Last week we introduced the concept of LIM – a framework for analyzing and prioritizing your negotiating goals. Closely related to LIM is the notion of BATNA – Best Alternative To No Agreement.
BATNA is what happens if the negotiation doesn’t result in a deal. You are back where you started from – and have lost time, effort, expenses and energy. BATNA, often referred to as the ‘no deal option’, is your worst-case-scenario.
Why is BATNA so important?
Experienced Chinese negotiators use their BATNA as the starting point for establishing the LIM framework. The whole purpose of negotiating is to improve you situation, so BATNA is a crucial benchmark. Sometimes, however, inexperienced negotiators don’t consider their own BATNA or misunderstand what their true BATNA is.
BATNA helps negotiators in 3 ways:
1) Tells you when to walk away. If the proposal is below your BATNA, its time to go.
2) Helps you set your goals and LIM
3) In the longer term, understanding your own BATNA helps you run a more efficient department or company because it shows you how to raise your no-deal option.
Raising your BATNA is important because the higher your BATNA, the stronger your bargaining position.
Let’s take a look at 2 scenarios.
1 – Bob wants to buy a pair of shoes. He goes to Xu Jia Hui where there are many department stores, malls and shoe stores. Since he has so many options, his BATNA is very high – if he doesn’t like the prices or selection (i.e.: his Negotiating Variables) in one store, he knows he can easily go to another. Bob enjoys a very strong position and receives good service from a wide range of sellers who want his business.
2 – This time, Bob is looking for a hotel in a small town in the middle of nowhere. It is 6:00 in the evening, and getting dark. Bob is hungry and tired and has an important meeting first thing in the morning. There is only one guest-house near the train station – and Bob doesn’t know of any others. If he can’t make a deal with the guest-house manager, then he will have to sleep in the train station or on the street. Sure, he could keep looking – but that might make his situation worse if he can’t find an alternative quickly. In this case, Bob’s BATNA is very low.
HINT: Never confuse your BATNA with your counter-party’s. I often hear Chinese negotiators say that the other side will have to accept the terms because otherwise it will be a disaster for the Chinese side. That’s not logical.
Some negotiators don’t recognize their true BATNA until the negotiations have already failed. Make sure that you don’t make this mistake in your China negotiations.
