The goal of an alternative dispute resolution (ADR) process is to come to a resolution together so that the parties can both agree on and avoid the eventual litigation that could arise in the dispute. However, not every mediation or negotiation ends in a settlement agreement, and the knowledge that the parties may walk away without an agreement means that they have to know what the alternatives would be in that case. Knowing and understanding what these alternatives will be can be an essential part of the preparation for a negotiation. Additionally, understanding the alternatives that the other party may influence one party’s decisions when negotiating. Even without acknowledging these alternatives, they will influence the decisions that the parties will make.
Some of the alternatives will be better or on par with a negotiated settlement, while other alternatives will be far below what the parties could achieve in the processes. Additionally, the possibilities outside the alternative dispute resolution process will be more available to some parties, while other parties may not be able to proceed forward with the dispute. The ability to rely on alternatives may push a party to only agree with a very favorable settlement. Conversely, the lack of good alternatives for a party may push them to agree to a less favorable settlement for fear of leaving without anything. All of these considerations will play into any negotiations, which makes it vital for each party to be fully aware of their own alternatives and the other party’s alternatives.
In the study and implementation of alternative dispute resolution, these alternatives are often called the BATNA and the WATNA. A BATNA is the best alternative to a negotiated agreement, and the WATNA is the worst alternative to a negotiated agreement. Analysis and discussion of how to determine what each party’s BATNA and WATNA is and then the best ways to utilize this knowledge will be the focus of this set of articles. This first article will discuss the importance of defining a BATNA and WATNA, and begin to discuss some possible alternatives to a negotiated settlement. The second article will discuss the process of finding the BATNA and WATNA in a dispute and will provide some examples to demonstrate the process. The third article will focus on the ways that BATNA and WATNA may be used in negotiations to help achieve a favorable result.
The Importance of Defining your BATNA and WATNA:
These powerful tools in negotiation are such tools because they determine the importance and necessity of a negotiated agreement for a party. Understanding a BATNA and WATNA will help the parties to make an informed decision about the best course of action in a negotiation. It will also provide something to compare the offers on the table to once the parties have started to move toward an agreement. It will help determine if an offer is in the party’s best interests or if it would be better to continue negotiating. When a party has a strong BATNA, they are more willing to walk away without a settlement. Additionally, if a party has really poor alternatives, they will be more willing to accept a settlement that is less favorable to ensure that there is an agreement when they leave the room.
Considering the alternative is useful, even when the parties will eventually reject a negotiated agreement for two reasons.
- Other Interests: Analyzing the BATNA and WATNA allows the parties to look at the other interests that are driving the negotiation outside of a specific dollar amount. This allows the parties to know what the other party may need or want in further negotiations or offers outside of a formal process. It also allows a party to clearly see their other interests and to find out what they need out of a settlement.
- Knowledgeable Choices: Having done a thorough analysis of the settlement alternatives will allow the parties to feel as if they have made informed decisions knowing what may happen without a settlement.
A Note about the Role of Mediators:
Often, when the parties are in mediation, a mediator may encourage or require the parties to go through a BATNA/WATNA analysis so that the parties and the mediator are all informed throughout the process. A mediator may even help the parties move through the process in caucuses to help the parties move forward. However, it is important for mediators doing such to not encourage the parties to follow what the mediator believes may be the best option, but should encourage the parties to come up with their own alternatives. Additionally, a party finding a favorable BATNA may be comfortable walking away from a mediation, which may not be the easiest for a mediator to accept because they had hoped to broker a settlement. While the goal of mediation is to find a favorable settlement for both parties, the mediator needs to allow the parties to come to their own agreement, and mediators must be willing to help the parties find that, whether through mediation or other alternatives.
Defining BATNA and WATNA:
As stated above, BATNA stands for the best alternative to a negotiated agreement, and WATNA stands for the worst alternative to a negotiated agreement. These are alternatives that a party will have if the negotiations are not successful. These acronyms seem fairly self-explanatory, but finding the best and worst alternatives includes a thorough analysis of all of a party’s interests and desires in addition to a dollar amount. It will also include a study of a party’s ability to achieve a favorable result outside of negotiation, such as in litigation or if the dispute is dismissed. Knowing the strengths and weaknesses of alternatives can be the most powerful negotiation tool for a party.
Some Alternatives to Negotiation:
The first step in any BATNA/WATNA analysis is to identify alternatives. There are several possible paths to resolution that a party may see as their alternative to a negotiated settlement. These options may be the best or worst alternative for either party. It is important to look at each alternative that the parties may consider to fully analyze the ways that a party may realistically move forward. These possible alternatives include:
- Litigation: Often one of the first alternative paths many parties will consider, the most common analysis of alternatives will always consider the possibility of litigation and the effectiveness of their argument in litigation. Some parties will have a great case and are confident that they will win in litigation. Other parties will have a much closer case and would prefer the certainty of a negotiation. Still, others will have a poor case in court and would prefer to control the outcome or what they will have to contribute by a negotiation.
- Arbitration: Similar to litigation, a party will need to analyze the strength of their case should it proceed to arbitration. This is a particularly strong alternative when the parties are bound by an agreement to go to arbitration without a settlement.
- Higher Authority: If the dispute is within a company or an organization, it may be an option to seek the counsel of a higher authority in the organization. This could be an ombudsman or someone neutral who can settle the dispute from their position.
- Alternative Party: If the dispute arises during negotiations for a buy or sell or in business operations, one alternative may be that the party can find another party to be the supplier, buyer, or seller that is more willing to meet the requirements. This is a strong option if there are multiple buyers or sellers for a product, or when other parties are readily available. This alternative would not work as well if the item is unique or scarce.
- New Job: In an employment dispute, an alternative may be to seek new employment, This may be a great alternative in certain cases where the dispute has made the workplace unworkable or if the employee’s skills would be utilized more in another spot. It may be a poor decision if there is a long history of employment or finding a new job would be difficult.
- Publication: In a situation where the reputation of one party is a strong consideration, going to the press may be an alternative that could force that party to move or negotiate. Considering this option may help the party without reputation issues leverage this power and may cause the party worried about their reputation to reconsider their position to avoid the press.
- Avoidance: A party may have the ability to ignore the issue. This can be an alternative for a party who is attempting to avoid paying. However, when a party needs to be compensated or needs relief, this will not be an alternative for them.
Identifying all possible alternatives to a negotiated agreement will help the party move forward in determining their BATNA and WATNA. However, this is only the first step in an analysis to discover what the best possible alternatives and worst possible alternatives may be. However, working through this list and other possible outcomes will help each party begin to determine how to move forward with the negotiation in an informed way and considering all of their interests. The next article in this series will focus on the rest of this analysis to determine which one of all the possible outcomes is the best for a party and which one is the worst. Until that article, consider the variety and knowledge that identifying the alternatives will provide for negotiation power in a mediation or negotiation.
Continued in Part 2… (click to learn more)