Securing Investors and Structuring the Deal 325are market value, precedent, scientific judgment, professional standards, efficiency, costs,
court decisions, moral standards, norms of equity, norms of equality, norms of reciproc-
ity, and tradition.
The second major contribution from the Harvard project is the concept of BATNA.
In most distributive bargaining and in some integrative cases, negotiators develop a
resistance point, a bottom line which they decide beforehand that they will not cede. If
pushed beyond this point for concessions, negotiations must be terminated.
But is this really rational? What if a negotiator wants to buy a business for $500,000
and after protracted negotiation the seller will go no lower than $510,000? Is walking
away the rational thing to do? Consider John and Jane Doe, who are selling their house
because they are taking new jobs in another city in a month. They want to get $160,000
but the best offer they’ve received is for $150,000, $10,000 below their bottom line. Is
rejecting that offer a good choice?
The Harvard project offers a rational criterion for determining whether to remain at
the bargaining table: Instead of setting a bottom line, the negotiators ought to under-
stand what their alternatives are. By knowing their BATNA, the negotiators can protect
themselves both from accepting terms that are too unfavorable and from rejecting terms
that might serve their best interest.
In the case of buying a business, if there are no alternative businesses on the market
that satisfy the buyer’s criteria, the BATNA is to resume the search—but herein lies the
fallacy of thinking in the aggregate. In the aggregate, there are lots of other businesses out
there. But when it comes time to buy, the purchaser negotiates for only one at a time. Each
time the difference between the buyer’s and the seller’s price may come down to $10,000
or even more, so the rational thing to do is pay the price and buy the business. Likewise,
in the case of the house, if the BATNA to selling the house is to own two houses, make
two mortgage payments, and worry about the security of a property far from home, the
rational thing to do is sell the house for $10,000 less than the sellers hoped for.
These examples lead to three crucial conclusions that apply to all negotiations: (1)
good negotiators know what their BATNA is; (2) developing an attractive BATNA is a
powerful negotiating tool; and (3) knowing the opponent’s BATNA helps determine
what concessions he or she will make.
Constituent Effects. Figure 8.3 showed that negotiators often represent others as well
as themselves. Accountability brings out the competitiveness in negotiators. When con-
stituents are in close proximity or can directly view the negotiation, the result is tougher
bargaining, less cooperation, and fewer concessions. This is why negotiators prefer
media blackouts: It is difficult to reach a compromise or a win-win result in public.
Role of Third Parties. There are four categories of third parties: (1) mediators—neu-
tral third parties; (2) arbitrators—persons with the authority to determine the outcome;
(3) conciliators—parties trusted by the bargainers to make useful suggestions to both
sides; and (4) consultants—persons skilled in problem solving and conflict resolution
techniques. Research indicates that when the goal of the negotiating parties is to reach
a mutually acceptable, long-lasting agreement, third-party facilitators are effective. In
other words, if the parties are truly interested in reaching a settlement, they all work
toward an agreement.