- They suggest realistic expectations
- They listen to both sides without bias
- They help stimulate alternative thinking or different approaches to a resolution
- The may suggest a compromise that neither party considered
- They may give both parties an “out” or a way to save face
Tag archive: labor-negotiations
Do You Need a Mediation?
Webster’s defines mediation as “intervention between conflicting parties to promote reconciliation, settlement or compromise.” The U.S. Equal Employment Opportunity Commission (EEOC) defines mediation as "a fair and efficient process to help you resolve your ...disputes and reach an agreement. A neutral mediator assists you in reaching a voluntary, negotiated agreement." The emphasis, which the EEOC includes in their definition, is on fairness and efficiency. If you are interested in labor meditations, please read more about the EEOC and negotiation here. By understanding those definitions, it seems that every business and diplomatic negotiation could use mediation. After all, what is negotiation if not the act of reaching an agreement? However, not every negotiation requires a mediator. Many times, the parties are able to reach an agreement on their own. On the other hand, certain situations such as deadlock or when communications have been compromised by heightened emotion, benefit greatly from mediation and even require mediation to be able to conclude negotiations. A mediator helps to diffuse conflict and to reach accord. He or she acts as a communications go-between. Dr. Chester Karrass tell us that mediators bring the following to a negotiation:Read more »
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!Read more »
Forestalling a Breakdown in Talks
Let us consider some ways to forestall breakdowns before they harden into long-term bickering or wars. The suggestions that follow will help get stalled talks back on track. They allow a negotiator to rebuild negotiating space for talk without the loss of face or bargaining power for either side.Read more »
- Change the time shape of performance. Not everything needs to be done now, next month or next year.
- Get the help of someone both sides can trust and respect to mediate the difference. That’s what the Chinese and Japanese do so effectively.
- Alter the risk factors that make it harder for one side or both to say “Yes.”
- Change the scope of work. There is always some room for give and take in the work to be done or the way it is done. Getting into the details serves to enlarge negotiating space and point the way to economies of effort.
- In most negotiations, as the end approaches, the sum of settled issues generally outstrips those that are not. Nobody at the table relishes the idea of walking out after so much has been accomplished. It pays to recapitulate all matters already settled and those still open. The balance usually favors moving on to closure.
- Determine if the gap that separates you can be bridged gradually: a little now, more later and completely next year.
- The best way, by far, to break an impasse is to collaborate with the other person to search for and discover a better arrangement for both sides. Change the mode of negotiating from the conventional competitive mode to one that is collaborative and Both-Win®; that is, coming from an essentially self-centered mode to one that fosters mutual gain.
A Walk in the Woods
Some things are best not settled in the light of publicity or under the scrutiny of those at the table. Much of what is said in the negotiating room is said not to reach agreement but to prove to others that their views are being expressed and fought for. Off-the-record talks permit the opposing parties to tell the other what the real impediments to agreement are and why some issues are more important than others. Off-the-record discussions also set the stage for later accommodation at the bargaining table. In her ten-year research study of labor negotiations, Ann Douglas found that private talks between principal negotiators frequently preceded settlement. I had the same experience in customer-supplier negotiations. What we learned from each other during private meetings could not have been said in front of others. Yet it was what we learned “off-the-record” that closed the deal. Off-the-record talks foster movement toward settlement because the negotiators can talk about their personal feelings as well as their organizational constraints on a person-to-person basis. They can privately indicated a willingness to compromise or to exchange one issue for another. These informal moves toward reconciliation might be politically unwise if discussed at the table in front of others. There is a downside to off-the-record talks. Good negotiators know that not everything can or should be said off the record. They also know that some people, especially those with a strong need to be liked, talk too much in the privacy of a comfortable restaurant or under the gentle influence of good wine. Therein lies the danger inherent in a walk and talk in the woods.Read more »
The NFL and NBC Negotiation
Here’s the background on a real world collaborative negotiation that the National Broadcasting Corporation (NBC) had with the National Football League (NFL) for broadcast rights to NFL football. It all started with NBC wanting to raise their ratings and deciding that NFL football was the way to go. The negotiation began as most negotiations do with NBC making an offer for NFL broadcast rights, which the football league rejected as inadequate. Talks continued for a considerable time with insufficient give and take on both sides to reach settlement. Both sides remained determined to hold out for an agreement that met their needs without leaving too much on the table. With deadlock imminent they decided that a new negotiating strategy was necessary to reach agreement. The new strategy was to move talks into a collaborative Both-Win mode rather than remain centered on conventional competitive bargaining. The scope of issues was enlarged from simply broadcast rights and price to issues of higher value; that is, those issues that created new opportunities and benefits for both sides not previously explored. Suddenly the negotiation involved not only the NFL and NBC, but also General Electric (GE), the huge corporation that owned NBC. After being shut out of NFL broadcasting for nine years, NBC successfully negotiated a six-year deal with the NFL for what was then a huge amount of money and mutual benefits that will go on for years, benefits that accrued not only to the NFL and NBC, but to GE as well. This was all the result of a we-centered collaborative Both-Win negotiation that opened the door to new opportunities and entrepreneurial innovation. How did NBC gain from the deal?Read more »
- Four hours of potential top-ten prime-time programming every week.
- Two Super Bowls (2009 and 2012) with their large advertising dollars.
- The annual Thursday night opening game and two wild-card games.
- A platform to promote NBC’s prime-time lineup of shows.
- The right to choose the late season games it will broadcast (a right the NFL would not provide before).
- GE Finance will play an increased role in the NFL loan pool financing program for new stadium financing.
- GE’s Security Services Unit will promote and provide enhanced stadium security to NFL owners.
- On-site medical technology provided and promoted by GE Medical Products.
- It costs a lot to illuminate these football stadiums. GE is the leader in energy efficient lighting technology and manufactures a lot of light bulbs.
- Access to the NFL as a customer of its financial services and capital.
- The sales of its security services to NFL stadiums and owners.
- The sales of its on-site technology medical equipment at each NFL stadium.
- The sales of new lighting technologies.
The Difference Between Relationship-Based Compromise and Self-Centered Competitive Compromise
People negotiate for good reason. They don’t do so because they are lonely or have nothing else to do. A difference between them exists which one or both believe it best to resolve. At the very least they wish to protect their interests. At most, they wish to strike a deal that will best achieve what they want and need. Both realize that competition exists between their respective goals and both are defensive of their interest and positions. External and internal workplace negotiations are similar in those respects. Yet, internal and external negotiations must be conducted in importantly different ways. Internal dealings are far more we-centered as a rule than external ones. Both sides are clearly members of the same organization and share similar organizational goals. Both must work together in a measure of harmony from task to task and day to day. Self-centered strategies and tactics are frowned upon within the organization and recognized as counterproductive in the long run. Relationship-based approaches are paramount to building positive relations. Even when one’s goals seek to promote one’s interest through bargaining, the negotiator is best served when his or her inputs are recognized as being honest, respectful and worthy of trust. When those who oppose view the other person’s or words as bluffing, threatening, manipulative, untruthful or secretive, their relationship diminishes. The goal of relationship-based negotiators is to leave the table with a fair and reasonable agreement that commits both sides to work together cooperatively in the future; and, to forge an agreement that stands the test of time and can be resolved fairly when and if problems arise later. Such a settlement makes future negotiations easier and defuses problems and differences before they explode in anger. Relationship-based negotiators recognize the strategies and approaches they cannot use. Borderline tactics are shunned in workplace dealings. Tactics such as fait accompli, figure-finagling deception, word play, devil in the details and deliberate escalation are never used. These negotiation tactics are clearly counterproductive in workplace bargaining and dangerous to use in any negotiation because they incite anger and revenge in those who feel victimized by their use. External negotiations are not so closely limited in what is said and done. Often the goal externally is to do as well as one can do, but not leave the other party so dissatisfied that they fail to perform as agreed. Self-interest is a motivator in most conventional transactions as it is in internal dealings. Good relationships are generally valued in both types of negotiation. But there is one major difference between workplace bargaining and that between buyer-seller or union-management representative. In most external negotiations, competitive self-interest, not relationships, dominates the exchange. Even there certain limits to action prevail. Strategies that are illegal, coercive or abusive are taboo there as they are in the workplace. Relationship-based give and take rests on the premise that what one does and says at the negotiating table directly affects the relationship of the parties as much as the outcome itself. External negotiators, like commercial buyers and sellers, face one another at the table then go their mostly separate ways. Workplace negotiators have to face each other and work together every day. So when it comes to workplace negotiations good relations, rapport and open-honest dealing, matter a great deal. When these elements are missing, work will not get done effectively and creative collaboration becomes unlikely.Read more »
Moving to Agreement Through Relationship-Based Compromise and Concession Exchange
Ideas, however creative or original, will not reach the global marketplace unless we as entrepreneurs learn to work together and make decisions in a better way. A report published recently in the Wall Street Journal made that point in no uncertain terms. The report, titled “Project Design,” describes seven good ideas and how they moved toward market, some successfully, others not. The editor, Lawrence Rout, wrote: “It begins with an idea. A pair of women’s jeans that fits well but won’t cost a lot… a car that will appeal to consumers in both China and the U.S…. a watch that can be worn indoors but has a flashlight that makes it particularly useful at night.” And then, Mr. Rout says, “It gets interesting. Because it’s one thing to have a broad idea of what you want to a product to be. It’s something else to figure out how it will all be put together and what it’s actually going to look like.” The report goes on to cover other products that reached the marketplace after considerable research and collaboration. In every case, it was teams of specialists who nursed these ideas to market, not individuals working by themselves in small laboratories or garages as in earlier times. This blog is titled, “Moving to Agreement Through Relationship-Based Compromise and Concession-Exchange” for two reasons. When bargaining for anything, we usually proceed toward agreement through a series of reciprocal concessions and compromises. Through the process of sharing information and give and take, we reconnoiter the possible settlement range and move to a fair and reasonable agreement that satisfies both parties. The negotiating and concession exchange process, while far from perfect, is a relatively fast and efficient way to reach agreement. The words “relationship-based compromise and concession-exchange” in the title are critically important in the context of negotiations taking place within our own organizations. In the workplace it is essential that all concession-making approaches take into account the significance of maintaining and advancing positive relationships between the parties. Unless we do so our ability to work together on a daily will result in little or nothing getting done. Relationships are, of course, important in external negotiations such as those between diplomats of different countries or buyers and sellers. While important, they are not as crucial there as they are in internal dealing where interpersonal matters like respect, honesty, transparency, belonging and credibility play such a large role. In the next blogs, we will explore the difference between relationship-based negotiation and concession exchange, and the conventional competitive techniques often employed in external give and take negotiations.Read more »
The Firm “No” Response
There are people who respond to any new idea presented to them or any opening offer in negotiation with a firm “No.” They usually do so with a view to reducing the other person’s expectations or by ending the talks as quickly as possible. Of course, both are legitimate negotiating objectives, even if they are not conducive to fostering better relations between the parties. This firm “No” approach is sometimes used by buyers in commercial negotiations when they have considerable power and wish to leverage that strength to achieve a goal they have already decided on. The seller is told, “This is my final offer. Take-it-or-leave it.” If you are going to respond to someone’s idea or position with a firm opening “No,” minimize the hostility they will surely feel. Never use the phrase, “Take-it-or-leave-it.” It is unnecessarily incendiary and invites retribution. When a firm “No” is backed by facts, good precedents or history, it is less onerous. So also when the “No” is defended by existing organization policies, procedures or published constraints. Yet, however politely a firm “No” is rendered, it will be resented. Time is also a factor in determining how the “No” will be accepted. If the other person is provided adequate time to present and defend their position or idea they will not resent the “No” as much. Whether a firm “No” is expressed early or late in the talks makes a difference. A “No” expressed late in the bargaining process is apt to be received with less bad feeling. What can you do when the other opens the talks with a firm “No” to your “great” idea or “reasonable” offer? My advice is: test the rejection hard. It may not be as rigid as it appears. Several options are available. The best, I believe, is to broaden the nature of the deal under discussion. Expand the problem or differences to be resolved to include other matters of interest to both sides such as service, work product or quality considerations not covered by the “No” response. In addition to broadening the matter or issue, you may test the “No” by using one of these ideas:Read more »
- Saying the words, “But it doesn’t apply in this case,” usually opens the door to further interest on the part of the other side. They will wonder why so you will have to spend time preparing for the “Why” and come up with some reasonably good reasons. The negotiating dialogue that follows will allow you to also discuss other aspects of your basic position.
- Another approach that works surprisingly well is to continue speaking as though you never heard the “No.”
- Find a face-saving way for the person who said “No” to retreat from their position. In a strange way, the person who says “No” in a rigid way has trapped themselves into an awkward, inflexible position. They need a good way out or they won’t retreat.