Before You Negotiate, Know Where It Will End

 

In our previous issue, we discussed a concept known as the BATNA, or Best Alternative To a Negotiated Agreement. Simply put, if you couldn’t work out a deal during a negotiation, the BATNA is what you would turn to instead. As we pointed out in that issue, it is important to work out your BATNA before the negotiation even starts, because the one who enters the negotiation with the least amount of options usually ends up on the losing end of the deal.

However, one of the added benefits of identifying one or more BATNAs before you come to the negotiation table is that by identifying your BATNA you will also start to define your Bottom Line. The bottom line is usually understood to be the minimum value, benefit, or least favorable set of terms you can accept from the other side and still benefit from staying in the negotiation. Should the other party not offer something that is at least equivalent to your bottom line, that usually means you would be better off withdrawing from the negotiation and pursuing your BATNA, because to do so would provide more value to you than the offer that is on the table.

Knowing your bottom line helps you in a couple of ways. First of all, it provides you with perspective during the course of the talks. Sometimes the interactions may become very intense, and in your desire to stay competitive and achieve your demands you may arbitrarily reject offers which, while not up to your ideal solution, are still markedly better than your bottom line. It is best to always at least appear to consider any offers that are better that your bottom line, because there is a good chance that you can work to improve that initial offer and come away with an even better deal!

Secondly, knowing your bottom line BEFORE you start can boost your confidence and improve your focus during the negotiation. Having already settled on the point at which you are better off walking away, you are less likely to be pressured into taking a bad deal that you will regret later. Knowing your bottom line is like having an automatic warning light that clicks on, telling you it is time to pull over before you really get into trouble.

How do you develop your bottom line?

Developing your bottom line begins during your research on your BATNA. As you establish the various risk and reward features of your BATNA, you are also establishing benchmarks to help you recognize any options that would be better.

Let’s say you are the marketing VP for a regional grocery chain, and you are negotiating a new employment contract. You are asking for a 15% raise. Your BATNA (if you can’t get an acceptable deal from your current employer) is to change employers. In your conversation with a corporate headhunter, you discover there are two companies right now that will meet your salary demand. However, both jobs would require you to move to cities with a higher cost of living where the raise would be only worth about two-thirds of what it would be where you live now (i.e., the equivalent of a 10% increase). So, in this simple case, your bottom line might be that your present employer would need to offer you a salary increase of at least 10% or you would take one of the other jobs.

There are very few simple cases.

Most of the time, a negotiation situation involves a combination of issues, which can make it harder to determine your bottom line. Continuing with the above example, suppose that, in addition to a 15% raise, you also wanted stock options and a C-level title. Of the two job opportunities the headhunter found for you, one would meet your desire for a 15% raise (although in a market with a higher cost of living), provide you with a modest stock option plan after you had been on the job for a year, but would not confer C-level status on your position. The other job would only offer you a 12% salary increase (also in a market with a higher cost of living), offered no stock options, but did have an outstanding performance-based bonus plan and would discuss creating a C-level position at the end of six months.

Using this information, what should your bottom line be in your negotiation with your present employer?

 

Re-Print Permission
This article may be reprinted in it's entirety if the following conditions are met:

1. The complete tag with the author's name and contact information is included immediately after the article.
2. A copy of the printed article is mailed to the author at 10101 SW Freeway Suite 630 Houston, Texas 77074 within 30 days of publication.
3. The article is presented in a positive light as part of an appropriate business related publication.

June Negotiation Quick Tip -- Don’t Say "NO" Unless You Want to Slam the Door

To borrow a phrase from Otto von Bismarck, "Negotiation is the art of the possible." It is inevitable that when parties come together to negotiate something, they will start out some distance apart on certain issues. Never assume that this opening distance represents an insurmountable obstacle, and by all means, never say "NO" unless you want to shut down the conversation altogether. The best way to address an impossible request is to provide a response outlining what is possible for you. For example, "I appreciate your opening salary offer, but since there is going to be significant overtime required for which I would not receive additional compensation, the base salary will need to be 15% higher than you have suggested." Now, the door is still open to work out a deal