BUS403: Negotiations and Conflict Management

2a. Describe and give examples of effective sales negotiations

• What is a sales negotiation?
• How might someone negotiate a salary increase from their employer using the five steps of negotiation?
• What items are open to negotiation when receiving a job offer that includes cash and non-cash components?

A sales negotiation is a discussion between a buyer and seller to make a sales deal. The parties address their concerns about the perceived value of the product or service, other available concessions or benefits, and the price the seller is willing to accept and the buyer is willing to pay. Research and communication are critical to a successful negotiation.

For example, during the first phase of salary negotiation (investigation), you should define your best alternative to a negotiated agreement (BATNA) by researching what other companies pay people who perform similar job functions in your area, so you can demand a comparable and reasonable salary. Determine your acceptable salary range: this bargaining range will guide your zone of possible agreement (ZOPA) with your employer.

The second phase is presentation. You should be able to communicate your past successes with appropriate evidence. Why are you a valuable employee who deserves a raise? What will you contribute to your company in the future? During Phase 1, you should have prepared a response to reservations your employer may raise, so you can explain why their concerns are unwarranted. During Phase 3 (bargaining), you may agree to accept certain concessions. Phase 4, where you and your employer "close the deal," is the final stage.

Most employers offer financial rewards and other types of compensation during salary negotiations. Cash components include your base salary, periodic bonuses, and sales commissions. Typical non-cash components include paid holidays, vacation, sick leave, health and dental insurance, stock options, retirement account contributions, tuition reimbursement, and parking or mass transport subsidies.

Employers offer potential employees additional incentives during the bargaining phase of salary negotiations. During collective bargaining, union representatives argue employers should provide certain cash and non-cash benefits when they negotiate on behalf of their union members.

To review, see Closing Starts at the Beginning and Principles of Persuasion.

2b. Compare approaches for negotiating with suppliers

• What are stakeholders?
• Why is trust such an important basis for sustainable profitability?

A stakeholder is a person or organization with a vested interest or concern about something. Stakeholders include stockholders, employees, and customers. James Stuart writes, "The best business runs on sustainable arrangements." Stakeholders should promote a win-win strategy to instill trust among the negotiating parties. He lists ten steps for successful business negotiation. Trust is a basis for sustainable profitability.

An integrative or collaborative strategy requires assessing the components of the negotiation and the relationship between the parties. This approach concerns creating or maintaining trust to encourage future, long-term interactions and a win-win outcome where all parties come away with most or everything they want. Sustainable profitability is only achieved through being treated fairly, respectfully, and honestly.

To review, see The Essence of Negotiation.

2c. Summarize the history of labor negotiations in the United States

• What are some key historical events of the U.S. labor union movement?

The labor movement in the United States reached its pinnacle during the 1940s and 1950s. In 1935, the U.S. Congress enacted the Wagner Act, also known as the National Labor Relations Act, to safeguard employees' rights to form unions by prohibiting employer interference, coercion, or restraint. However, there was a significant policy shift in 1947 when Congress passed the Taft-Hartley Act, which leaned favorably toward businesses. Later, in 1959, the Landrum-Friffling Act imposed several restrictions on unions. During the 1950s, 36 percent of the American workforce was unionized (Friedman, 2010), whereas the current figure is just over 11 percent.

The U.S. National Labor Relations Act of 1935 covers most collective agreements in the private sector. This act makes it illegal for employers to discriminate, spy on, harass, or terminate workers' employment because of their union membership. It also makes it illegal for employers to retaliate against employees who engage in organizing campaigns, form company unions, or refuse to engage in collective bargaining with the union representing their employees. It is also illegal to require any employee to join a union as a condition of employment. Unions are also exempt from antitrust law hoping that members may collectively fix a higher price for their labor.

The U.S. National Labor Relations Act of 1935 covers most collective agreements in the private sector. This act establishes a range of prohibited employer behaviors, such as discrimination, spying, harassment, or wrongful termination based on an employee's union membership. Moreover, it safeguards employees from retaliation when engaging in organizing campaigns, forming company unions, or refusing to engage in collective bargaining with their designated union. Additionally, the act explicitly prohibits the compulsory requirement of union membership as a condition of employment. Unions are granted an exemption from antitrust laws, with the intent of enabling members to collectively negotiate for better labor prices.

In the past, labor negotiations have followed the advent of 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 encouraged employees to organize to demand better pay, benefits, hours, and a share in profits, such as local hospitals, Amazon, Starbucks, and Trader Joe's.

During collective bargaining, the negotiation process between employees and employers, employees attempt to achieve employment conditions that serve their shared interests. What might be an issue under dispute during the collective bargaining process?

To review, see Collective Bargaining.

2d. Describe the role negotiation plays in mergers and acquisitions

• What are mergers and acquisitions?
• How do mergers and acquisitions compare to each other?

Mergers are business combinations – when two firms agree to proceed as a single new company rather than remain separately owned and operated. Companies' dominant rationale to explain why mergers occur is that the acquiring firm wants to improve its financial performance. An acquisition occurs when one company takes over the operational management decisions of another smaller, weaker company. The weaker company continues to operate under the name of the stronger company that purchased them. Note that the acquisition could have resulted from a "hostile takeover."

Synergy refers to the benefits of combining two different groups, people, objects, or processes. The underlying principle is 2 + 2 = 5. In other words, combining two companies creates a new entity worth more than the sum of its parts.

Imagine you work for a small company that has struggled financially and learn that a large, well-known corporation has acquired your workplace. Your management team has been extremely secretive and did not communicate the acquisition details to its employees. What would your main concerns be regarding your future in the new organization? Why do companies want to acquire others?

To review, see Mergers and Acquisitions and Investment Thesis on Sears: Case Study.

2e. Compare the roles of principles and agents during business negotiations

• What are agents and principals?
• How would you describe the two categories of duties that an agent owes their principal: fiduciary duty and general duties imposed by agency law?

The principal is someone who engages an agent to work on their behalf. The agent has a fiduciary responsibility to act in the principal's best interest. Their professional duty includes:

• avoiding self-dealing
• preserving confidential information
• using skill and care
• demonstrating good conduct
• keeping and rendering accounts
• not attempting the impossible or impracticable
• obeying the principal
• giving information to the principal

The relationship between the principal and agent is not only contractual but relies on each party's trust in the other.

Let's say you want to buy the perfect house, and the real estate agent you contract is working on commission. They will only make money if you buy a house through them. Do you believe they will apprise you of pertinent information such as price reductions, plumbing or electrical problems, and other concerns about the house?

To review, see Relationships between Principal and Agent and Liability of Principal and Agent; Termination of Agency.

2f. Identify the advantages and disadvantages of multiparty negotiations

• What are some characteristics of multi-party negotiations?
• Can you describe the advantages and disadvantages of these facets?

During a multi-party negotiation, interested parties bring a variety of interactions, including sides, parties, roles, and issues. All of these variables, and more, play a role in the outcomes of the negotiations.

Multi-party negotiations are more complicated than two-party negotiations because each party may decide to join with one or more other participants to form a coalition. The process is more involved because of individual or coalition agendas and the formulation of BATNAs that may fluctuate throughout the negotiation. Other complexities result from social aspects, such as groupthink, fears of leaked information, defection, and the formulation of decision rules.

To review, see Multi-Party Negotiation and Power.

2g. Explain the effect of timing and the "six power tactics" in negotiations

• How do negotiators utilize behavioral, rational, and structural power tactics?
• What are the definitions of the six sources of power: legitimate power, referent power, expert power, reward power, coercive power, and informational power?

Negotiators use three categories of power tactics to push or prompt others into action: behavioral, rational, and structural.

1. Behavioral tactics can be soft or hard. Soft tactics take advantage of the relationship between the person and the target. They are more direct and interpersonal and can involve collaboration or social interaction. Hard tactics are harsh, forceful, and direct and rely on concrete outcomes. However, they are not necessarily more powerful. In many circumstances, fear of social exclusion can be a stronger motivator than physical punishment.
2. Rational tactics of influence use reasoning, logic, and objective judgment. Irrational tactics rely on emotionalism and subjectivity. Examples include bargaining and persuasion (rational), evasion, and put-downs (irrational).
3. Structural tactics exploit the relationship between individual roles and positions. Bilateral tactics like collaboration and negotiation involve reciprocity between the influencing person and the target. Unilateral tactics are enacted without any participation on the part of the target. These tactics include disengagement and fait accompli. Political approaches, such as playing two against one, take yet another approach to exert influence.

The six sources of power are:

1. Legitimate or positional power refers to an individual's role or status within a company or organization. This formal authority was delegated to the position holder.
2. Referent power comes from an individual's ability to attract others and build loyalty. It is based on personality and interpersonal skills. Others admire these individuals due to personal traits, such as charisma or likability. These positive feelings become the basis for interpersonal influence.
3. Expert power draws from someone's skills and knowledge. It is especially potent when an organization needs them. It is narrower than other power sources because it only applies to a specific area of expertise and credibility.
4. Reward power derives from one's ability to confer valued material rewards and other positive incentives or motivate others through benefits or gifts. For example, a manager can reward employees with cash, promotions, pay increases, or extra time off.
5. Coercive power refers to applying threats, sanctions, and other negative consequences, such as through direct punishment or withholding desired resources or rewards. Coercive power relies on fear to induce compliance.
6. Informational power derives from the ability to access facts and knowledge that others find valuable or useful. This access signifies relationships with other influential individuals and communicates a status that leaves a positive impression. Informational power enables the establishment of credibility and facilitates rational persuasion. It also serves as a basis for engaging in beneficial exchanges with others actively seeking that information.

To review, see Sources of Power.

Unit 2 Vocabulary

• acquisition
• agent
• behavioral tactics
• bilateral tactic
• coalition
• coercive power
• collective bargaining
• expert power
• fiduciary responsibility
• hostile takeover
• informational power
• Landrum-Friffling Act of 1959
• legitimate power
• merger
• multi-party negotiation
• National Labor Relations Act of 1935
• National Labor Relations Board (NLRB)
• principal
• rational tactics
• referent power
• reward power
• sales negotiation
• stakeholder
• structural tactic
• synergy
• Taft-Hartley Act of 1947
• unilateral tactic
• zone of possible agreement (ZOPA)