Reference no: EM131544627

Literature to read:

BATNA is an easily misunderstood concept. Yes, it means Best Alternative to a Negotiated Agreement but it's not often how we think before entering a negotiation. First, it's time consuming and it's not something you want to go through if your conflict is about a restaurant to visit for dinner. In fact, these Getting to Yes worksheets should be used on big conflicts; it's actually worth it in selling a house, asking for a raise, making a new work plan, etc. Anytime when thinking the negotiation through ahead of time is worth an hour of time (I'd spend an hour in order to save $4,000 in buying a new car), these worksheets are worth the effort.

OK, back to BATNA. Here's a real-life example. I'm changing the dollar amounts so that they're easy to work with, but the rest of the conflict actually happened. Years ago, when I was single, I owned a townhouse that I paid $100,000 for. I had a roommate (Jim) who paid $500 a month rent (which was half my mortgage payment). When I got married, my wife and I did not want to live there (it had no yard for our son, cat hair and odor permeated the house and both my wife and son were allergic). So we rented a house for $1,000 a month and I put the townhouse on the market for $115,000 (a $15,000 profit). I let Jim, and his very nice furniture that made the townhouse look more attractive, live there while I was selling it. But it was a bad time to be selling; the market was down and no one was buying. During that time, I was paying my house rent plus my duplex mortgage (minus the $500 that Jim paid each month) and my financial situation was not looking good.

After months and months of no one even coming to look at the townhouse, finally someone made an offer. My real estate agent said she'd be over in an hour to tell us the details. My wife and I strategized during that time. The first thing my wife said was that we should set our bottom line right then so we wouldn't get caught up in hunger for closing the sale. I didn't want to lose money in selling the house for less than I bought it so we decided we could go down to $100,000 if necessary.

Then I remembered about Getting to Yes and BATNA. We rejected the bottom line concept and decided to figure out our BATNA. We got out the book, re-read the chapter and went through the process. We thought of all our options, that is, what we would do if after all the negotiation, they didn't buy the house. The first few options we came up with (offering them a rent to buy option, various financing options, etc.) were good ideas but not BATNA options. They were negotiation strategies, i.e., how to negotiate, not what to do if we couldn't finalize the deal, so we tossed them out of BATNA consideration. Here were the alternatives we could think of:

• Move to the townhouse ourselves
• Have Jim find a roommate
• Charge Jim the full mortgage payment
• Have Jim move out and find a family to rent it
• Keep losing $500 a month until we sell it
• Get a new agent (basically just a variation of the above option)
• Torch the place for insurance (OK, we didn't really consider this but when you brainstorm, you never know when ridiculous ideas might lead to a creative, good idea)

We evaluated each option. We'd already tried talking with Jim; he couldn't afford any more than what he was paying and we'd both searched and couldn't find him a roommate. We just couldn't move in ourselves, what with leases, allergies and everything else we had going on. We were afraid of the time it would take to find a family to rent it, so we decided our best alternative, if we couldn't cut a deal with this potential buyer, was to keep at it, knowing we'd lose $500 a month until we could sell it.

Now we had a BATNA. Whatever the buyer offered, we had something to compare it to. For example, if the buyer offered $90,000 we would decide which was better - our BATNA or taking the $90,000. In other words, we'd consider whether we could find another buyer who'd offer enough more than $90,000 to offset the $500 a month we were losing. If we thought in 6 months time, after losing $3,000 ($500 X 6 months), someone else would offer more than $93,000, we wouldn't take the deal. As it turned out, after negotiation, we sold the place for $96,000. Yes, I lost $4,000 in the deal but I thought it would take way too long to find another buyer who would offer more.

Actual Question:

Steve and Kathy are thinking of buying a new car. They have looked around a bit at their cars their friends and neighbors are driving and have checked the local paper for advertisements. They think that they want to trade in their current jalopy, a twelve-year-old gas-guzzler with over 100,000 miles.

Steven Kathy have done some Advance preparation, thinking hard about their interest in their transaction. They care a lot about the car's gas mileage, both because of the cost and because they worry about the environmental damage that burning fuel causes. Steven Kathy are expecting to have a child sometime in the next couple of years, and they would like a practical and save car in which they could put the legally required infant restraint when the time comes. Because they commute to work together (Cathy drop Steve off and parks at and uncovered lot near her office) and use that time to chat, they don't do much care about the car sound system, but they do care about the car's appearance and its ability to stand up to the weather year-round. Finally, being relatively ignorant about Automotive mechanics, they would prefer a car that would not give them much trouble and a reliable, convenient service center to take it to when necessary. the dealership closest to their home, and therefore the most convenient, it's called your neighbors drove it-used cars.

1. Identify my key interest that you would have

2. Of those key interests consider what could I do to satisfy my interest if we do not reach an agreement by establishing and identifying possible alternatives along with their pros, and cons.

3. Of my Alternatives, what will I really do if no agreement is reached (my bantas)? Why?

4. What can I do to improve my banta's? (Write down concrete steps you could take to improve your Banta even before you go into the negotiation.)

5. Consider alternatives open on the other person side by identifying their key interests.

6. What could they do to satisfy their interest if we do not reach an agreement?

7. List some Alternatives along with their pros and cons.

8. Consider what you would do if you were in their shoes? (Which of their self-help Alternatives looks best for them?)

9. How might I legitimately make their Banta less attractive? (Identify this in two ways: 1. by making it harder to pursue? 2. And by influencing their perception of how unwise or costly it might be?