Fall-back position

Assess your strategy and modify your tactics to try to reach a BATNA acceptable to both parties. You know your BATNA: say, in a price negotiation with a buyer, you are prepared (and permitted) to offer up to 20% discount on an offered price. You open the bidding by offering an 10% discount, which is rejected out of hand, and receive a demand for 30%. In fact, the other party is willing to accept a 15% discount - but you do not know this. There is an overlap in the fall-back positions, so the optimum outcome falls within both parties' individual assessment of a realistic agreement and an outcome between 15% and 20% discount can be agreed (see Figure 6.1). Whereabout this lies depends on several factors:

• The negotiating skills of the salesman and the buyer.

• How much the salesman needs to make the sale.

• How urgently the buyer requires the goods.

Figure 6.1 Assessing a fall-back position

However, where the salesman's fall-back position is a 15% discount, and the buyer will accept no less than a 20% discount, there is no overlap, and the negotiation has no chance of succeeding.

It is important, both in overlap and no-overlap situations, to try to keep the shape of the deal fluid, to help both parties to search creatively for ways to put the agreement together to their mutual advantage. Adding an attractive service package to a 12% discount offer to the buyer could clinch the deal for the salesman if he can sell the long-term benefits to such a deal to the buyer. Offering repeat orders of a size which would be beneficial to the salesman's company from a production economies of scale viewpoint might swing the salesman to accept a 23% discount demand.

Keep the whole package in view when you are negotiating, and be prepared to be creative to reach agreement. But do not introduce new proposals at a very late stage - this can be disruptive and is likely to upset the co-operative climate you have already established.

Remember that most negotiations are not just one-off affairs. Employer/employee, salesman/buyer - these are examples of long-term relationships which existed before the negotiation began, and will have to continue and be maintained long after the negotiation has finished. And there will in the future be other negotiations between the parties. So make sure that both parties go away from the negotiations feeling they have achieved something positive. If one party feels it has been exploited in the process, resentment will fester; implementation of the agreement will be done under duress; and the negotiators will lose credibility and become scapegoats for the dissatisfaction of their constituents Remember that you may face more reluctant and aggressive negotiators next time - who are out to 'screw' you! Therefore look at the outcome and its implications from the point of view of the other party, too. If you don't, you are closing your eyes to potential future conflict.

What is a BATNA?

When discussing a BATNA (B est A lternative T o a N egotiated A greement) it is probably appropriate to start out by saying that it is not the socalled bottom line that negotiators conceptualise to protect themselves against concluding agreements where they give too much or receive too little.

A bottom line denotes the worst possible outcome that could be accepted, and is therefore intended to act as a barrier beyond which the negotiation may not extend. It is a defense against the pressure and temptation that is often exerted on members of a party to agree to a deal that is selfdefeating. Although bottom lines undoubtedly do serve a purpose, they unfortunately create rigidity and inflexibility, inhibit creativity and innovation, and reduce the incentive to seek tailor-made solutions that reconcile differences.

By contrast, a BATNA does not concern what should be achieved, but what the course of action should be if an agreement is not reached within a certain time. As the standard against which an agreement is measured, it prevents a negotiator from accepting an agreement that is too unfavourable or not in its best interests, as it knows of a better option outside the negotiation.

By virtue of the fact that it concerns what the alternative to a negotiated agreement would be, it allows far greater flexibility and room for innovation than is the case with a predetermined bottom line. The better a negotiator’s BATNA, the greater that negotiator’s power, given the attractive alternative that negotiator could resort to if an acceptable agreement is not reached.

When developing a BATNA, a negotiator should:

· Brainstorm a list of alternatives that could be considered if the negotiation failed to deliver a favourable agreement;

· Select the most promising alternatives and develop them into practical and attainable alternatives; and

· Identify the most beneficial alternative to be kept in reserve as a fall-back during the negotiation.

Although it would be ludicrous to enter a negotiation with a preconceived decision to not conclude the negotiation, having a viable BATNA is an essential insurance policy. A well thought through, clearly defined BATNA has the advantage that it makes it possible for the negotiator to break off the negotiation if it becomes clear that a beneficial outcome is not achievable, as the negotiator would then know what the consequences would be should the negotiation fail. This ‘willingness’ of negotiator to break off a negotiation should it become necessary, permits the negotiator to adopt a more firm and forceful stance when presenting ideas and interests as the basis for an agreement.

The question as to whether a BATNA should be disclosed to the other party/ parties depends on the strength/attractiveness of the BATNA. Should a negotiator have a strong BATNA, it may be beneficial to reveal it, as this would prevent the other party/ parties from acting as if a good alternative does not exist. Where a party, however, has a weak BATNA, non-disclosure may be the preferred approach, as this may, especially where the other party is showing signs of over-estimating its opponents BATNA, prove to be a bonus that should not be squandered through disclosure.

The more a negotiator knows about the alternatives available to the other party/ parties, the better that negotiator is able to prepare for a negotiation. Should a negotiator before a negotiation have access to information that the other party is over-estimating its BATNA such information could very effectively be used to lower its negotiation expectations.

Where both parties to a negotiation have a strong BATNA, negotiation would seem rather meaningless, as there would be very little incentive to come to an agreement. In such cases the parties should rather look elsewhere to pursue their business.

When a party to a negotiation fails to explore its BATNA, it finds itself in a very insecure situation, and is exposed to:

· Strong inner pressure to reach an agreement, as it is unaware of what would happen if the negotiation fails;

· Over-optimism about proposed agreements, often resulting in the associated costs not being fully appreciated;

· The danger of becoming committed to reaching an agreement, as it is then unaware of alternatives outside the negotiation, and therefore would be inclined to be pessimistic about its prospects if the negotiation fails; and

· The vagaries of the law of agreement, which holds that when persons agree to something this is entirely dependent on the attractiveness of the available alternatives.