What causes negotiators to walk away from deals that are superior to what they could achieve elsewhere?
This error tends to be rooted in a phenomenon that Harvard Business School professor, Max Bazerman, calls the mythical fixed pie of negotiation. We often approach negotiations with the assumption that the pie of resources is fixed, a mindset that causes a purely win-lose situation.
It is true that a small number of negotiations are solely distributive, such as negotiating the price of a vehicle. However, in most negotiations, especially family law, the pie is not fixed as there are multiple tradeoffs. There multiple assets with multiple values. After values are settled, what is the percentage of division of assets and debts? Other tradeoffs could include liquid assets v. pre-tax retirement accounts; contractual alimony that is or is not a tax deduction to the payor and income to the payee; spousal maintenance v. contractual alimony. Creative parties and lawyers can develop many other tradeoffs and options, a concession from party A, in exchange for a concession from party B.
ZOPA and BATNA analysis: Avoiding twin perils of either accepting a subpar deal or walking away from a great deal, begins with thorough preparation for negotiation, including determining each side’s BATNA, best alternative to a negotiated agreement, as well as the zone of possible agreement, ZOPA. These concepts are explained well by Roger Fisher, William Ury and Bruce Patton in their seminal book, Getting to Yes: Negotiating Agreement Without Giving In. Your BATNA is “the only standard which can protect you both from accepting terms that are too unfavorable and from rejecting terms it would be in your interest to accept,” according to Fisher, Ury, and Patton.
BATNA analysis helps you determine each party’s reservation point, or walk away point, in the negotiation. If there is a set of resolutions that both parties would prefer over impasse, then a ZOPA exists, and it would be optimal for the parties to reach an agreement. For example, if party A is willing to pay between $65,000 and $75,000 and the party B wants to receive between $70,000 and $80,000, there is an overlap of $5,000 and a ZOPA of $70,000-$75,000 exists.
Courthouse Option: In many negotiations if the parties don’t reach an agreement, they go to court and let the court decide. Going to trial v. agreement can expand the mythical fixed pie. The parties and lawyers have to consider the financial costs, emotional strain, time commitment, risk and uncertainty of outcome of going to trial v. reaching an agreement. There is no dollar sign on peace of mind and certainty of an agreed resolution.
This article is an adaptation of Kate Shonk’s April 2016 article in the Harvard Program on Negotiation Blog.