BUS403: Negotiations and Conflict Management

Sales generally include buyers and sellers. Each side wants something from the other, whether that means a lower or higher price, access to a certain commodity, a higher salary, or health benefits. The market can be physical or virtual (online). Timing (environment, social, political, financial) is often the most determinant element in whether a sale occurs.

Weather conditions, politics, conflicts, and wars among states or countries frequently impact inventories and the availability of raw materials. Negotiating with suppliers means staying abreast of local, state, national, regional, and global conditions and instabilities. These factors can affect availability, transportation, safety issues, hiring decisions, merger and acquisition opportunities, and profits.

The Covid-19 pandemic in 2020 exposed how quickly supplies, inventories, and supply chain routes can change, disappear, or become cost prohibitive. Businesses that warehoused their supplies locally were prepared, but many were left to the whims of their suppliers.

The U.S. labor movement was at its height during the 1940s and 1950s. In 1955, the AFL (American Federation of Labor) merged with the CIO (Congress of Industrial Organizations). Union membership began to decline in 1947 when Congress authorized changes to the National Labor Relations Act, decreasing labor bargaining power via the Wagner Act. During the 1970s, union membership peaked at 21 million, but by 2022 membership will be 14.3 million, according to the U.S. Bureau of Labor Statistics.

In the past, labor negotiations have followed nearly every new industry, such as the steel industry of the late 1890s, factory workers in the 1930s, and public and private sector employees during the 1970s and 1980s. In 2020, the Covid-19 pandemic exposed poor working conditions in several industries and large companies. Low unemployment rates and greater demand for workers have emboldened employees to organize to demand better pay, benefits, hours, and a share in profits, such as local hospitals, Amazon, Starbucks, and Trader Joe's.

For most businesses, the goal of a merger or acquisition (M&A) is to increase profit or market share. The merger can be among companies that are the same or different sizes. Negotiation teams include attorneys skilled in mergers or acquisitions, bankers, retired managers or directors, former owners, outside experts, and consultants. The process can last days, weeks, months, or years. For example, in 2000, Time Warner and AOL (America Online) merged in a deal costing $182 billion dollars.

An agent is a person who is authorized to act for or in place of another. The principal authorizes the agent to act on their behalf. For example, you can think of the principal as a business owner who hires a lawyer (agent) to attend all meetings and negotiate the little details using their expertise in the field of business. The agent is subordinate to the principal (their employer). But the principal is the ultimate "lead" negotiator (although they may not attend all of the meetings or have the expertise) because the business owner is ultimately responsible. In other words, the principal makes the final legal decisions when they sign the final contract, not the agent.

Countless articles have been written about conflicts between principals and agents, such as when the agent acts on their own behalf rather than that of the principal. You can probably think of several scandals in the news that resulted when these relationships fell apart due to a loss of trust or public disclosure.

Business negotiations have changed during the past decade, often due to the global nature of business and long international supply chains. A single set of processes toward a single goal has become a complex web of deals, talks, and stakeholder debate. Multi-party negotiations have become commonplace as business leaders study their industries and create business alliances to improve their odds of successful negotiations.

Timing is a critical component of many negotiations. Talks are often upended when parties move too quickly or slowly. We can trace timing mistakes to eager employees who want to be the first to announce a new initiative or indifferent supervisors who fail to follow through on their plans. Knowing how and when to move in a negotiation is a team effort. Turns and wrong moves are accompanied by poor communication, vague strategies, and mistrust.