I’m thinking about selling my car. It’s an Audi A3, 2014, with… actually no thats my neighbour’s car… It’s a Hyundai Getz, 2006, with about 100k on the clock. I know nothing about cars. So I have asked a few people what they think it might be worth if I sold it privately. One said $4,000, another said $5,500. Others were somewhere in between. I looked online and saw that you can pick one up for anything between $3,000 and $6,000. So, when it comes to negotiating a price, what should I do?
Until recently, I would have assumed that I needed a bottom line. I would have thought that this would have stopped me from accepting a bad deal in the heat of the moment, because I liked the person, or because I wanted to get home to watch The Bachelor. I’ve since learnt that a bottom line is actually a pretty rudimentary tool when it comes to negotiation.
‘Getting to Yes’, which I have written about before here and here, points out several flaws in the ‘bottom line’ method (I know I am beginning to sound like a ‘Getting to Yes’ groupie of Crossfit proportions, but bear with me…). A better alternative is to go in to a negotiation knowing your ‘Best Alternative to a Negotiated Agreement’, aka your BATNA.
Not only is BATNA fun to say, it is also your best tool for avoiding a bad deal, or, more annoyingly, saying no to a good deal that you probably should have taken.
You might think that a bottom line would do this well enough. Going back to my car sale, if I decide that my car is worth $4,000 to $5,000, I could adopt a bottom line of $4,000. Providing I don’t accept any offer below that price, I should be right. Right?
Well, sort of. But what if I was offered $3,800 from someone at work, before I had even gone to the trouble of listing the Getz online. My bottom line would tell me that the $3,800 offer is a bad deal, and that I should say no thank you.
However, my BATNA would tell me this: I have two options. One is to accept the offer of $3,800, which is reasonably close to the value of my car. My alternative is to reject the deal, which would mean I would have to get on with the process of selling the car. I would have to take photos, upload them and write a witty sales pitch just to get the thing listed. After that I would have to politely chat to potential buyers on the phone and take them test driving for god knows how long until someone was smitten enough to hand over $4k. That picture of indefinite inconvenience is my best alternative, if I were to reject the offer of $3,800. It’s not pretty, and in my view, avoiding it is worth more to me than $200.
So, weighing up the offer and my BATNA, I can see that my interests are best served by taking the deal and getting on with my life. If I had stuck with my bottom line, I may have battled through the above scenario, only to make an extra $200.
This is a pretty simple example of a BATNA and you’ve probably found yourself weighing up your options in this way before, without really knowing that there was method to your thought process.
So what I have learnt is this. Instead of having a bottom line, I should:
- know my BATNA; and
- improve my BATNA
What’s that second one you ask? Well, improving your BATNA warrants a whole story of its own, and I’ll write about that later. But the premise is, if your best alternative to a negotiated agreement is better, you are more likely to push for a better deal. Otherwise, why would you agree?
This is particularly relevant (and useful!) in salary negotiations. For example, if you go into your annual salary negotiation knowing that you have a job offer at another place where they will pay you x dollars, you are going to make sure your newly negotiated salary is equal to or better than that offer. If it’s not, you might call quits on your current job and defer to your alternative – the other job with the better pay. Had you gone into that negotiation blind, without any BATNA, who knows what kind of lowly pay rise you might have accepted? If any? Praise be to BATNA.
Okay all this talk of salary negotiations has me needing chocolate and a lie down. Let’s talk about this another time.
Have you used a BATNA? Did it work?
Thought Leader(s): Roger Fisher, William Ury, Bruce Patton, Patrick Green QC
Source(s): Roger Fisher, William Ury and Bruce Patton (2012) ‘Getting to Yes’, 2nd Edition, Penguin.