Negotiations in the Spotlight: AT&T and CWA

AT&T and Communications Workers of America

After five months of negotiations, AT&T and the Communications Workers of America (CWA) have reached a tentative three-year agreement on a new labor contract. The deal affects about 18,500 “core wire-line” (those who work in AT&T’s wired phone division) in the Midwest. The deal is pending ratification by the union membership.

Negotiators for the union were focused on three issues:

1) Maintaining and improving employees' standard of living,
2) Protecting retirees,
3) Enhancing employment security.

The newly negotiated contract terms include annual pay raises, pension increases, and provisions for cost-of-living adjustments. Workers also get more opportunities to switch jobs within AT&T.

A sticking point in the negotiations was the issue of healthcare benefits. The deal that was hammered out will include fully funded preventive care and company-funded health reimbursement accounts that can be used towards eligible health-care expenses.

Commenting on the negotiations, AT&T CEO Randall Stephenson said: “These were tough negotiations in difficult economic times and amidst major changes in our wireline business.”

According to the Indianapolis Star, AT&T's wired business has been losing revenue as more people switch to cell phones and Web-based communications.

Negotiations are still ongoing to discuss contracts covering more than 100,000 workers.

This negotiation between a corporation and its union illustrates the effect of the tough economy. The corporation (AT&T) making the case it is losing business and the union making the case for better job security and benefits in an environment of rising employee uncertainty.

Information for this article came from Reuters http://www.reuters.com/article/rbssTechMediaTelecomNews/idUSN1535675120090715 and the
the Indianapolis Star: http://www.indystar.com/article/20090716/BUSINESS/907160373/CWA++AT&T+agree+on+tentative+contract

Great Negotiating Stuff On The Web

There’s a lot of useful and interesting information about business and political negotiations the World Wide Web. We’ve found a few articles to share with you that are well worth a read.

How to negotiate with a carrier
If you are a shipper, have you ever tried to negotiate with a carrier? Well, if you haven’t, you probably should. According to this article by Rob Martinez in Multichannel Merchant, there’s always room for negotiation:

http://multichannelmerchant.com/opsandfulfillment/0701-reallife-carrier-negotiations/

Will financial sanctions bring North Korea to the negotiation table?

We’ve discussed before how North Korea seems unwilling to talk and instead focuses on threats. In this article from the Wall Street Journal Asia, Christian Whiton discusses how financial sanctions may reveal pressure points in the regime’s hard stance:

http://online.wsj.com/article/SB124655655032187281.html

Are you paying too much rent for your office or commercial space?

Small business owners have to be very aware of their bottom line, and a huge chunk of that can come from rent paid on their office or commercial space. Here’s an article from Gary O’Brien, an expert on commercial leases, about how to negotiate the rent:

http://www.nuwireinvestor.com/articles/negotiating-lower-rent-for-your-business-53207.aspx

Basketball player contract negotiation

For L.A. Lakers fans out there, here’s an article from the an Los Angeles Times blog regarding Trevor Ariza’s negotiations with the team regarding his contract:

http://lakersblog.latimes.com/lakersblog/2009/07/trevor-arizas-negotiations-a-quick-thought.html

We are always interested in great articles and information on business negotiations. Feel free to forward us links to websites and blogs that you have found to be useful and interesting.

Recession Is Boon to Negotiating Skills

There has never been a better time to sharpen your negotiating skills. Many companies are feeling the recessionary economy’s pinch and are now more open to negotiating rates, fees and added value. Because of the recession, the power scales are being tipped in favor of the buyer.

Consumers who negotiate are getting better deals and saving money. Savvy shoppers are bargaining for deals on furniture and for other goods and services that were traditionally sold at face value. In fact, many shoppers are using the recession as leverage, knowing that stores are anxious for sales.

“Most everything, it seems, is open to negotiation these days as supply outstrips demand, emboldening price-conscious consumers to push for discounts and deals,” writes Susan Todd in the New Jersey Star-Ledger.

http://www.nj.com/news/index.ssf/2009/06/in_recession_more_consumers_pu.html

Price negotiations are also going on in the business-to-business sector. For instance, according to Crain’s Detroit Business, hotels are now more flexible on rates for meetings and conventions (read article here:

http://www.crainsdetroit.com/article/20090607/FREE/306079992/1068#

The Los Angeles Times is reporting that a growing vacancy rate in even upscale retail locations is “giving a bargaining edge to those tenants who've been able to hang on, and many have been negotiating cheaper leases. In some cases, landlords in the Los Angeles area have dropped rents between 20% and 40%, brokers said.” Read the full article here:

http://www.latimes.com/business/la-fi-retail-space6-2009jun06,0,826746.story

As with any negotiation, be prepared. Do your research, and know what price you are willing to pay before you start negotiating. Also, be sure to understand the willingness of the seller to negotiate.

For a more in-depth look at how to negotiate during a recession, refer to our earlier post: Strategies for Recession Negotiations.

Have you found that you are negotiating price more during the recession? Please share your experiences in the comments.

Best Business Resources on the Web

With millions of websites and blogs at our fingertips, we at Karrass decided to find some of the most useful business sites to share with our readers. The following is a list of websites and blogs that we think provide some great business information and resources. We know there are plenty more out there.

Which website or blog (other than Negotiation Space of course) do you rely on for great business tips? Please share in the comments.

Company Information
(Note that there may be a fee to obtain detailed information)

Hoovers: http://hoovers.com/free/

Manta: www.manta.com/


Business and Management Information

All Business: http://www.allbusiness.com/
BNet: http://www.bnet.com/

Business Pundit : http://www.businesspundit.com/

Business Week Magazine: http://www.businessweek.com/

Fast Company: http://www.fastcompany.com//

Women on Business: http://www.womenonbusiness.com/

Leadership
The Intelligent Leader from the Washington Post:
http://voices.washingtonpost.com/leadership/

Small Business/ Business Advice

Inc. Magazine: http://www.inc.com/

Small Business Trends blog: http://smallbiztrends.com/

Stocks and Finance
Motley Fool: http://www.fool.com/

CBS Marketwatch: http://www.marketwatch.com/

“Aim higher to do better” Revisited

It always amazes me when something we have been teaching as a simple truth for a long time becomes someone else's revelation.

From Business Week, September 10, 2007: "A new study conducted by professors at leading MBA programs suggests that most negotiators don't realize how much they are leaving on the bargaining table." (Because they didn't aim high enough)

The professors divided nearly 300 students into buyers and sellers of motorcycle parts. After three separate negotiations of 45 minutes each, the professors compared the outcome with what each party had predetermined to be their limit. "The professors discovered that each side underestimated how much the other party was willing to bend, with the result that each party reckoned it got the better end of the negotiation."

"The buyers, for instance, thought they had hit the seller's bottom figure, when in fact they still overpaid by a wide margin."

The professors logically concluded that you should lead with an aggressive bid, and then give in slowly. "…the costs more than outweighed by the possible benefit."

This is always good advice as long as we remember that aiming higher takes into consideration the current market place, the nature of the relationship and does not mean to aim stupid to do better.

Jim Sauerwein

Good Suppliers Make Customers Better

In the July, 2007 issue of GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES magazine, they report on their annual survey of the best suppliers in the transportation industry.

Out of the 1800 nominated suppliers they selected the best 100 and looked for what set them apart from their peers. The most common 10 qualities that users looked for in their vendors were:

Reliability (of course) --- "When a vendor has proved itself to be rock-solid, an enduring partnership is assured."

Repeatable excellence --- Good performance is expected routinely, but nearly a quarter of the finalists had a record of exceeding expectations on many occasions.

Value and cost savings --- This may be a good place to comment that you will not find in these top ten qualities any mention of lowest price, cheapest or lowest bid. The most important financial measure was creating value in increasing sales, production efficiency or other revenue related measurements.

Expertise and knowledge base --- Customers are looking to their suppliers to provide best practices specific to their market, product and industry.

Problem solving ability --- "Many of our nominations were based on companies that had experienced emergencies, but thanks to the supplier's response cost and delays were minimized."

Continuous improvement --- "Especially for technology vendors, companies want to see a plan for product development, so they know their needs will be met in the years ahead." Suppliers that help their customers be "first to market" will always be the least threatened in a competitive marketplace.

Support --- So many manufacturing and transport firms have experienced multiple rounds of downsizing that they now must rely on their vendors to do many of the functions they no longer have manpower to do. Winning suppliers now manage local and remote inventories, provide computer interfaces for the elimination of paperwork and quicker deliveries, assume maintenance functions……….

Positive culture --- The phrase most often mentioned in all of our nominations was "can do". "The greatest accolades were bestowed on those vendors that took on any challenge and found a way to accomplish a goal without complaints or excuses."

Global capabilities

Strong management --- Strong and long-term supplier leadership insures that no matter how many people in the selling functions leave and are replaced, agreements will be honored. In other words, there will be no erosion of commitment no matter who is managing the account.

I think these 10 winning characteristics provide a great checklist for self-evaluation, no matter where you are in the supply chain.

Remember, having all these positive characteristics does not matter much unless your other party is aware of them!

Price Negotiations

An independent study by the McKinsey Consulting Group indicates "the fastest and most effective way to enhance corporate earnings is to raise prices."

There are a variety of ways to increase earnings. Obviously a company can raise prices or reduce costs. A company can also often enhance earnings by increasing their volume of business – provided there are no additional costs – this is referred to as "business efficiency." What is surprising about this McKinsey study is the huge impact just a small price increase has on corporate earnings – as compared to the impact for the same amount of cost savings.

McKinsey says that "for a typical S&P 1500 corporation, a 1 percent increase lifts operating profits by 8 percent. This impact is nearly 50 percent greater than what would occur with a 1 percent reduction in variable costs (such as direct labor) and more than three times greater than the impact of a 1 percent increase in sales volume."

So anyone negotiating a sale needs to remember what just 1 or 2 percent can do for the company’s bottom line. Be careful with your concessions. If you are forced to provide a price concession, don't forget to ask for something in return. During your discovery process, search for "Both-Win" ways to help your customer while at the same time enhance the price you are going to get.

And don't give it away! The impact of a few percentage points in price goes both ways. From McKinsey: "A decrease of 1 percent in average prices has the opposite effect, bringing down operating profits by that same 8 percent if other factors remain steady. Managers may hope that higher volumes will compensate for revenues lost from lower prices and thereby raise profits, but this rarely happens; to continue our examination of typical S&P 1500 economics, volumes would have to rise by 18.7 percent just to offset the profit impact of a 5 percent price cut. Such demand sensitivity to price cuts is extremely rare. A strategy based on cutting prices to increase volumes and, as a result, to raise profits is generally doomed to failure in almost every market and industry."

In the course of a business transaction, there are many negotiations taking place where price erosion can occur. There are often a variety of discounts, incentives, promotions and other giveaways that help close a deal. After an order is placed there may also be cash discounts, prompt payment discounts, extended payment terms (i.e. 60-90-120 days to pay), volume discounts or even rebates. Some negotiations even deal with 'performance penalties' that provide customers discounts if for some reason delivery schedules are not met or orders are not filled according to plan. Each one of these elements, if not negotiated appropriately, allows profits to "leak away."

Prices are impacted by hundreds, sometimes thousands, of individual negotiations each day. Standard and discretionary discounts allow percentage points of revenue to drip off the table one transaction at a time. At the end of the day, you have to look at what really the company is really putting into its pocket. With all of these negotiations happening, there are ways to find and capture an additional 1 or 2 percent. It pays to use your negotiating skills!

Women Don't Ask!

In THIS WEEK magazine, May 4, 2007, there is an article regarding woman's pay vs. men's. "One year out of college, women make 80 percent of men's pay. Ten years after college, women make only 69 percent of what men earn."

This may appear to be a social comment, but there is a significant negotiating context at work here.

In a wonderful book called, WOMAN DON'T ASK, the authors cite three studies which support the premise of their title. In one study, the experimenters looked at the starting salaries of students graduating from Carnegie Mellon University with master's degrees. The starting salaries of the men were 7.6 percent higher (nearly $4000) than those of the women. They then looked at who had accepted the initial offer and who had negotiated. Only 7 percent of the female students had negotiated while 57 percent of the male students had asked for more money. "The most striking finding, however, was that the students who had negotiated were able to increase their starting salaries by 7.4 percent, or $4,053, almost exactly the difference between men's and women's average starting pay."

In another study, students were recruited to play a game called Boggle. They were told they would be paid between $3.00 and $10.00. After four games, the experimenters handed each student $3.00 and asked, "Is three dollars okay?" "The results were striking --- almost nine times as many male as female subjects asked for more money."

Subsequent studies verify these results. Women don't negotiate as effectively for themselves as men do. I talked to a female director of a significant institution today and she said, "We do a better job and we just expect to be recognized for that and to be paid accordingly." Is this too passive?

Dare to ask!

Take the Time

In the May issue of the Negotiating newsletter published by Harvard, there is an interesting study about how the starting time of a negotiation affects the outcome.

I have always believed that Americans get involved in negotiations too late. Usually it is the deadline that drives us into a negotiation. Then, our focus is getting it done on time as opposed to trying to find the best agreement for both parties.

The summary of the study, done by professors Henderson, Trope and Carnevale of NYU states: ".....student subjects in a negotiation simulation made more multi-issue offers and counteroffers and created more value overall when the project at stake was five months away rather than the next day. The students were more capable of abstract, creative reasoning when contemplating distant simulations than they were when considering immediate ones."

So, aim higher to do better, and give yourself more time to negotiate, at least on those issues that will make the greatest impact.

Jim Sauerwein

"The Behavior of Successful Negotiators"

In "The Behavior of Successful Negotiators" by Neil Rackham we learn specific characteristics of successful negotiators.

Forty-eight successful negotiators were studied over 102 separate negotiating sessions. Their approach and behavior was recorded and compared to a similar sample size of negotiators considered average.

Here are some of the characteristics the Huthwaite Research Group, Ltd. found in successful negotiators:

• In planning, successful negotiators gave over three times as much attention to common ground areas rather than conflict areas.

• The skilled negotiator showed twice as many comments on long term concerns rather than short term.

• Skilled negotiators were more likely to set upper and lower limits while average negotiators were more likely to plan around a fixed point.

• ".....skilled negotiators made immediate counter - proposals much less frequently than average negotiators."

• "The researchers found that skilled negotiators tended to give an advanced indication of the class of behavior they were about to use, instead of just asking, "How many units are there?" They would say, "Can I ask you a question? -- How many units are there?" giving a warning that a question was coming."

So there are a few ideas, and perhaps a good checklist for you to evaluate your negotiating behavior.

Jim Sauerwein

Price vs. Total Cost

In the May edition of Purchasing magazine there is a study of how buyers rated distributor's performance in 2005. The study reports an interesting correlation between price and the performance rating.

From the article: "Buyers who typically place orders with suppliers based on lowest price are less likely to give distributor suppliers good grades for performance in the past 12 months. Those who negotiate competitive prices and consider total cost when entering into an agreement with a distributor may view the suppliers in a different light."

The data in the study shows that Quality and Availability take precedence over price in evaluating distributor's overall rating. The weight of Total Cost has risen significantly while the weighting on Price, Service, Technical Assistance, Reputation and Inventory Carried have all gone down.

Buy smart, not cheap; sell on total cost! Negotiate the best agreement for both parties in the long term!

Jim Sauerwein

Why Bother?

Often we are asked, "Why bother with all this negotiating stuff? Just lay your offer on the table; they will either accept it or they won't." If the world were perfect and everyone thought the same way, this would be a very efficient approach.

In negotiations involved in long-term relationships, we hope to achieve satisfaction, not only from the outcome, but from the process of negotiation.

Richard Shell, in his wonderful book, Bargaining for Advantage, cites a study where three variables strategies were tested:

1. Start high, then refuse to move.

2. Start moderately, then refuse to move.

3. Start high, then gradually concede to the moderate point.

"The last strategy was the most successful by far. More agreements were concluded using this strategy. The parties employing the third strategy made more money per transaction than did those using the first two. And, the people who faced negotiators using the third strategy reported much higher levels of satisfaction with their agreements than did people who faced those who refused to move."

Shell concludes, "Concessions are the language of cooperation."

Jim Sauerwein

Make Them Earn Those Concessions!

There is a great study quoted in THE WEEK magazine, June 4, 2004. It discusses the importance in human nature of earning our rewards. This is an important lesson for negotiators. What we give someone generally creates less satisfaction than what they earn from us.

The article:

"Despite their wealth, trust-fund babies and lottery winners are often unhappy. New research explains why: Our brains are hard-wired to enjoy rewards more when we earn them. Behavioral scientists at Emory University in Atlanta monitored the brain activity of two groups of people as they played computer games.

One group had to successfully execute difficult tasks before being rewarded with sacks of simulated cash. The other group got the cash no matter what they did.

When the money arrived, only the people who had to work for it registered a flurry of activity in the region of the brain that appears to process rewards and experience pleasure.

"From the brain's perspective, earning it is more meaningful and probably more satisfying." researcher Gregory Berns tells the Associated Press."

Jim Sauerwein

Negotiating Essential To Your Career

A recent newspaper article talked about the importance of 'negotiating' relationships inside your own organization. Getting promoted may depend upon your ability to negotiate internal relationships.

Telecommuters may go nowhere – career wise.
(Los Angeles Times – January 17, 2007)

Maybe Woody Allen was right, that 80% of life really is just about showing up. At least that's what most executives seem to think about people who work from home. Telecommuters are less likely to get promoted than peers who head into the office every day, according to a global survey of 1,300 executives. (Conducted by Los Angeles-based executive search firm Korn/Ferry International.)

Executives are concerned about promoting a hardcore telecommuter to a management position in which face time with employees is essential. . . 61% dinged telecommuters as being poorer bets for advancement.

If you're not cultivating the right network of people, you won't move up in any setting, whether you're telecommuting or not," said Jennifer Allyn, a human resource manager for accounting firm PricewaterhouseCoopers, which allows many employees to telecommute. But she and other executives recognize the pitfalls for workers, offering materials to help telecommuters and employees who travel frequently to maintain strong office relationships.

Employees are quick to cite the advantages of their home office routine, including no time lost to commuting, the ability to work in pajamas and bedroom slippers, and quieter surroundings. Human resource managers say telecommuting and other work-life programs cut turnover and improve productivity.

The findings of this study speak to a "general fear" that workers who have the boss's ear in the office will get promoted ahead of an off-site colleague who is doing better work. So if you are a telecommuter, beware. Find ways to regularly interact and negotiate with others in your organization. Use these opportunities to develop your relationships. Your career could depend on it!

Note from the Author . . .

We are very pleased with the readership of this site, but we would like to ask a favor.

If you don't have a comment on a particular article, how about a question regarding negotiation?

Perhaps you would share with the readership a difficult negotiating problem you have or are encountering.

We would like to hear from you. Is there a topic you would like us to discuss?

Jim Sauerwein