If so, you have a lot of company.

Having reviewed negotiation publications and listened to colleagues, I can confidently assert that most of us grossly misuse the term “BATNA.”

This is one of my pet peeves, which drives me crazy – an admittedly short excursion.

I discussed this in my top-notch post, BATNA, MLATNA – No Big Difference, Right?, and I illustrated my point in a later post.

I refer you to those posts for a detailed explanation of the follies.

This post is to highlight some of the problems and encourage offenders to mend their ways.

First, let me review the main point, which is that the term has lost its meaning because people generally refer to the MOST LIKELY alternative to a negotiated agreement (MLATNA) when they use the term BEST alternative to a negotiated agreement (BATNA).

BATNAs are not the same as MLATNAs unless there is no uncertainty.  Theoretically, this can happen when someone is considering an option but would be quite content to continue the status quo.  For example, if Jane is satisfied with her job and gets another job offer, both the BEST and MOST LIKELY alternatives to accepting the offer would be that she stays in her job.  That’s an oversimplification, however, because things inevitably change, for example if Jane might get a great promotion or her company might go bankrupt.

In most legal disputes, there is considerable uncertainty.  Lawyers and parties discount their assessments of possible outcomes to reflect the risks, so MLATNAs therefore are always inferior to the BATNAs.

Consider the following hypothetical case.  A plaintiff’s lawyer believes that the absolute best possible result for his client is a $1 million net recovery and that the most likely net outcome at trial would be $100,000.  The lawyer would be a damn fool to urge rejection of a $500,000 net offer because it is less than $1 million.

Moreover, people often wrongly use the terms “BATNA” and “bottom line” (or “reservation price”) synonymously.  As mentioned above, people often use BATNA when they mean MLATNA.  But there also is a difference between a MLATNA and a bottom line.  In the preceding hypo, the MLATNA – the best estimate of the likely court outcome – is $100,000 but the plaintiff may be willing to accept as little as $50,000 (his bottom line) because of low risk tolerance, additional costs to go to trial, etc.

People often talk as if BATNAs (or, really, “bottom lines”) are fixed positions that people can set in advance and never change during negotiation.  Of course, this is balderdash.

People almost inevitably change their assessments as they learn more about the dispute and the other people’s perspectives.  Indeed, this routinely happens when people end up accepting less favorable terms than they planned when they started.

To get a more realistic understanding about how people actually do – and should – make decisions in negotiation, you need to focus less on BATNAs and bottom lines and more on decision tree analysis.  This incorporates considerations of multiple possible outcomes affected by various contingencies.

I understand that some people use “BATNA” as a kind of simple shorthand.

The problem is that it is a lousy, confusing shorthand that muddles people’s minds to misunderstand the reality of negotiation (and mediation etc.).

So I beseech you to stop using this term (inaccurately).

Come on, people.  We can do better.

  1. I, too, have grappled with the issue of how to define BATNA more precisely so I was interested to read your posts on the topic. I think this post underscores the need to revisit some of the foundational terms/concepts we use in negotiation–concepts that are actually trickier than they first appear. So in this I agree with you.

    But I have to say I disagree in this particular case that most people are using BATNA incorrectly. In the litigation or other context where there is uncertainty, BATNA *already* incorporates the idea of the most likely outcome in litigation–ie., the expected value of a case. It should not be your best case scenario because that’s unrealistic, which is another way of saying that it’s not a real alternative in the first place. In your example, if a P is suing for $1 million, actually getting $1 million at trial is not her BATNA. It’s her FATNA (fantasy alternative – i.e., assuming a jury will see things 100% her way, which is nuts). To claim that $1 million is her BATNA is like saying a seller’s BATNA to accepting one of several offers in the $1 million range is to sell it for $2 million because, who knows, some rich Saudi prince might come along. I don’t think anyone in the disputes or transactions context is equating BATNA with FATNA in this way. Instead, I think what most authors say is that one should conceptualize BATNAs and calculate RPs by reference to existing, real alternatives (or, where there is uncertainty, what is *most likely* to transpire in the future), taking into account other costs like lawyers fees, time, preferences, risk aversion, lost opportunities, etc.

    Another point: By agreeing with you that the idea of a BATNA must–in cases of future uncertainty like litigation–be tied to most likely rather than fantasy outcomes, one would also not be agreeing that BATNA is actually MLATNA. In the litigation context, the MLATNA for some Ps will be a voluntary dismissal. But that may not be their BATNA. In the disputes context, the most likely outcome at trial can still be the *best* of all alternatives for a P if, e.g., a voluntary dismissal would be worse all around. And if so, it is correct to refer to the alternative of trial as her BATNA, no matter how likely an alternative it may be (or not) for the P.

     
  2. John Lande replied

    Today I chatted with a colleague who sheepishly admittedly that she sometimes uses “BATNA” as a shorthand. I replied that lots of people in our community do the same thing.

    I get the need to have a shorthand term for conversation. The problem is that BATNA is just a terrible choice.

    “Alternatives,” on the other hand, is a terrific, easy-to-use shorthand, which has the added virtue of reflecting reality quite well.

    For example, if someone gets an offer, you could say that she should consider the alternatives (to accepting the offer etc.). While considering the BEST alternative to a negotiated agreement can be helpful, usually people especially want to consider the MOST LIKELY and WORST alternatives to a negotiated agreement as well.

    You can do this. It’s not that hard.

    And this from Sam Imperati:


    Biography


    John Lande is the Isidor Loeb Professor Emeritus at the University of Missouri School of Law and former director of its LLM Program in Dispute Resolution.  He received his J.D. from Hastings College of Law and Ph.D in sociology from the University of Wisconsin-Madison.  He began mediating professionally in 1982 in California. He was a fellow at the Program on Negotiation at Harvard Law School and the Director of the Mediation Program at the University of Arkansas at Little Rock Law School. His work focuses on various aspects of dispute systems design, including publications analyzing how lawyering and mediation practices transform each other, business lawyers’ and executives’ opinions about litigation and ADR, designing court-connected mediation programs, improving the quality of mediation practice, the “vanishing trial,” and planned early negotiation.   The International Institute for Conflict Prevention and Resolution gave him its award for best professional article for Principles for Policymaking about Collaborative Law and Other ADR Processes, 22 Ohio State Journal on Dispute Resolution 619 (2007). The ABA recently published his book, Lawyering with Planned Early Negotiation: How You Can Get Good Results for Clients and Make Money.  His website, where you can download his publications, is http://www.law.missouri.edu/lande.



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