May 2nd, 2016
When you are involved with a negotiation you generally think about what is the Best Alternative to a Negotiated Agreement (BATNA) or the Worst Alternative to a Negotiated Agreement (WATNA), before proceeding into a negotiation, but do you stop and consider the Zone of a Possible Agreement (ZOPA) before and during a negotiation?
Generally in business upon entering a negotiation, one party has identified their position and they believe they know the other party’s position. Businesses tend to look at these as win-lose in hard negotiations rather than as an opportunity for mutual gain. In business negotiations, one party tends to reflect before going into the negotiation on what is their BATNA considering that if a certain level of agreement is not achieved it is just as acceptable to walk away. A BATNA may call for a certain level or return or profit to accept a deal. They should keep in mind other alternative deals that may offer a better option now or in the future. In some instances a WATNA needs to be considered as well. For example if an agreement is not worked out for a particular deal, this may cause the business to go out of business. That alternative is clearly a WATNA. This fortunately is rare, but consider not only BATNAs but WATNAs .
Before and during the negotiation it is wise to consider and carefully develop a ZOPA. For example if you are willing to accept the contract as agreed to for $900,000 to $1,000,000 and the other side is offering to have the work completed and to pay for the work for between $850,000 and $925,000 then a ZOPA exists between $900,000 and $925,000. If however you are willing to accept a contract for $900,000 to $1,000,000 and the other side is offering to have the work completed and to pay for the work for $800,000 to $875,000 then there is no ZOPA. There may be other issues such as changing elements of the contract to take into account other items that may yet allow for a deal to be struck. Many other variables may enter into the picture such as timing, relationships, quality of the workmanship, financing, maintenance and service contracts, and other enhancements or considerations.
Often in negotiations the parties tend to be so focused on the deal at hand that they fail to consider alternatives outside of this negotiation. For example in this case the party that would be happy to accept the contract for $900,000 to $1,000,000 may want to consider other contracts currently on the table with others, or the ability to obtain additional work at some point in the future with the other party or other parties.
In an article from the Harvard Business Review Program on Negotiation written by Katie Shock entitled “How to Find a ZOPA in Business Negotiations” she points out three considerations in particular. These are:
1. One party may hide that the deal struck is really not in the other party’s best interest.
2. Parties may be reluctant to walk away from a deal due to sunk time spent on this deal.
3. The desire to maintain or strengthen a relationship may prevent one or both parties from walking away from the deal.
She makes a very good case for upfront developing a BATNA and ZOPA rationally ahead of the actual negotiation to avoid the three traps above. I agree. Having been the party to over 2,000 negotiations, I have seen many poor agreements, and over time become far more oriented towards considering a BATNA, WATNA and ZOPA before ,entering into a negotiation. This allows my clients to enhance their ability to negotiate with the other party.
The topic of BATNA and WATNA are discussed in detail in my new book, Peaceful Resolutions, and in my book The Servant Manager: 203 tips from the best places to work in America. I would recommend anyone involved in negotiations to also consider having a copy of Fisher, Ury and Patton’s book Getting to Yes: Negotiating Agreement without Giving In.
Mike is a manager with over 25 year’s experience at all levels of management. Mike provides services to help clients with conflict resolution on a wide variety of issues. When not serving clients, blogging or tweeting, Mike is an avid writer, speaker and educator. When not working Mike enjoys family, church, volunteering, and daily yoga, meditation and exercise.