Join Fred Kofman for an in-depth discussion in this video Coming up with your best alternative to a negotiated agreement, part of Fred Kofman on Managing Conflict.
- There's an important term when you're negotiating, BATNA, B-A-T-N-A, this is an acronym, which means the Best Alternative To a Negotiated Agreement. Why is this so important? Because whenever you're negotiating, you're trying to reach a solution that will be better for you then what you could do on your own. I mean, imagine, you're going to ask for a raise and your alternative, if they tell you no, is to quit and be unemployed and starve to death.
I mean, whatever they tell you, actually they could tell you, we're going to lower your salary because you asked for a raise and you have to say, ok, this is better for me than starving to death so almost anything would be better. Now, put yourself in the same situation, but you're going to ask for a raise because you have another job offer that pays, actually, a little more than what you're asking. Well, if they say no, you can say thank you, I appreciate that, I'm leaving. Totally at peace, you don't have to argue. The floor of the outcome of this negotiation is going to be given by your outside option.
So perhaps, the most important part of the negotiation happens before you start the conversation, which is to prepare your plan B. What do you do if the negotiation doesn't yield a good outcome? What's the best you can do without the cooperation of this other person? And that's why it's called BATNA, what's your best alternative to a negotiated solution? So let us say, you are a customer and you'd like to buy a car and you go and you negotiate the price and the salesperson is saying, well, this is my last price, I'm not going to lower the price anymore.
Now you have two options, you can take that or you can go buy another car. If you have another option that for you, it's a better deal than the last option of the last offer of this seller, then you take the other. And that allows you to see that whatever outside option you developed, it's like a ratchet because that's the floor of what's going to happen in this negotiation. If your option is here, you're willing to come down to here, but if your option is here, the moment it crosses this line, well, then you have your outside option.
So perhaps the most important source of bargaining power is your BATNA. What would you do if you can't agree? That's very strategic but that's something you have to do before you start the negotiation. You don't develop your BATNA while you are speaking to the other person. You take a step back and you say, what would I do if we can't agree? What's the best thing I can do alone? In a non-organizational situation, when you are negotiating with someone that you don't have a long-term relationship or you don't belong to the same company, well, your options are, you stay or you leave, or you agree or you disagree and you can agree to disagree and part ways.
When you're working in the same company, you can't do that. You can't just say, well, you know, we agree to disagree and then we're not going to do anything. Let's just say, I'm the engineer that wants a certain feature in the product and you're the product manager that thinks that feature is not helping. Well, we can't just agree to disagree, the product will either have the feature or will not have the feature. We have to resolve the conflict somehow and what if we talk we understand but we, generally, disagree on what to do.
How do we solve this? Well, in general, BATNA is not a good way. People can't go and say ok, I'll put the feature alone or I block your feature all by myself. In an organization, you need to involve a person that has the authority to make a judgement call. At LinkedIn, we have something called the Five Day Alignment Process, for example, and five days means if two people disagree about anything and they cannot agree after five days of thinking about the issue, then they have to escalate.
And by escalate, we mean something very, very specific. We mean escalate in a clean way. How do you escalate in a clean way? What's the plan B within an organization that wants to keep a good network of relationships and collaboration? Well, the first thing is both people go together, there's no such thing as unilateral escalation. You never go behind the other person's back. So both people agree that they can't agree, that they see differently and there's no obvious solution to this problem and then they say, ok, we'll escalate together and then they both go to see their manager.
And they explain to their manager what are the trade-offs that they see, what is one person's position, what is the other person's position and what may be some ways to move forward, either by choosing this tool or by relaxing some constraint and allowing both things to be integrated at the higher level. That is a very collaborative conversation with the manager. It's not who's right and who's wrong. It's, we both have the same collaboration purpose, which is to help the company, within this purpose, we have different strategies that we believe are going to be more constructive or more useful but we don't essentially disagree over what we're trying to do, we're disagreeing about what's the best way to accomplish what we're trying to do together.
And we'd like your help, Mrs. Manager, because you have the authority to make a judgement call and we'd like to explain to you how we see things and trust that you'll make a call that is in the best interest of the system as a whole. So in a company that plan B is not, you part ways and you do something else, but you actually join ways and you go see a person in authority together to get their help in making a judgement call on how to move forward.
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