When and How Professionals Develop Their Walk-Away Positions

What Is the Best Practice?

The best practice approach states: Determine your "walk-away positions" only

(i) at the end of the negotiation

(ii) based on your individual assessment.

When it comes to defining Stop-Positions (Walk-Away Positions), I recommend that every decision-maker I advise follow these 3 key rules:

• Goal: As a decision-maker, focus first on your target-positions and starting-positions (optimized target-positions that your negotiator will use at the outset). The motto of elite negotiators is: "Focus on your goal" (Dominick J. Misino).‍
• Timing: Set your walk-away position (the point at which you end the negotiation) only after you have analyzed all available information in the given situation, meaning at the end of the negotiation.‍
• Standard: Decide whether to walk away based on your individual assessment of all advantages and disadvantages. The decision to walk away should always be guided by your own perceived subjective benefit.

This approach aligns with the best practice.

For lawyers, this approach (determining walk-away positions at the end of the negotiation based on a business-oriented assessment) is standard practice. The German Federal Court of Justice (BGH) requires decision-makers (board members/managing directors) to follow the so-called "Business Judgment Rule" to avoid liability, meaning they must first exhaust all available sources of information before weighing all advantages and disadvantages of each possible course of action (see Ziemons/Jaeger in Haas/Ziemons, Beck OK GmbHG, § 43 Rn. 109). Each individual negotiation serves as a key source of information. The business decision to be made at the end of the negotiation may be based on "instinct, experience, creativity, an intuition for future developments, and a feel for markets, customers, and competitors' reactions" (Grieger, Oehlschlaegel, Schön, Jarrelss, NJOZ 2024, 641 ff.).

To clarify: this rule does not apply to:

(i) legally mandated "red lines," such as: "Our company does not negotiate with firms listed on an embargo list and

(ii) to auctions that are purely price-driven.

When it comes to strict red lines, deviation is never an option. In price-driven negotiations (e.g., in the automotive sector), it is essential to determine before the negotiation at what price your negotiator must walk away to avoid falling into a loss-making zone. Any advice suggesting to "Always set your walk-away positions before the negotiation" is, in my view, a clear indicator of a severe lack of practical experience, as it underestimates how much critical information is gained during real-world negotiations. Even the Harvard-Concept (rightly) rejects the idea of setting a rigid "pain threshold" before negotiations (see below: "Poor Practice: Pain Threshold/BATNA").

Walk-Away Positions - A Real-World Example

The decision-maker (a shareholder of the GmbH) instructed me before the negotiation with a key potential CEO to demand a 5 year term for the service contract, justifying it, among other things, as the "standard." This was given to me as the starting position. From the decision-maker’s perspective, it was also his walk-away position, but he did not disclose this to me. During the negotiation, the financially independent executive insisted on a one-month notice period at the end of each month (maximizing his flexibility) and justified his stance as follows: "A 5 year contract is just an illusion of security for your side. If I’m no longer motivated, I won’t perform anymore - whether there’s a contract or not. I will not accept a notice period longer than one month under any circumstances. My freedom is my top priority."

I reported this new situation to the decision-maker during the debriefing. After internal discussions, he decided: "We will accept the very short notice period (exceptionally and for the first time) because we cannot change the mindset of this (financially independent) individual. However, I want this person 'on board as CEO'."

Had the decision-maker told me before the negotiation that the 5 year term was his walk-away position or absolute pain threshold (which, from his perspective, it was before the negotiation), I would have had to terminate the negotiations (without reporting back to him,) immediately. As a result, my client would have missed the opportunity to hire an outstanding CEO.

Poor Practice – Pain Threshold / BATNA

Many negotiation books and experts strongly advocate defining the "Stop-Positions" (also referred to as "Reservation Value" or "Walk Away position") before entering a negotiation. The Harvard-Concept differentiates between a "pain threshold" (which it rejects) and BATNA positions, which are meant to align with walk-away positions in substance.

The Individually Determined Pain Threshold

According to the Harvard-Concept, an (individually determined) "pain threshold" refers to a

(i) fixed outcome that is determined before the negotiation and

(ii) final limit described as "a result you can just barely accept" (p. 148), such as a maximum or minimum price.

The Harvard-Concept rejects the concept of a "pain threshold" for three reasons:

(i) The "pain threshold" is too rigid because it does not allow for new information gained during the negotiation to be taken into account,

(ii) the "pain threshold" prevents creative solutions (see p. 149),

(iii) and the "pain threshold" is arbitrary (and irrational): "An arbitrarily set number is not a valid benchmark for what you should accept" (p. 150), because "It is unlikely that an arbitrarily chosen pain threshold reflects your true interests" (p. 151).

If the "pain threshold" is defined as a predetermined stop-position that also blocks creative solutions during the negotiation, then rejecting it is entirely justified. However, outright (arrogant) rejection of an individually determined (arbitrary) stop-position is completely unacceptable.

The Harvard-Concept overlooks the fact that all decision-makers, including when determining stop-positions, make their decisions "always on an emotional level, navigating the tension between their desires and fears. Only afterward is the decision rationalized with logical arguments" (Salewski, Die Kunst des Verhandelns (2008), p. 47).

Or simply put: "We make decisions with our gut and justify them 'with our head'" (p. 47). People prefer "what holds the highest expected hedonic value for them" (Pfister/Jungermann/Fischer, Die Psychologie der Entscheidung, 4th ed. (2017), p. 310). This is based on their subjective perception of benefit, assessed through the simple evaluation of "pleasant feeling" or "unpleasant feeling" (see Pfister et al. (2017), p. 310).

BATNA Positions as Walk-Away Positions

The Harvard-Concept recommends using the (respective current) BATNA positions as walk-away positions for the preferred deal. Before determining your walk-away position, you should first consider what you will do if the intended deal falls through (No-Deal Option). According to the Harvard-Concept, this situation, regardless of how unfavorable it may be, is "the only benchmark that can prevent you from accepting terms that are not in your interest or rejecting terms that would be" (p. 151). "Deviating from this approach is considered an 'error'" (Thompson, 2015, p. 38).

In many cases, this is simply the status quo (the negotiations with a potential new employer fail, and you remain with your current employer, keeping your status quo). You may also have multiple alternatives (negotiations with several potential employers), in which case your BATNA is the best of all available options. This approach is described as "rational" by the Harvard-Concept.

I reject this approach for two reasons.

Firstly: A rational method fails to recognize that people make emotianlly driven decisions about when to walk away from negotiations. Secondly: Constantly focusing "downward" (Is my current deal still better than the No-Deal Option?) can lead to poor outcomes because it undermines your own motivation. Mark Schweizer already summarized this in his highly impressive 2005 dissertation "Kognitive Täuschungen vor Gericht": "Those who focus on their desired outcome achieve objectively better results than those who keep their best alternative to an agreement in mind" (2005, p. 87).

‍In short: Stick to the 3 rules outlined at the beginning.