Takeaway: Your bottom line position is your Best Alternative to No Agreement. What have you got if there is no deal?
Last week we discussed the difficulties of setting negotiating goal-systems, but that is only half the problem. The real difficulty is the other side of the range – the Best Alternative.
Boss Rules –
- Alternatives are your main source of bargaining power.
- Good negotiators are brutally honest about their options – and obsessive about building finding new ones.
- The worse you alternatives, the more important that you understand is.
- BATNA or Best Alternative to No Agreement sets the bottom line in a negotiation. This is your situation if there is no agreement (for whatever reason).
Don’t let the “best” in BATNA – Best Alternative to No Agreement - confuse you. This is the bottom line, the no-deal option, the situation your are stuck with if the answer comes back as a definite NO. It would be more accurate to call this the “least worst” option. It sets the bottom of your negotiating range, since no rationale actor willingly harms his own interests.
Negotiators frequently overestimate their own alternatives. They confuse looking for another offer” with “having another offer”. There is also a dangerous tendency to underestimate what they have and to overestimate what else is out there. Jaded baby-boomers who have survived wave after wave of layoffs and downsizing are constantly mystified by how quickly millennials are willing to jump ship for what Boomer bosses consider to be unimportant reasons.
Millennial challenge: Millennials are prone to 2 deadly BATNA mistakes. First, they confuse “action plan” with analysis. “I’ll look for a new job” is an action plan. “I have $470 in the bank and $1200 per month in student loan debt” is an analysis.
Second, they tend to be over-optimistic about their options. Whether its because they are optimistic about the future or fatalistic about their present situation, millennials are prone to believe that the grass is always greener ANYWHERE else.
Tools: Best alternative analysis.
Our Story. We now return to our ongoing story of Mel the Millennial, and his boss Bob the Boomer. Mel works at Infinity Systems – an online matchmaker between freelancers & other providers of digital content and corporate outsourcers.
Last week the HR department invited Mel to participate in a year-long management development program for high-potential hires, but he hesitated. Today Mel was warned that if he turned down the program – and informally commit to staying with the company for another 18 months, then his opportunities at the organization would be extremely limited. He would be able to keep his sales job, but any chance to move up – or laterally to a different office – would be pretty much impossible. Since Mel wants to move to a different city, this is a potential deal killer for him.
Mel is considering his options, and quitting his job is near the top of his list. He has started drafting a letter or resignation already.
Ok – Mel is confusing 3 different issues here.
- He is wildly overestimating his best alternative action plan. Remember – he wants to relocate to a new city AND change his professional focus from sales to business development He isn’t looking for a new job – he’s looking for a new job in a different city for a different job function. His optimism might be justified if he were to search for another sales job in the DC area, because he has some soldi, high profile experience and a network of connections. Finding a biz dev job in DC might be a possibility, and finding another sales job in a new city like NY or Seattle is a bit riskier but still reasonable. A new city and a new career? Much tougher.
- He has not done a thorough analysis of his present. He is all about feelings and emotion reactions. He needs to check his bank balance and cash flow.
- He doesn’t have a plan for making things happen. There are things he can do now to prepare for his ideal future. He can make new connections in the Biz Development side of the business, take management or other training courses, or try to get the company to start sending him to other cities for conferences. He has already been told the he can stay at his existing position even if he doesn’t make the commitment to the MD track.
A) Let’s start our BATNA analysis the Meteor Test. Imagine that the day before his big meeting with Bob Boomer, a meteor from outer space comes out of nowhere and destroys the Infinity office in DC. Thankfully no one was hurt (Sunday), but Mel’s job is gone. It was no one’s fault, no one’s plan – but Mel is now operating on his SAC – Sudden Alternative Contingency.
- How much cash does he have on hand/in the bank?
- How much does he owe?
- What is his rent and living expenses?
- Does he have other SURE FIRE sources of income or assets?
Think of this as the worst-case inventory. We’re not making any plans yet – we’re figuring out how long he can afford to keep himself going. We’re going to end up with a number – he has X dollars, and divide that by his monthly expenses to come up with another number – Y months of living expenses.
Once we know his SAC, we are prepared for the next two steps.
B) Assess the no-deal option. Maybe it turns out that Mel’s SAC is really, really awful. Without this job, he has nothing going on. He’s in debt, he’ll be homeless and so desperate that he’ll have no choice but to accept the first offer. On the other hand, he might be in pretty good shape. If he has a big cash cushion and he can easily relocate to a more desirable location, then he has plenty of options. The Meteor Test will help him inventory his assets and obligations. Right now Mel is reacting emotionally.
C) Action Plan. Not that Mel has the facts, he is in a position to come up with an action plan. If he decides that his no-deal option is really terrible (i.e.: no money, lots of debt, no job prospects, generally hopelessness) then he will probably opt to accept the company’s offer and enter the management development program. If he decides that his situation is great (lots of money in the bank, contacts in Seattle and Brooklyn, good job prospects) than he will probably use this opportunity to jump ship. If he assesses that his situation is middle-of-the-road, then he might decide to turn down the program but stay in his current position while he looks for a better situation.