Chapter 12
Negotiation
What the Chapter Covers
This chapter deals with employment relations negotiations; a topic that is strongly connected to collective bargaining that was dealt with in the previous chapter, and conflict, which is covered in the next chapter of the book. The material in the following order:
• negotiation is defined, together with a conceptual explanation of the process • the contextual circumstances that influence negotiation is then given
• the internal dynamics of negotiation is explained by reference to a very specific model, that of Walton and McKersie behaviour theory of labour negotiations
• the practical aspects of negotiations are then considered, and in this section some of the skills and stages of good practice are explained.
Three themes run through the chapter. The first is that negotiation cannot be divorced from other related processes, such as collective bargaining or industrial action and control in employment relations. Second, negotiations do not take place in a vacuum, and therefore contextual factors and organisational climates have a strong bearing on the nature of negotiations. The final theme is that negotiation is a process with complex and sometimes very delicately balanced internal dynamics. Thus it is one in which the relations and interactive skills of the participants can be highly important.
New Concepts Introduced in Chapter
Alterative Dispute Resolution (ADR): the use of external third-party mediation to help resolve a dispute when a failure to agree is reached
Attitudinal structuring (negotiations): a process whereby negotiators seek to modify the perceptions and expectations of their own constituency, and those of the opponent negotiator.
Bargaining range (negotiation): a negotiating range for each party, depicting their lowest and highest points leading to a negotiated agreement
Concluding negotiations: the fourth and final phase of face-to-face negotiations, and is defined as the process of agreeing to what has been agreed.
Developing the case (negotiation): the second phase of face-to-face negotiations, in which both sides argue the strength of their own case, and seek to reduce the validity of their opponent’s arguments.
Distributive bargaining (negotiations): a zero-sum negotiation in which a gain to one side is a loss to the other party; likened to dividing up the slices of a cake.
Employment Relations Climate: a particular ethos or atmosphere in an organisation which reflects the quality of the employment relationship.
Failure to agree (negotiation): a situation where both parties agree there is little likelihood of further concession or compromise, and agree to withdraw from the negotiating process to either seek third party conciliation or engage in industrial action.
Fall-back point (negotiation): a negotiated minimum, below which agreement would be
unacceptable for each of the parties
Ideal settlement (negotiation): an ideal negotiating outcome on a particular issue for each party
Integrative bargaining (negotiations): a positive sum affair in which the parties engage in cooperative negotiation; likened to a joint effort to make the cake bigger.
Inter-organisational bargaining (negotiations): the actual interface where negotiators negotiate on behalf of their respective constituency, which is the employing organisation for management, and employees who are union members for the trade union negotiators. Interpersonal relationship (negotiators): the level of rapport and the degree of trust that can exist between the principal negotiators
Intra-organisational bargaining (negotiations): a process whereby negotiators negotiate with their own constituents in order to bring the expectations of the group they represent into line with their own expectations about what can be realistically achieved.
Mixed bargaining (negotiations): the coexistence of both distributive and integrative bargaining activities.
Multiple bargaining objectives (negotiation): the existence of a number of different negotiating issues, each with their own separate bargaining ranges and fall-back positions. Negotiation: a process of dialogue through which the parties seek to reconcile their differences, with the aim of producing an agreement, whether formal or informal, by using elements of power, persuasion and argument
Opening moves (negotiation): the first phase of face-to-face negotiations, in which the proposing side will present its claim and supporting arguments
Potential zone of settlement (negotiation): the potential for a negotiated settlement, without recourse to industrial action, within the range of each parties minimum fall-back position.
Relative importance of a negotiating issue: the importance attached to a particular negotiating issue according to the constituent group the negotiator is represents.
Relative power of the parties (negotiations): the capability to get the other side to change their view, which may or may not involve the use of sanctions
Seeking agreement (negotiation): the third phase of face-to-face negotiations, in which one of the parties make public definite and concrete proposals for agreement.
Teaching Materials in Textbook
Pause for Reflection Exercises: Hints for Completing
Exercise on page 359: Objectives and context of a negotiating situation
You might want to think about a negotiating experience you have encountered yourself at some point in your life, whether this was buying a car, renting an apartment or even discussing an allowance for college from your parents. What sort of bargaining power do you think you (and your opponent) had in this situation? Is that anything like negotiations in employment relations?
Exercise on page 370: Practical stages of negotiation
Realising why the post-negotiation stage is important might be do with how things are implemented and how a negotiated agreement is communicated to others across an organisation.
Critical Discussion Question: Hints for Completing
Critical Discussion Question, p365: Critique of the Walton and McKersie framework
If you are having difficulty with this, review the Walton and McKersie model. Do think that even the most cooperative (integrative) bargaining activity can still be distributive in some way.
Case Studies
There are two case studies (12.1 and 12.2) in the chapter, and a supplementary case study (case 12.3) provided later. Case 12.1 in the chapter is reasonably short, and can normally be read and digested in approximately 20 minutes. Case 12.2 is a little longer and it is best if you prepare their answer and ideas prior to the class.
Exhibits
Supplementary Case Study 12.3: Vertex Plc (Stage 2): Negotiation
Case study 12.3 on the following pages is a rolling-scenario type case that is also a role play exercise. Stage 1 of this case study has already been covered in the web-base materials that support Chapter 8 (i.e. supplementary case study 8.3). Stage 1 involved management informing its workforce and the union about the proposed restructuring of Vertex. Case 12.3 goes beyond informing and consulting and moves into the second stage, that of negotiating.The case material should be studied for about 1 hour prior to the simulated face-to-face negotiating role play exercise. The relevant stages of negotiation for this exercise are explained on pages 363-370 of the textbook, covering the Internal Dynamics of Negotiation, and the Practice of Negotiation. It may also help to review what you covered and how the issues were handled in case study 8.3 previously.
Supplementary Case Study 12.3: Vertex Plc (Stage 2): Negotiation
General Briefing Scenario for Stage 2
In case study 8.3 the board of directors of Vertex Plc met at a country hotel to discuss the implications of a company restructuring proposal. In outline this included the following: 1. A single-site operation for the company. It was noted that the Derby plant has a great
deal of under-utilisation and existing buildings could accommodate production operations from the Rotherham and Walsall plants.
2. As a result of 1, investment will be needed in terms of new equipment and new working practices. The Walsall and Rotherham sites could both be sold which would offset the any refurbishment at Derby.
3. The new equipment and working practices would mean a concentration on assembly work at the Derby plant, with the bulk of manufacturing operations to be outsourced to sub-contractors.
4. During the transition to the single-site operation at Derby (estimated to take 10 months), the quantity of finished products would need to be built-up. To this end, additional levels of overtime working would have to be introduced at all three sites to build-up a sufficient stock of finished goods.
5. As a consequence of the proposal, there would have to be a reduction in staffing levels, and the board of directors feel it is important to try and negotiate a redundancy
agreement with the trade union in order to maintain good employment relations and workforce cooperation for the future of Vertex.
6. As a first step in this direction, the Chairman and Managing Director, Mr Eric Wood, wrote a personal letter to all employees explaining the position.
7. Shortly after the letter, an initial information and consultation meeting was held with the trade union side of the JWC, at which management presented their proposals for the single-site operation. The trade union members present asked a few questions and sought additional information. A summary of the minutes of this meeting are given below.
8. It was also decided to reconvene the JWC in two weeks time to consider more fully the proposal, with a view to reaching an agreement on the way forward for Vertex. It is at this reconvened JWC negotiating meeting that the case study commences.
Summary Minutes of the first stage meeting of the JWC
Present on the management side were:• Mr Eric Wood, Chairman and Managing Director • Mr Tom Evans, Director of Finance
• Mr David Jones, Manufacturing Director • Mr Harry Stonewood, Director of Marketing • Mrs Elaine Kay, Human Resource Manager. On the trade union side those present were:
• Richard Twiss, Works Convenor, Derby
• Peter Guss, a skilled toolmaker, who was also from Derby • Albert Brown, representing the workforce at Rotherham • Gordon Doughty, representing the workforce at Walsall.
The meeting was opened by the chairman, Eric Wood, who briefly outlined the background to the board’s decision. He stressed that while Vertex was still a viable firm, it increasingly had to cope with a far more competitive environment than in the past. Moreover, the time was not far off when competition would get even tougher, and if it failed to pay attention to its effectiveness, operating costs and efficiency, Vertex was liable to go under. As such, the board felt that it needed to take action now to remain viable for the future, and an essential element of this was to move to a ‘single-site’ manufacturing set-up.
Mr Wood then handed over the meeting to Tom Evans, the Director of Finance, who gave details of the proposed reorganisation. This outlined the details of the proposed changes, and contrasting staffing levels at all existing sites with the envisaged staffing of the single-site operation. Mr Evans drew the meeting’s attention to the final column of the staffing statistics, which made no mention of which of the three existing sites would be required to shed labour. This, he explained, was because at this stage in the proceedings, the board had purposely decided to maintain a very flexible, open-minded approach. For example, it might be the case that some employees would not wish to move, and instead, would opt for redundancy. Thus the board had gone no further than calculating envisaged staffing requirements.
The meeting was then handed over to David Jones, the Manufacturing Director, who dealt with the practical details of the proposed reorganisation. He noted that the Walsall and Rotherham sites were very different in size and this had a bearing on the complexity of what was involved for each one. Therefore, the board had opted for what he called a ‘staged’ approach, starting with the smallest move first. This would be the move of production from Rotherham to Derby. The Rotherham site would officially close on 31 August, and a completion date for the transfer of all assets and work in progress had been set for early in the new year (5 January). Following this, the Walsall site would be the next to close, and this would need to be completed by 31 July. This was followed by a short explanation of what would actually be involved in making the move.
To allow the trade union side to consider its position, the meeting was then adjourned and after the adjournment, it was opened for questions to be asked of management.
Richard Twiss, the works convenor, expressed the trade union side’s alarm at the scale of the restructuring. He pointed out that the way it had been presented was less than what the union expected under the statutory requirements for redundancy consultation.
Albert Brown and Gordon Doughty (from Rotherham and Walsall sites respectively) pointed out that this would be a severe blow to their members, and they needed time to digest the full implications of the proposal, especially the impact this will have on part-time workers.
Relatively few other questions were asked from the union side, and it was clear that sufficient time would have to be made for the union to consider all the implications and consult with its members before any further discussions on the proposal could take place. It was therefore decided to reconvene the JWC in two weeks time, with a view to reaching an agreement on the way forward for Vertex. To facilitate this, Mrs Elaine Kay, Human Resource Manager, announced she would make arrangements for line managers on all sites to allow the trade union representatives on the JWC to hold workplace meetings, in order to brief their members. She also stated that in order to obtain a preliminary estimate of how many employees on each site would wish to be considered as a potential candidate for a move to Derby, she will ask line managers to hold preliminary interviews with all employees.
The meeting closed and a date set for a reconvened meeting of the JWC in two weeks time to move to stage 2; that of trying to negotiate an agreement on the restructuring proposals.
Useful Sources of Additional Material
Books and Journal Articles
ACAS (2008) Mediation: an employer’s guide, London: Advisory Conciliation and Arbitration Service and CIPD. A very useful and practical guide complied by ACAS and the CIPD, showing the stages and benefits of mediation and its role with negotiation. Available at: http://www.acas.org.uk/CHttpHandler.ashx?id=949&p=0
Cairns, L. (1996) Negotiation Skills in the Workplace: A Practical Handbook, London: Pluto Press. Written from a trade unionists perspective, this book provides practical tips and skills for negotiators.
Findlay, P., A. McKinlay, A. Marks and P. Thompson (2009) ‘Collective bargaining and new work regimes: too important to be left to the bosses’, Industrial Relations Journal, Vol 40 (3), pp.235-251. An article that utilizes the Walton and McKersie model of negotiations to capture the complexity and dynamics of union-management bargaining.
Fisher, R., W. Ury and B. Patton (2003) Getting to Yes: Negotiating an Agreement Without Giving In (revised 2nd edn), Random House Business Books, London Although something of a ‘how to do it’ flavour is reflected in the book, it gives a very readable explanation of the principles which can be followed to try to develop negotiating skills. Gibbons, M. (2007) Better Dispute Resolution: A Review of Employment Dispute Resolution in Great Britain, Department for Business, Enterprise and Regulatory Reform (BERR), London. A review of grievance and collective dispute resolution procedures in Britain, with practical guidance.
Nicholson N. (1979) ‘Industrial relations climate: a case study approach’, Personnel Review, vol.8 (3), pp.20-25. An empirical article that documents the effects of bargaining and negotiation between management and unions on organisation climates.
Walton R.E. and R.B. McKersie (1965) A Behavioural theory of Labour Negotiations, New York: McGraw Hill. A seminal work which gives a systematic examination of the strategies and tactics of negotiation. A book that is worth studying in its own right.
Walton, R.E, J.E. Cuther-Gershenfeld and R.B. McKersie (1994) Strategic Negotiations: A Theory of Change in Labor-Management Relations, Boston Massachusetts: Harvard Business School Press. A review of contemporary labour-management relation in the US, arguing that effective negotiations can foster organisational changes and more cooperative attitudes among organisational stakeholders.
Web-based Materials
For those who enjoy exploring study materials on the internet, given below are a number of potentially useful websites that give further information on the topics and issues covered in the chapter 12.
http://cep.lse.ac.uk/piep/query.asp?id=1
The Centre for Economic Performance at the London School of Economics publish a range of discussion and research papers concerning pay and pay inequalities in employment relations in Great Britain.
http://www.tuc.org.uk/organisation/index.cfm?mins=444&minors=444
The TUCs ‘Bargaining to Organise’ campaign that is promoting a wider bargaining agenda among union members in Great Britain.
http://www.unionlearn.org.uk/policy/index.cfm?mins=53
Union learning and skills web-site, including resources and information relating to union negotiating skills and rights.
http://www.eef.org.uk/UK/whatwedo/hrlegal/by+subject/collective+employment+issues/co llective+bargaining.htm
The EEF – previously known as Engineering Employers Federation and now called “EEF: The Manufacturers’ Organisation” – provides regular briefing documents about collective bargaining and pay issues on its web site.
http://work911.com/articles/negotiate.htm http://www.how-to-negotiate.com/
Although somewhat simplistic, the these web-sites provide tips and advice on negotiating skills.
Multiple Choice Questions
Try the following multiple choice questions to test your knowledge of the information in chapter 12. You should note that each question has only one correct answer, and this is one of the four alternatives (a), (b), (c) or (d) listed below the question. When you have answered the questions, move to the grid at the end of this chapter to see the correct answers.
This activity contains 10 questions.
1. Which of the following is a reason argued in your text for suggesting that negotiation in employment relations differs from negotiations that occur in other commercial settings?
a) because trade unions have very little bargaining power these days
b) because either of the parties in employment relations negotiations always has the power to inflict harm on the other
c) because both of the parties to employment relations negotiations are concerned with cooperation and partnership
d) because commercial negotiations are almost always conducted by legal experts rather than employment relations actors.
2. Which of the following can be said to be one of the most fundamental and basic objectives of employment relations negotiations?
a) to find an agreeable resolution to the differences that exist between employers and employees
b) to enhance the bargaining power of managers over unions c) to improve productivity and company performance
d) to make sure that employment relations rules are equitable and fair
3. The process of negotiation is influenced by which of the following contextual factors? a) the size of the organisation in terms of the number of workers employed
b) the trust and interpersonal relations that exist between the main negotiators c) the use of performance appraisals to set individual pay rates
4. The relative power of the parties during negotiations can be defined as:
a) how important a bargaining issue is to a negotiator’s constituent group of members b) the extent of open and honest dialogue that exists between the principal negotiators c) the capacity for one party to get the other to change its view during negotiations,
with or without the use of sanctions
d) the relative ease at which one party can deploy sanctions to inflict harm on the their opponent
5. According to Walton and McKersie, which of the following is NOT one of the sub-process that make up labour-management negotiations?
a) organisational climate b) attitudinal structuring c) distributive bargaining d) integrative bargaining
6. Distributive bargaining can be defined as:
a) a zero-sum bargain that produces a legally binding agreement b) a positive-sum negotiation in which the parties agree to cooperate c) a zero-sum bargain where a gain to one side is a loss to the other
d) a positive-sum negotiation that enhances the quality of the employment relations climate in an organisation
7. Mixed bargaining involves which of the following activities?
a) The coexistence of union and non-union employee negotiators around the same bargaining table
b) Bargaining over more than one substantive issue at the same time
c) The coexistence of distributive and integrative bargaining activities during a negotiating situation
d) A bargaining situation where the principal negotiator seeks to alter the demands of both their own constituency and those of their opponent
8. Which of the following is NOT one of the three main stages of negotiation? a) the face to face stage
b) the preparation stage c) the selling the offer stage d) the post-negotiating stage
9. The potential zone of settlement for either negotiating party can be defined as:
a) a point of possible agreement that is possible without the need for industrial action and which is above the minimum acceptable to one side and the maximum acceptable to the other side
b) a point of possible agreement that will allow the negotiators to save face with their consistency without recourse to industrial action
c) a point of possible agreement which is less than the desired expectations of the negotiators constituent group
d) all of the above
10. In employment relations the term used to describe either a break-down in negotiations, or when no acceptable agreement is reached, is often called:
a) the concluding phases of an unsuccessful negotiation b) a failure to agree
c) an unacceptable bargaining range d) an unlikely zone of settlement
Answers to Multiple Choice Questions
Question Number Answer Level of Difficulty Page Number
1 b Easy 358 2 a Moderate 358 3 b Moderate 360 4 c Moderate 360 5 a Easy 363-364 6 c Moderate 363 7 c Moderate 364 8 c Easy 366-370 9 a Easy 367-368 10 b Easy 370
