I work with a lot of people.
Students, managers, executives, doctors, attorneys, salespeople,
and I realize that everybody is negotiating nearly all the time.
I also realized that most of these people often don't have a game plan for
negotiation.
We're going to review two key things, your BATNA and your reservation price.
Let's start with BATNA.
First, BATNA is an acronym, and it stands for
your best alternative to a negotiated agreement.
It's your plan B, as some people like to call it.
Your BATNA is your backup plan.
The course of action you can take if all else fails.
To make this come alive, let's put this in a salary context.
Let's take the case of one of my students, let's call her Sandra.
Company X made Sandra a job offer for $80,000 a year.
However, Sandra was hoping for more.
What is the first question I ask Sandra?
The first question I ask her is how many other job offers do you have?
Sandra looks at me in dismay and
says, look, this is not the roaring 90s, I only have one job offer.
At that point, I introduce the concept of BATNA to Sandra.
And she groans, oh my gosh, I don't have a BATNA.
Panic starts to ensue.
At that point, I say, look Sandra, you have a BATNA.
You always have a BATNA.
Yours may not be very attractive, but you have a BATNA.
In other words, Sandra could work at the post office.
It's a perfectly decent job.
Sandra could also flip burgers.
That is also another decent job, but we all know
that Sandra would have a lot more leverage, a lot more bargaining strength.
If she had a job offer at Boston Consulting Group, or Abbott, or
Google, or Hyatt, or you name it.
In other words,
the stronger your BATNA, the more leverage you have in the negotiation.
I am going to give you three pieces of advice when it comes to BATNAs.
Number one.
Don't be passive about developing your BATNA.
Be very proactive.
You need to cultivate your BATNA.
Treat it like a plant.
Feed it, water it, grow it.
BATNAs are dynamic.
Second, never reveal your BATNA to the counter-party.
If you do, you give up all your leverage.
Suppose, for example, Sandra tells Company X,
look, my next best alternative is to make $9.00 an hour at the local burger shop.
That would not be a wise move.
Yet, you would be surprised at how many people reveal their BATNA.
Rather you want a signal that you have options
without revealing their exact value.
Third, never lie about your BATNA.
Many people are tempted to misrepresent their alternates by
claiming to have offers that they don’t have.
This is unethical and can backfire if the other party calls your bluff.
Your BATNA is a course of action that you are going to take,
in the event that things don't work out with your negotiation.
BATNAs may be uncertain.
Let me give you an example.
I've had several students receive exploding job offers.
An exploding job offer is kinda like a Cinderella job offer, meaning that
it's only good for a few days or until midnight and then it will be retracted.
One of my students decided not to take the exploding job offer
based on the belief that he may receive a better offer in the future.
We aren't done.
Stay with me here.
We need to talk about your reservation price or RP.
If your BATNA is your best course of action outside of the negotiation.
Your RP is the lowest amount you can agree to, or
highest amount you can pay inside a negotiation.
Let me give you my own painful example.
Several years ago, I was selling my house.
Like Sandra I did not have a good BATNA.
That is another way of saying no one had made an offer for my house.
My BATNA was to rent my house to undergraduate students.
Many of my colleagues and neighbors pointed out the disadvantages.
Those kids are going to ruin your carpets.
You'll be in the police blotter.
They were right.
It was a very unattractive BATNA.
One young woman in my negotiations course raised her hand when I told this story and
said professor, what is the least amount of money I could offer you for
your house right now, where you would be indifferent between
selling your house to me or renting to the students.
I gave that student an A plus,
because she perfectly understood what a reservation price is.
A reservation price represents the exact monetary equivalent of your BATNA.
Okay. Let's sum up.
Number one, you always have a BATNA.
Even if it means waiting and hoping.
Two, you should always try to improve your BATNA.
Don't be passive.
Three, you should never directly reveal your BATNA to the counter-party,
otherwise you lose your leverage.
Four, signal to the other party that you have attractive options.
Finally, once you determine your BATNA,
then you can devise your RP, your reservation price.
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