Win - Win

Win – Win

Earlier this week I wrote a piece on BATNA (best alternative to a negotiated agreement), a friend sent me an email asking whether I had become a salesman. I think he meant it as a slight dig. The answer is no, but rather since I have been in the software field for over 20 years, I actually became a salesman long ago. All of us in IT must be able to sell and negotiate whether we are dealing in ideas, jobs or commitments.

BATNA represents what you will do if you fail to get an agreement at the end of a negotiation. For example, if you are negotiating for a new house and you can’t come to an agreement (your bid is low or they won’t fix the roof before the sale) perhaps you will look at other houses or rent an apartment. Every party in a negotiation has a walk-away point when they will give up and accept their BATNA. It should be noted that if a walk point or BATNA does not exist for one the parties, the activity being pursued is more of discussion of terms than negotiation. The common area between the parties’ walk-away points is known in negotiating circles as the zone of possible agreement (ZOPA). If there is no overlap, there can be no negotiated agreement (on a grand scale this is the areas were wars occur). Each party in a negotiation will have their own perception of the ZOPA. Each parties perception of ZOPA establishes the boundaries for them to pursue compromise to get an agreement. Deals or suggestions that are outside of the ZOPA will generally not be considered by one party or the other and often lead to the end to the negotiations. Early in my negotiation career, my wife and I wanted to buy a house. We decided to make a low bid for a house to get the negotiations started. Our realtor transmitted the bid and the answer was not a negotiation, but a crisp “no.” Our offer had been below the value of the seller’s BATNA and therefore not within the ZOPA. Frankly, we had not done our homework to try determine what ZOPA for the seller, house and market might be. After that I adopted a different approach which continues to evolve.

As noted in Negotiations: BATNA, establishing your own BATNA before beginning a negotiation is a critical step in a good negotiating process. Be very careful in sharing information that would expose your BATNA or you might give the person/organization you are negotiating with too much power. After you determined your BATNA, attempt to establish the other party’s BATNA. There are all sorts of techniques for gathering information you can use to scope out the other parties BATNA. These include asking questions, market research or evaluating past behavior, exploring others interests and values. Just as I suggested that you are very careful with information about your BATNA, the other party will generally be equally guarded. I have often found that as you build relationships over time, more information can be initially shared which will shorten negotiations and generally results in a win-win outcome. In all negotiations, as the negotiation progresses actual behavior or new information can be used to adjust your perception of the other parties BATNA and therefore the ZOPA.

Negotiations never occur with perfect information. While knowing the ZOPA will increase the likelihood of not making a boneheaded move that will end the negotiation, your perception of the BATNA of party you’re negotiating with be an approximation and therefore your perception of the ZOPA will also be an approximation. Remember where no ZOPA exists there are fewer options, such as walking away, accepting a bad deal or changing the playing field. Changing the playing field is typically done by “enlarging the pie” through a process of establishing common ground and then building on that common ground. Building on the common ground might include expanding the scope of the deal to change the value. For example, in one negotiation when both parties came to the conclusion that there was no common ground for a piece of coaching work, we expanded the scope to include a post-coaching mentoring retainer. The deal was different enough to allow us to identify common ground and come to an agreement.

We all have to negotiate, the question is whether we negotiate well and whether we are aware of the tricks of the trade. BATNA and ZOPA are concepts that help negotiators negotiate better. In end committing to the right work, buying the right house and at the right price or signing the right services contract is the best outcome for everyone because it will reduce the stress on all parties.

Cabbage or Onion, Which Can I Afford?

Cabbage or Onion, Which Can I Afford?

“All the worlds a negotiation, and all the men and women merely players” (apologies to William Shakespeare As You Like It, Act II Scene VII).

When done correctly, negotiating is like a play in which the parties are still working out the final scene. Each party will have an idea of what the scene will be like; however the scene may never happen so they need to have a fall back plan. In negotiation terms that fallback plan is called the best alternative to a negotiated agreement or BATNA. The term BATNA was originally coined by Roger Fisher and William Ury in their 1981 their book Getting to Yes: Negotiating Without Giving In. Every project manager, Scrum master, product owner, developer and tester is involved in countless negotiations on a daily basis. Those negotiations can be as trivial as were to go to lunch or as momentous as whether a specific feature will be included in a release. One of most common failings of an untrained negotiator is to not identify their BATNA BEFORE they begin negotiations.

Establishing a BATNA provides a negotiator with more negotiating power. Knowing what your alternative is before you start negotiating allows a negotiator to understand what they can concede and where they have to push to attain their goals. Not having a BATNA can lead to a negotiator conceding too much or needlessly digging in their heels.

We have noted that cognitive biases affect how people interpret data. One common bias that affects negotiations is the outcome bias. A person (or group) afflicted with this bias judges a decision by its eventual outcome instead of how they arrive at the decision. The single-minded pursuit of the final outcome of the negotiation, for example a new contract or a new house, leads the party with this type of bias to make the wrong concessions, often leading to buyer’s remorse. Establishing a BATNA before the negotiations begins provides an anchor (another form of bias) that can be used as a flag to indicate when walk away.

BATNA is a very simple concept. BATNA represents what you will do if you fail to get an agreement at the end of a negotiation. Simply put, BATNA is the best you can do when the other party stops negotiate and you can not agree to that position. Without a clear understanding of your BATNA, it is difficult to determine when to accept, draw the line or walk away. For example, once on a family vacation our Subaru Legacy broke down in rural New York State. We found the only person that could work on a Subaru to look at the car. Because they were the only dealer in over a 100 miles we determined that we had two options other than accepting their repair estimate. Our BATNA was either to buy a new car or have our car towed home and take the bus back to Cleveland. Neither were good options. Luckily the dealer’s estimate was VERY reasonable. However we prepared in case we had to negotiate more strenuously or had to walk away.