Three Common Misconceptions…| Hal Movius & Joanna Chango

Being scholar-practitioners requires paying close attention to discrepancies. As we read the negotiation literature, work with clients, and read postings by fellow negotiation consultants and trainers, we’ve repeatedly come across major and persistent misconceptions about negotiation concepts and tactics.  Here we’ll address three of them.

Misconception #1: A Best Alternative to a Negotiated Agreement (BATNA) is a number.

While the term “BATNA” has been in use for over thirty years, people still get it wrong. BATNAs are not numbers, bottom lines, or walkaway points. Rather, a BATNA is a scenario or situation. It’s your next best option if no agreement is reached.

Your BATNA informs your reservation value or “walkaway point.” But these terms are not synonymous.  You can’t determine where your true walkaway point lies until you’ve thought hard about your BATNA. And you always have a BATNA, even if it’s uncertain, complicated, probabilistic, or god-awful.

But developing a sound negotiation strategy means considering your own BATNA as well as your counterpart’s. Carefully considering the other side’s BATNA provides a standard for decision making in terms of what one side will accept or reject in the negotiation. A counterpart’s weak or uncertain BATNA can give you leverage, even when your own BATNA is weak.

As an example, consider a renegotiation between a company and a consultancy that have worked together for many years. The company demands that the consultancy reduce its fees. The consultancy considers what to do.  At that moment, the company’s BATNA might be to find another consultancy that can perform the work at a lower price. But switching consultancies would involve lost time, money, and risks to the quality of work.  All in all, therefore, the company’s BATNA might not be very attractive, and their reservation price (or walkaway point) might be more flexible than their demand suggests.  If the consultancy has thought this through, they might decide to push hard to maintain current prices, while working to create value in other ways for the client.

Misconception #2: You should always make the first offer – and it should be ambitious.

We’ve heard negotiation trainers give this advice, and it is dangerously incomplete.  Yes, studies have shown that the initial offer in a negotiation serves as an “anchor” (a psychologically powerful number) that pulls the bargaining range toward your end (Kahneman, 1992). Yet research has demonstrated that when negotiators think very carefully about their counterpart’s reservation value and BATNA, the potential benefits of making the first offer on the outcome of the negotiation are eliminated (Galinsky & Mussweiler, 2001).

Moreover, there are serious risks in such an approach. The first is that you may know much less about the bargaining range than you think.  Making a first offer that is quickly accepted may mean that despite being “aggressive” you actually undershot what was possible.  The second is that by being aggressive, you risk impasse where none was warranted, losing credibility if you end up settling at a price far away from your first offer and fraying relationships along the way.

A wiser approach is to adjust your opening strategy to how much you truly know about the zone of possible agreement, or bargaining range.  When you don’t know a lot, start by thinking through BATNAs carefully.  Ask questions.  Create a ground rule for inventing without committing.

Finally, in distributive negotiations, or situations in which you have to make a bid, open with the highest number or most attractive package for which you can make a reasonable claim.

Misconception #3: Identifying attractive precedents and benchmarks will help you persuade the other side to give you what you want.

The “legitimacy” of a proposal – what makes it fair or reasonable – is almost always a subjective matter.  Demanding that the other side accept your benchmarks pulls for positioning bargaining and is meant to claim value. Conversations focused heavily on legitimacy are a) unlikely to lead to productive communication and a learning-oriented process that allows the parties to more easily create value; and b) probably means one side is talking too much and not listening enough.

Asking questions about the other side’s interests and learning about what is really important to them is an essential skill in creating value, and doesn’t mean you have to give anything up.  In many complex negotiations, differences will emerge in how the sides value different issues and options. By inventing options and discussing possible trades across differently valued issues, a negotiator can exploit differences and create joint value. Arguing over legitimacy after value has been created is a more useful and productive strategy than opening with that tactic.

At Movius Consulting we try to distill thousands of studies on negotiation, and draw on our practical experience, to provide nuanced and sound advice to clients.  Watch this space for more insight and reflection.