Dictionary of a
Successful NegotiatoR

The art of negotiation is as old as the world. What turns this art into a structured process is a set of established frameworks and concepts, following which you gain control of a negotiation to steer it with confidence into the desired result. This article covers the foundation of any negotiation framework and talks about the concept of BATNA, reserve price, ZOPA, FOTE and interest vs position. Sounds like an alien language? Let's break it down into simple definitions.

The most widely used term in negotiation is BATNA. It stands for Best Alternative To Negotiated Agreement. In simple words, it is your Plan B in negotiation. It is important to mention, that the term was introduced by two Harvard professors, Roger Fisher and William Ury, in their book "Getting to Yes" in 1981. This book has established a major framework for a negotiation process that is widely used by all academics and practitioners today.

BATNA is your Plan B in case you don't achieve an agreement with your counterparty. The next question is, at what level are you ready to walk away from making the deal? The answer to this question will be your reserve price, minimum price (if you are a seller or maximum if you are a buyer) you are willing to accept to reach an agreement.

BATNA is the key in any negotiation tactic and should be determined before a negotiation takes place.

What makes your negotiation position even more powerful is a similar analysis of your counterparty's BATNA and reserve price. It also allows determining a zone of possible agreement (ZOPA). ZOPA is a bargaining range in an area where two or more negotiating parties may find common ground. Let's consider an example to understand better the concept.

Let's look at Sara, who lives in Brussels and works for a think tank as an analyst. One day she talks to her friends who work in the same industry and realises that her compensation is at least 15% below the market. The next day Sara calls few local recruiters who confirm that the average wage for her skills and experience is 15- 20% higher than Sara's salary. Sara likes her job, and she would prefer to stay in this company. However, her aspiration is to get more international exposure and start travelling to other European countries for business and research. She approaches her boss to discuss if there is a possibility to reconsider her current level of compensation and as well as to extend her responsibilities. Sara's BATNA, in case her boss says NO is to find another job with a 10-15% higher compensation package. Her boss's BATNA is to find someone else to replace SARA, which might involve at least 10-17 % extra cost (of the current annually compensation) and some extra time. So the boss' BATNA is to recruit someone else, but he prefers to continue working with Sara as long as her salary raise is not higher than 17% (which is the boss's reservation price). We can predict that there is a high chance that Sara and her boss will find a positive solution. The area where the interest of Sara and her boss intersect is called ZOPA or Zone of Potential Agreement.

With our example, Sara approaches her boss, explaining that she really enjoys working for this company and that she expects to stay there for a long time. But through her research and by talking to her colleagues in the same industry, she found out that the compensation for her level of expertise should be higher. So she decided to discuss this with her boss to see what could be a solution to this situation. In addition, Sara adds to her speech that she feels that she could take on more responsibilities, and she would really like to start travelling more for business.

In Sara's case, FOTE strategy works, and her boss is willing to work together to find new interesting international projects for Sara. He also offers an immediate pay raise of 15%. So, by focusing on her interest by staying in the company and taking on more international responsibilities, Sara improves her relationships with her boss, get a pay rise and new career opportunity. Now let's imagine the opposite situation. Sara works in the office of her boss, demanding a pay raise of 20%. She explains that she has an alternative job offer that is above her current salary level, and if she didn't get the same level of compensation here, she would need to leave the company. After going back and forth, they agree on the 15% pay raise. At the same time, Sara's boss suspected that Sara might leave sooner or later, and he needs to hire someone in the foreseeing future to replace her.

The most common example of position negotiation is a story of two girls who were arguing over one orange. In the end, they decided to split the orange onto two equal halves. The first girl takes her half and squeezing it into orange juice, and then throws away the rest. The second one peels the orange, throws out the fruit and adds the peels to her orange cake (you can watch this example here). If the girls were more open and discussed their interests, they would divide the orange differently, achieving much more.