In his recent article “Do You Use ‘BATNA’ Wrong” (Mediate, January 3, 2018) and in a subsequent blog titled “Confusing Dispute Resolution Jargon” (featured at Mediate, January 9, 2018), John Lande raises some interesting and complex questions regarding BATNA (“Best Alternative to a Negotiated Agreement”). Understanding BATNAs is especially important to mediators because BATNA provides negotiators with power. As noted in Getting to Yes (emphasis in original), “The better your BATNA, the greater your power . . . . In fact, the relative negotiating power of two parties depends primarily upon how attractive to each is the option of not reaching agreement.”
This article has three goals relating to John’s article and post. First, it will describe a free teaching package designed for instructors who teach negotiation and mediation. The package includes coverage of BATNA strategies. Second, the article will discuss decision tree analysis (a specific tool that John covers at length in his blog on BATNAs) as it relates to mediation. Third, it will briefly comment on an issue that was not addressed in the article or blog—the legality of using a BATNA strategy.
The Free Teaching Package
I have taught courses and seminars on negotiation and dispute resolution to a wide variety of learners, including athletic directors, attorneys, engineers, entrepreneurs, judges, managers, and physicians. Over the years I have developed a negotiation exercise called “The House on Elm Street” that is designed to introduce negotiation fundamentals such as (1) preparation for negotiation using a negotiation analysis that includes a reservation price, target goal, stretch goal, and zone of potential agreement; (2) application of ethical standards to negotiation; and (3) value creation in a manner that benefits both sides. BATNA strategies (finding and weakening the other side’s BATNA, and improving your BATNA) are emphasized in the exercise.
After receiving requests from organizations in the public sector (for example, the World Bank) and private sector (one of the largest US companies) that wanted to use the exercise for in-house training, I developed a teaching package that is available without charge. The package includes a Teaching Note, two roles, and my Powerpoint slides. Here is a link to these materials:
I also developed a website, with links to free apps, that includes a negotiation planning tool that can be used for dispute-resolution and deal-making negotiations and mediations. The planning tool includes questions that encourage negotiators to think about their and the other side’s BATNA. Another tool at the website enables negotiators to assess their negotiating style, which is especially useful in cross-cultural negotiations. Here is a link to the website:
Decision Trees and Mediation.
Decision tree analysis, which is discussed in John’s blog, is an especially useful tool for mediators for several reasons. To illustrate, let’s assume that a mediator is attempting to help parties settle a lawsuit. Decision trees are useful, first, if the mediator asks the disputing parties to work side-by-side when diagramming the conflict in the form of a tree. This process might enable the mediator (in the words of Getting to Yes) to “separate the people from the problem” by focusing on the issues depicted in the tree.
Second, asking the parties to assign (1) probabilities to each uncertainty depicted in the tree and (2) values at the end of each branch (which the parties will probably want to do in caucus because of the confidential nature of this information) will facilitate communication between the disputing parties and their attorneys. For example, when attorneys tells clients that “it is likely” that they will win, the attorneys might be thinking there is a 60% chance of winning while the clients might be thinking 90%. Assigning probabilities to verbal statements helps to avoid misunderstandings.
The assignment of probabilities will also help the mediator pinpoint the issues in dispute. If, for example, there are three key issues in dispute and the parties have the same assessment of one side’s probability for success on two of the issues, discussion can focus on the third issue.
Third, using the probabilities and end point values to calculate an expected value of the litigation will provide the mediator with an opportunity to engage in reality testing. The parties can evaluate the attractiveness of a settlement offer by comparing it to the expected value of the litigation.
These benefits from using decision tree analysis during litigation-related mediation are discussed in greater detail in my chapter on “Using Decision Tree Analysis to Break an Impasse in Mediation” in the International Bar Association publication Mediation Techniques:
Beyond dispute resolution, decision trees are useful during mediations related to deal-making negotiations—an increasingly popular form of mediation. In Negotiating for Success: Essential Strategies and Skills (2014), Chapter 3, I show how to use a three-step process to create a decision tree to resolve disputes and then use the same process to create a decision tree related to a transactional negotiation. The book also includes other tools related to mediation, such as the use of screens to determine the best dispute resolution process.
The Legality of Using BATNA Strategies
As noted earlier, John’s article and blog do not discuss the legality of using BATNA strategies. Most countries follow civil law, which includes a duty to negotiate in good faith. In these countries, negotiators who walk away from negotiations because of strong BATNAs face potential liability to their counterparts.
The United States has a common law system, under which there generally is no duty to negotiate in good faith. However, US negotiators often agree to negotiate in good faith through preliminary agreements (such as term sheets, memoranda of understanding, letters of intent, and agreements in principle). The Delaware Supreme Court recently decided that a negotiator who breached a good faith duty that originated in a preliminary agreement was liable for expectation damages that are designed to cover lost profits (in this case $113 million).
In a recent article published in the Berkeley Business Law Journal, coauthor Greg Marsden and I discuss in greater detail the differences between the two legal systems and we provide practical lessons for negotiators in both system:
Thank you again to John Lande for raising questions about BATNA and for his continuing scholarship relating to dispute resolution and mediation.