The dictionary tells us that the words “alternative” and “option” are synonyms. I remember using them interchangeably when I was in college. Among those who think about and study negotiation, however, these two words mean very different things. Mastering that difference can be a big step in becoming a better negotiator.
In negotiation-speak, alternatives refer to the things you can do apart from and outside of the deal you are working on. For example, when negotiating with an auto dealer about how much you should pay for the “special trim package” on the car you are discussing, your alternatives include buying the car from another dealer altogether, getting a used car from your cousin, and continuing to drive the old jalopy you currently own.
Negotiation teachers, starting with Fisher, Ury, and Patton in Getting to Yes make a big deal about your single best alternative. This is often referred to as your BATNA (Best Alternative to a Negotiated Agreement) and there is an important reason to focus on it. A negotiator cannot make the choice to substitute all of her alternatives for the deal currently under negotiation. To the contrary, she can only use one. Thus, that series of exercises which help you focus on your BATNA is critical to figuring out which single path you will take if it becomes necessary to walk away from the current deal.
It’s a lot of fun to demonstrate this concept to students by reminding them that their application to Wharton was a negotiation. What if a deal could not be reached? What would they have done instead? We start by making a list of all their alternatives. The result of many students in the class is a varied list, which we put up on the board. Stay at my current job, take trains across Europe, finish my novel, climb Mt. McKinley, have a baby, open a surf shop on Fiji, live in my parents’ basement and play internet chess, open a hedge fund, and dozens more are suggested. Then I point out the cognitive trap. “What would you rather do,” I ask them, “Go to Wharton or travel, write, have a baby, play chess, and open a hedge fund?” The answer is obvious but so, too, is the fact that you cannot do all of those things. Indeed, the point is that you can actually only pick one of your alternatives. The best one, your BATNA, will be your ultimate choice.
This tool, figuring out and identifying your BATNA, turns out to be one of the most important in all of negotiation practice. It improves upon “bottom lines,” defines minimum acceptable values, and determines your power in the negotiation process. It is, arguably, indispensible to a successful negotiator.
Your “options,” on the other hand, are almost the opposite of your alternatives. Option refers to a different way to structure the deal you are currently working on. There are invariably many different ways to structure the deal. In most cases, thousands of possibilities exist. Some of those potential ways of putting the deal together are better for you. Some are better for the other fellow. A few are inferior for everyone and should be tossed out.
Let’s again consider the example at the auto dealership. How much should you pay for the car you want with the special trim package? Here are a few different possible options. You could ask to pay less if you finance the car through the dealership. You could take a less expensive package. How about if the dealer throws in the package for free provided you bring your brother-in-law to buy a car next week? You could pay more for the package if they add the 5-year warranty without charge. Perhaps if you trade in your old car as part of the deal then a more favorable price would be possible. And so on.
The work of identifying many good options and then working toward the best of them turns out to be a significant part of what sets great negotiators apart from average ones. Both sides are looking to get a big slice of the pie made up of the value that this deal creates. If the negotiators can work together to make that pie bigger before they start to slice it up, there is potential for everyone to leave the deal much happier and better off. Making that happen is what the very best negotiators do consistently.
In the end, the two words that are usually synonymous, “alternative” and “option,” mean very different things in the world of negotiation. What they continue to share, though, is tremendous importance to anyone who seeks to negotiate successfully.