent as they are in a home purchase. A lot of effort and research can be spent on getting a better picture of your opponent's BATNA and even your own. Still, having this information is the most effective way to being a better negotiator.

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