Abstract
Have you ever experienced a really tough time during a project? I'm sure you have! Even if you worked very hard to avoid it by being proactive, still it happened! So, the question is, “What can we do when such situations arrive despite actions done to stop it from happening?”
Let us consider the standard approach: the Project Manager uses risk management knowledge to start to find a solution within contractual constraints. Sometimes he will try to renegotiate the agreement, but it may not be enough for a successful outcome. Therefore, as a additional option, the BATNA (Best Alternative To a Negotiated Agreement) strategy should be considered and implemented.
When the project is in the planning phase, using of BATNA is straightforward as was originally proposed by Fisher and Ury in their best-selling book Getting to Yes: Negotiating Agreement Without Giving In (1981). The Project Manager should simply remember BATNA when negotiating the agreement on which the project will be based.
When the project is in the realization phase, the issue is more complicated as the Agreement is already signed. Therefore, there is no place to introduce BATNA in its pure form. There is a need to adopt it and I propose to use a new term called BATCIP (Best Alternative To a Crises In the Project). Using BATCIP one considers the cancellation of the agreement as the best option to any other solution and signing a brand new agreement (even thought it may be with different parties). By using BATCIP we should consider not only the financial risk of such an actionn but also the reaction of the stakeholders of the project which can never be underestimated.
Introduction
As they are unique, projects inherit high risk, which is part of and can be found both in the planning and realization phases. Running the project, the Project Manager should take into consideration the occurrence of crises situations, which when resolved incorrectly could lead to total project failure. Throughout skillful management one could reduce the risk of the occurrence of crises situations and, no matter how they happen, have the strategy to overcome them. Crises situations are assumed to be any situation in the project that seriously threats its realization and as the effect of occurrence can lead to the complete project failure. (Korver, 1999; Spalek, 2004).
Project Risk Management
According to A Guide to the Project Management Body of Knowledge (PMBOK® Guide). (PMI 2004) “project risk management includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control of a project ”(p. 340)
And in this area we can distinguish:
- Risk management planning,
- Risk identification,
- Qualitative risk analysis,
- Quantitative risk analysis,
- Risk response planning,
- Risk monitoring and control.
Following Pritchard (2001) we can distinguish the following risk categories:
- Unexpected External,
- Expected External,
- Non-technical Internal,
- Legal,
- Technical (quality & efficiency),
- Management of Project,
- Organizational.
Regardless of the risk categorization, if we want to manage risk efficiently we should be aware about the risk associated with any task in the project. By doing this we can determine the sources and types of risks and after that the probability of occurrence and the negative impact on the realization of the project. This action for example can be visualized in a tabular form as a matrix of risk assessment and the consequences of it occurrence (Bosschers, 2002). However, in a complex project, the pre-selection of tasks could be applied. So Hullet (1996) propose to group the tasks and make a risk analysis for them. As the main goal of risk management is to reduce the negative implications of risk within the entire project, one must prepare the set of tools and techniques which should make risk avoidance, transference, mitigation or acceptance (PMI 2004). The tools and techniques are chosen individually for each task (or group) depending on the risk type.
In fact, the risk could change not only during the period of time of the project (e.g. changing environmental conditions), but also can be influenced by parts of the project already completed. Therefore, after the project planning phase, the risk should be continuously monitored and the risk reactions should be controlled during the realization phase.
One of the key issues is to create a risk response plan (PMI 2004). Based on Chong and Brown (2000) the Project Manager, when creating the risk response plan, should know the risk effects or consequences to the project and they propose five descriptive levels of the influence:
- Catastrophic
- Serious,
- Significant,
- Marginal,
- Negligible.
According to Pritchard (2001) the descriptive scales should be simplified as much as possible. But Hillson (2004) remarks that the descriptive scales can be misunderstood quite often and the same risk terms could be interpreted by individuals in very different ways on the probability scale. Therefore it is advisable to include the agenda describing the noted expressions in conjunction with probability numbers.
Additionally, in practice, project managers should work out a risk reaction plan which takes into consideration the contractual constraints or – if possible – a plan to change the contractual obligations.
The above mentioned activities will not be sufficient to reduce the project risk, therefore it is proposed to use BATNA strategy to eliminate crisis situation in the project.
BATNA and the Project
BATNA (Best Alternative To a Negotiated Agreement) term was introduced by Roger Fischer and William Ury (1981). They proposed that, when negotiating an business agreement, we should work out, in the mean time, an alternative solution to the one currently discussed or agreed with the second party to the contract. This approach should secure us against signing an extremely adverse agreement or when the negotiation is unable to reach an acceptable goal by realizing an alternative approach.
Regardless of the complexity, each project can be basically divided into two major phases: planning and realization. These phases can be divided into more detailed ones, but for the purpose of this article – just to present the concept of the BATNA approach – this simplicity is adequate.
A crisis situation can occur both in the planning and the realization phase but the approach in eliminating the crises should be different. During the planning phase it is assumed that an agreement is not signed yet, so BATNA can be used in a straightforward way without any modifications. This means that during negotiation of the agreement associated with a project we should simply remember BATNA and use it when applicable. An example of such an approach can be found in Ertel’s article (2000).
If the contract is already signed before the planning phase we can use the similar approach as proposed further for the realization phase.
Whereas during realization phase, when the agreement is already signed, it is proposed to use BATNA with some modifications and for this approach the term BATCIP (Best Alternative To a Crisis In a Project) is proposed. The BATNA and BATCIP approaches are shown in exhibit 1.
Exhibit. 1. Usage of the BATNA strategy in a Project
The BATCIP approach should include not only the renegotiation of the current approach, but should also consider the possibility of cancelling the agreement and signing a new agreement with a third party. This could cause considerable difficulties, but in some circumstances it could be the only acceptable solution to secure our interests satisfactorily. However the most important issue using this approach is that it is not only about the profit and loss balance, but also takes into consideration the possible reactions of the stakeholders of the project
Conclusion
In this paper the possibility of using the business negotiating strategy BATNA in overcoming a crisis situation in a typical project was shown. Defining the problem using different approaches in different phases of the project was proposed. A new term BATCIP was proposed when using BATNA during the realization phase when the business agreement has already been signed and using BATNA might not be appropriate or possible.