Preparing for a Negotiation: BATNA or Bottom Line?

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Collective Bargaining > Best Practices > Preparing for a Negotiation: BATNA or Bottom Line?

Preparing for a Negotiation: BATNA or Bottom Line?
Chloe Xu, Australia, Premium Member
It is important to prepare yourself for any negotiation, including the minimum you are willing to accept. In my post on BATNA (Best Alternative to a Negotiated Agreement) I explained this concept and argued it is critical for negotiators as they cannot make a wise decision about whether to accept or reject an offer unless they are clear about what their best alternative is.

I also mentioned that in the process of developing a BATNA, reservation value (aka bottom line) needs to be considered. As BATNA is evaluated based on bottom line, are BATNA and Bottom Line in fact the same thing?

A Bottom Line is the least price you will accept as a seller, or the most you will pay as a buyer. The bottom line is meant to act as the final barrier where a negotiation will not proceed further. It is a means to defend oneself against the pressure and temptation that is often exerted on a negotiator to conclude an agreement that is self-defeating. Although bottom lines definitely serve a purpose, they also regrettably foster inflexibility, stifle creativity and innovation, and lessen the incentive to seek tailor-made solutions that resolve differences.

In contrast to a bottom line, a BATNA does not concern itself with the details of any particular negotiation, but rather determines the course of action if an agreement is not reached within a certain time frame. As a gauge against which an agreement is measured, it prohibits negotiators from accepting an unfavourable agreement or one that is not in their best interests because it provides a better option outside the negotiation.

Since BATNA is the alternative to what a negotiated agreement would offer, it permits far greater flexibility and allows much more room for innovation than a predetermined bottom line. When a negotiator has a strong BATNA, (s)he also has more power because he possesses an attractive alternative that he could resort to if an acceptable agreement is not achieved.

⇒ Any further tips for BATNA? What other tools do you recommend to prepare a negotiation?

Source: Chern, C. 2014, The Commercial Mediator's Handbook, CRC Press.

Preparing for Negotiations
Per Ohstrom, Business Consultant, United States, Member
BATNA is a good approach to use, since it allows a party to walk away if there is not enough "common ground" in the negotiation zone.
It is also very important to
- Understand the priorities of the other party
- Have a set of concessions of value to use over the course of the negotiation.

BATNA & Bottom Line
Colin Goodluck, Student (University), Guyana, Member
BATNA & Bottom Line have both worked for me at one negotiating table dealing with the same customer. Both may indeed be different, but both can also be used at the one table of ideology and finance tug-of-war.
Initially I went in with an alternative as a counter offer and I walked out because the bottom line offered was not in my business' interest.
Later on, we met again and considered my "BATNA", since the bottom line strategy did not provide a path of success for both parties. It turned out we both needed each other's services. I needed his money and he needed my expertise.

BATNA or Bottom Line
Josephat Olwal Ngesah, Kenya, Member
Personally, I think what matters is if the agreement is meeting my or my company's interests.
However, it should be clear how much ground you are ready to cede. Negotiations are meant to have a WIN-WIN outcome. The moment you start having one party dictating the terms then you should start preparing for a disastrous end. Like in Colin's case he realized they both needed each other and thus had to settle for a BATNA.

BATNA versus Bottom Line
Paul A Ford, Project Manager, United States, Member
This subject was part of my Communications for Project Managers graduate class. I learned that there is another view. Business professionals around the world swear by a common strategy: never leave money on the table.
Kate Vitasek says leaving money on the table is seen as a sign of weakness. If you leave money on the table, the thinking goes, you leave value for your company on the table. Simply put, youíve lost. But he says thereís a counter-intuitive concept to consider: leaving money on the table during a contract negotiation actually will result in a strong commercial agreement thatís built to last.
Source: Vitasek, K. "Leave Money On The Table When Negotiating Strategic Deals" at Forbes.

Leaving Money on the Table is Sometimes Necessary
Colin Goodluck, Student (University), Guyana, Member
@Paul A Ford: I feel that leaving money on the table is sometimes necessary, because the opportunity cost of not doing that is losing your company's integrity or yours. Why would I want to enter a contractual arrangement that goes against the grain of my company's philosophy and probably capacity to perform? There are some very dubious contacts that seek to offer the bear minimum for a project. For example, I met with a certain Asian embassy consular rep on a shipping project that sought to have the best of quality in customs clearance time, delivery, unpacking and set-up. However, they wanted to pay the regular market price rather than the cost for handling diplomatic cargo. I thanked them for their kind business offer but declined, because entering that contractual arrangement was a recipe for disaster. I could not pay my team bread scraps to perform three course meal services. I felt leaving that money on the table gave me more strength.

Batna versus Bottom Line
Carlos Espinosa Fernandez, Management Consultant, Mexico, Member
The best negotiation is the one in which both parts feel "it could be better".
The price balances what the market agrees to pay; offer versus demand.

BATNA versus Bottomline
Kiruba Nagini R, Student (MBA), India, Member
Choosing between BATNA or Bottom line must not go against the organization's interest. So a negotiator has to be strong enough to decide either to take up the bottom line or to go for BATNA. The ultimate aim should be the profit motive. Any business is expected to bring in profits, without which adhering to any of these so called methods will prove futile.

Meaning of Bottom Line in Negotiating
Jaap de Jonge, Editor, Netherlands
@Kiruba Nagini R: Be careful not to mix up the term "bottom line" as it is used here, in the context negotiations, with its meaning in finance!
The meaning of "the bottom line" in negotiating is not "the profit", but rather: "the lowest offer to or from the other party you are willing to make/accept".

Most Desired Outcome(MDO) and Least Acceptable Agreement (LAA)
David Miller, United States, Member
When preparing for a negotiation, it is critical to also determine your Most Desired Outcome (MDO), Least Acceptable Agreement (LAA) (or "bottom line"), along with your BATNA.
Trust me, the folks on the other side of the table will have already established theirs.
Negotiating is about "cause and effect", which allows one to more easily accept that a bad deal shouldn't be done. The deal must be done between the MDO's of the buyer and seller, and neither can stretch outside their LAA, or a "bad deal" will transpire.
Sometimes, while continually pushing for more may seem to be a good idea, if more exceeds the other party's LAA and the deal is done anyway, there will eventual be issues that may surpass the additional concessions negotiated.

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