Chapter 4 Integrative Bargaining 4 2 Integrative Bargaining

Chapter 4 Integrative Bargaining

4 -2 Integrative Bargaining n n n Defined: “A negotiating process in which the parties involved strive to integrate their interests, as effectively as possible in the final agreement” Based on Mary Parker Follett’s tale of the orange and two sisters AND 1970 s labor relations cooperative approach to collective bargaining

4 -3 Integrative Bargaining n Also called: “Win-Win” (Getting to Yes by Fisher and Ury) n “Mutual-gains” approach n “Expandable pie” approach n n All have in common the integrative approach: Create as much value as possible for both sides n Claim as much value as possible to meet your interests n

Negotiation Skills n n n 4 -4 Skill 4. 1: Key elements of integrative bargaining Skill 4. 2: Apply the categorization method Skill 4. 3: Recognize the first step – focus on the interests of the parties involved Skill 4. 4: Practice active listening Skill 4. 5: Utilize the packaging tactic Skill 4. 6: Apply interest-based bargaining (IBB)

Differences Between Distributive and Integrative Bargaining Distributive 1. One issue (or one at a time) 2. “Win-Lose” 3. Maximize share of “fixed pie” 4. One-time relationship 5. Keep interests hidden 6. One expressed position for each issue 7. Keep information hidden 4 -5 Integrative 1. Several issues 2. “Win-Win” 3. “Expand the pie” by creating and claiming value 4. Continuing long-term relationship 5. Share interests with other party 6. Create many options per issue to maximize mutual gains 7. Share information, explain “why” of issue

Chapter Case: Labor Contract Negotiations n n 4 -6 Ohio Metals Co. (management) and Local 56 of the Primary Sheet Metal Workers of America, AFL-CIO’s current three-year contract is about to expire There is a history of a positive labormanagement climate Management shares financial data for the past three years; union shares survey of members’ interests At the first meeting both share lists of economic and noneconomic issues

4 -7 Thompson’s Pyramid Model Integrative negotiations is both a process – how to bargain, and an outcome – mutual gain _______________________ n Level 3: Pareto Optimal – Maximum value for both parties Level 2: Superior Agreement – Create additional value for both parties Level 1: Agreement – Exceeds both parties’ reservation points or BATNA

The Categorization Method 4 -8 Step One: Identify all issues Step Two: Classify each issue as a. compatible b. exchange c. distributive Step Three: Agree on all compatible issues Step Four: Trade or exchange issues of approximately equal value Step Five: Use distributive bargaining on all unresolved issues

4 -9 Tactics for Success: Practice Active Listening n Active Listening = focus on what the other person is saying, understanding both the content and emotion

4 -10 Practice Tips for Active Listening #1 Maintain eye contact #2 Think only about what they are saying, don’t formulate a response #3 Take notes and use them to reflect their thoughts back #4 Pay attention to body language #5 Confirm that you heard and understand by summarizing – ask reflective and probing questions

The Five Steps of the Categorization Method of Integrative Bargaining

Applying the Categorization to the Chapter Case n n Step 1: Thirteen issues identified Step 2: All issues classified Step 3: Agreed on three compatible issues (length of contract [1]; drug testing [5]; no strike/no lockout [8]) Step 4: Exchanged n n n Method 4 -12 Union’s job security [11] for management’s subcontracting [10] Union’s pension proposal [2] for management’s shift differential [9] Union’s clothing allowance [12] for management’s funeral leave [7] Management’s profit sharing [4] for union’s overtime [13] Step 5: Distributive bargaining used to settle wage increase [3] and health care insurance [6]

Keys to Successful Integrative Bargaining 4 -13 1. Willing participation: Open discussions, explore new options and mutual gains 2. Relationship: Positive long term is valued 3. Collaborative atmosphere: Avoid “fighter pilot lock-on” over an issue or position 4. Packaging: Combine two or more issues into one proposal of equal gains for both

Labor Contract Negotiations Through Integrative Bargaining

Tactics for Success: 4 -15 Use Questions to Advance Negotiations 1. 2. 3. 4. Open-ended “What type of clientele would this advance course attract? ” Open-ended with explanation “The basic course targets entry-level employees. What type of clientele would this advance course attract? ” Moving from debate to dialogue “What profit margin do you need for the advanced course to be successful? ” Broad-based, clarification “You’re clearly concerned about taking on additional risks, so what exactly do you see as the risk to you in offering the advanced course? ”

Tactics for Success 5. 6. 7. 8. 9. 4 -16 (cont. ) Circular “How do you conduct a marketing campaign? ” “What is the difference between a basic and advanced course? ” Leading “Can you see that my firm is taking all the risks in this proposal? ” Loaded “Are you saying these unfair payment terms are the only ones you will accept? ” Underlying concerns “What type of payment arrangement would reward you for the risk and provide your firm an adequate profit? ” Seeking creative solutions “Why is it essential to offer classes on different days? ”

4 -17 Limitations of the Categorization Method 1. 2. 3. Parties believe they use “win-win, ” but in reality use distributive method on each issue Imbalance of power causes one party to use “win-lose” Overconfidence in knowledge of other party and failure to actively listen

Traps to Avoid: 4 -18 How to Respond to a Loaded Question “Are you telling me those unfair terms are the only ones you will accept? ” Possible responses: (don’t respond in anger, instead evaluate the emotions) 1. Silence: followed by returning to the prior issue 2. Humor: “I have other demands you will like even less!” 3. Take a break: “We need to go outside for some fresh air” 4. Call it what it is: “I consider that a loaded question, are these the only terms I will accept…? ”

4 -19 Interest-Based Bargaining (IBB) n n Increasing in popularity, but subject of debate: Is IBB a critical negotiation improvement or a new label for “integrative bargaining” (“principled negotiation” from Getting to Yes)? 2004 study: IBB effective, but negotiators also return to distributive bargaining on tough issues

Principles of IBB n n 4 -20 Negotiators view the process as one of problem solving IBB steps (according to FMCS) 1. 2. 3. 4. 5. 6. 7. Sharing of information Willingness to forgo power or leverage Brainstorming to create options Focusing on issues, not personalities Leaving past issues behind Expressing interests, not positions Both parties, committing to IBB

Advantages and Disadvantages of IBB n 4 -21 Advantages Focus is on underlying interests n Brainstorming leads to more options, better solutions n Parties seek out new options rather than defend portions n n Disadvantages May waste time seeking more options n Proposed options may not be realistic n Standards agreed to may be vague and subjective n

Union and Management Negotiators’ Reports on IBB Activities