Lesson: 39 Title: Give and Take: Collective Bargaining Topics to be covered:

• Definition • Subject matter • Importance • Pre-requisites • Problems • Solutions • Collective bargaining in India • Article 1: Good faith Bargaining • Article 2: Barriers to Change

Collective Bargaining Process

• Definition • Subject-matter • Importance • Pre-requisites • Solutions • Collective Bargaining in India • Article 1: “Good Faith Bargaining”

We are reaching towards the end of this subject. I hope you are enjoying it! Today we are going to discuss a new topic and that is collective bargaining. Before I proceed with telling you about it, can you tell me your idea about this? The words say it all. There are two words that are used here. One is collective and the other one is bargaining. We all understand what collective means. It implies a group effort. As far as bargaining is concerned, it implies negotiating. It also conveys give and take. So collective bargaining means bargaining as groups. The next question that can come in your mind is, who bargains with whom and for what? The answer to this is that the union bargains with the management for their welfare and various other issues. These issues will be discussed in detail in the due course of the class.

Collective bargaining is concerned with the relations between employers acting through management and organised labour. It is concerned not only with the negotiation of a formal labour agreement but also with the day-to-day dealings between management and the union. Definition: According to Dale Yoder, “Collective bargaining is the term used to describe a situation in which the essential conditions of employment are determined by bargaining process undertaken by representatives of a group of workers on the one hand and of one or more employers on the other.” In the words of Flippo, “Collective bargaining is a process in which the representatives of a labour organisation and the representatives of business organisation meet and attempt to negotiate a contract or agreement, which specifies the nature of employee-employer-union relationship.” Please understand that collective bargaining is a voluntary process under which the representatives of both employers and labour enter into an agreement. Also note that the process does not stop as soon as a bargain is reached at between the employer and the trade union. It is a continuous process because the contract is only the beginning of collective bargaining. Bargaining requires an efficient and permanent arrangement for negotiations. No temporary or one-time arrangements can make the bargaining process successful. The concept of collective bargaining will become clearer to you after we discuss the features. Features of Collective Bargaining The features of collective bargaining are as under:

I. It is a collective process. The representatives of both workers and management participate in bargaining.

II. It is a continuous process. It establishes regular and stable relationship between

the parties involved. It involves not only the negotiation of the contract, but also the administration of the contract.

III. It is a flexible and dynamic process. The parties have to adopt a flexible attitude through the process of bargaining.

IV. It is a method of partnership of workers in management

Subject-matter of Collective Bargaining Collective bargaining has two pronged concerns:

(1) Chalking out a broad contract of employment relationship between employers and workers, and

(2) The administration of the contract.

In fact, it has been recognised as a method of determining the wage rates and other terms and conditions of employment and of regulating the relations between the management and organised labour. Collective bargaining includes provisions with respect to hiring, lay-offs, promotions, transfers, work scheduling, work assignment, wages, welfare programmes, retirement benefits, discipline, etc.

The Indian Institute of Personnel Management suggested the following subject matter of collective bargaining:

I. Purpose of agreement, its scope, and the definition of important terms

II. Rights and responsibilities of the management and of the trade union

III. Wages, bonus, production norms, leave, retirement benefits, and terms and conditions of service

IV. Grievance redressal procedure

V. Methods and machinery for the settlement of possible future disputes

VI. Termination clause.

We will be discussing the process of collective bargaining in details in the next class. Please come prepared. Having understood the concept, let us discuss the need and importance of collective bargaining. Importance of Collective Bargaining Please note that collective bargaining is an important method of regulating relations between employers and employees. It involves negotiation, administration and enforcement of the written contracts between the employees and the employers. It also includes the process of resolving labour-management conflicts. There is a strong view that parties should be left to themselves to settle their disputes and the State should not intervene in these matters.

What are your comments in this regard? What do you think should be the role played by the government in collective bargaining? There could be various options like the government leaves it entirely on to the management and the union to decide on to a solution that is acceptable to both. Now that is not a bad idea at all! There could be another possibility that the government remains in the background that is it is behind the scenes and it regulates the relationship between the two parties. The government could also involve more and more depending on the situation! I am sure you will agree that healthy collective bargaining generates a spirit of self-confidence and self-reliance among the workers. It is based on a ‘give and take’ policy on both sides. Collective bargaining leads to increased goodwill and understanding between labour and management. This in turn helps to create peaceful and comfortable atmosphere in industrial relations. Having discussed the importance of collective bargaining, let us now dwell on the fact that what are the requirements to make the collective bargaining process effective. Pre-requisites for collective bargaining: Please understand that effective negotiations and enforcement requires a systematic preparation of the base or ground for bargaining which involves the following three steps:

1. Recognition of the Bargaining Agent. The management should give recognition to the trade union for participating in the collective bargaining process. In case there is more than one union, selection could be done through verification of membership by a government agency giving representation to all the major unions through joint consultations. Thus, the bargaining agent of the workers should be properly identified before initiating any action.

2. Deciding the Level of Bargaining. Whether the dealings are confined to

enterprise level, industry level, regional or national level should be decided as the contents, scope and enforcement agencies differ in each case.

3. Determining the Scope and Coverage of Bargaining. It would be better to have

a clear understanding of what are the issues to be covered under bargaining. Many a time, bargaining is restricted to wage and working conditions related issues but it would be advantageous for both the management and union to cover as many issues as possible to prevent further friction and disputes. Therefore, all the important and interrelated issues are to be taken for consideration.

Please note that all the three points (which are mentioned above) are needed for applying collective bargaining effectively.

Coming on to the hindrances in relation to collective bargaining. Problems of Collective Bargaining: The collective bargaining scene in India is not very encouraging. The major emphasis of both union and employers is to settle the disputes through adjudication rather than sorting out the issues among themselves. Whatever bargaining takes place, it is limited to large plants only. Smaller organisations generally do not prefer this form of handling the issues. Several factors are responsible for this state of affairs. These are listed below:

I. Due to the dominance of outsiders in trade unionism in the country, there is multiplicity of unions which are weak and unstable, and do not represent majority of the employees. Moreover, there are inter-union rivalries, which further hinder the process of collective bargaining between the labour and the management.

II. Since most of the trade unions are having political affiliations, they continue to be

dominated by politicians, who use the unions and their members to meet their political ends.

III. There is a lack of definite procedure to determine which union is to be recognised to serve as a bargaining agent on behalf of the workers

IV. In India, the law provides an easy access to adjudication. Under the Industrial

Disputes Act, the parties to the dispute may request the Government to refer the matter to adjudication and the Government will constitute the adjudication machinery, i.e., labour court or industrial tribunal. Thus, the faith in the collective bargaining process is discouraged.

V. There has been very close association between the trade unions and political

parties. As a result, trade union movement has leaned towards political orientations rather than collective bargaining.

Having discussed the problems, what should come in next? Of course the solutions! After all problems are solutions in disguise and now don’t tell me that I am sounding repetitive!

Strengthening Collective Bargaining

Collective bargaining can help bring industrial peace in our country by promoting mutual understanding and cooperation between workers and managements. It provides a framework for deciding the terms and conditions of employment without resorting to strikes and lockouts and without the intervention of outsiders. The management and the union can develop a matured relationship. Instead of fighting amongst themselves, they should work towards the betterment of the organisation. Does that sound impossible? No it is not impossible. When organisations like Eicher can do without a trade union and Tatas known for taking care of their employees and the community at large….this is not a myth! The following steps should be taken for the success of collective bargaining.

I. Strong Trade Union: A strong and stable representative trade union is essential for effective collective bargaining. For having such a trade union, workers should have freedom to unionise so that they can exercise their right of unionisation and form a trade union for the purpose of electing their representatives for collective bargaining.

A weak union not enjoying the support of majority of workers is not likely to be effective. The management will not negotiate with such a union; because mutual agreements are not likely to be honoured by a large section of the labour-force. Moreover, there is always a danger that non-union members may sabotage it.

II. Compulsory Recognition of Trade Unions: There must be an acceptable and recognised bargaining agent. That means that there must be recognised union or unions to negotiate the terms and conditions of the agreement with the management.

Please understand that the process of collective bargaining cannot begin until unions are recognised by the employers. Employers will give such recognition only if they believe it to be in their interest or if it is a legal requirement. A strong, stable and the most representative union should be recognised by the employers for the purpose because any agreement with that union will be acceptable to majority of workers and it will help in establishing sound industrial relations in the organisation.

III. Mutual Accommodation: There has to be a greater emphasis on mutual

accommodation rather than conflict or uncompromising attitude. Conflicting attitude does not lead to amicable labour relations; it may foster union militancy as the union reacts by engaging in pressure tactics.

The approach must be of mutual give and take rather than take or leave. The take or leave philosophy is followed in America where there is contractual labour. As of now this is not the case in India. So if the union and the management have to look for a long-term relationship they have to respect each other’s rights.

IV. Mutual Trust and Confidence: Trade unions and management must accept each other as responsible parties in the collective bargaining process. There should be mutual trust and confidence. In fact in any relationship trust is the most important factor.

Management must accept the union as the official representative. The union must accept the management as the primary planners and controllers of the company’s operations. The union must not feel that management is working and seeking the opportunity to undermine and eliminate the labour organisation. The company management must not feel that the union is seeking to control every facet of the company’s operations.

V. Efficient Bargaining Mechanism: No ad-hoc arrangements are satisfactory for the reason that bargaining is a continuing process. An agreement is merely a framework for every day working relationships, the main bargain is carried on daily and for this there is a need to have permanent machinery.

As for machinery being efficient, it has three aspects:

(a) Availability of full information (b) Selection of proper representatives (c) Recognition of natural temperament of each other.

VI. Emphasis on Problem-solving Attitude: I am sure you will agree that there

should be an emphasis upon problem-solving approach with a de-emphasis upon excessive legalism. Litigation leads to loss of time and energy and it does not benefit anyone. Therefore the emphasis is to look for mutually acceptable solutions rather than creating problems for each other.

Lastly, the overall political environment should be congenial. The political environment should support collective bargaining.

VII. Political Climate: For effective collective bargaining in a country, it is important to have sound political climate. The Government must be convinced that the method of arriving at the agreements through mutual voluntary negotiations is the best for regulating certain conditions of employment. Therefore, positive attitude of the political parties is a must for the promotion of collective bargaining.

Such an approach would help and encourage the development of strong, stable and representative trade unions, growth of mechanism for the resolution of industrial conflict, recognition of unions, etc. However, please note that the direct interference

of the Government should be minimised because collective bargaining is basically a bilateral process. Now to end today’s session, let us get a feel of how does the Collective bargaining process operate in India……….

Types of Collective Agreements in India Collective bargaining as it is practiced in India can be divided into three classes. First is, the bipartite agreement drawn up in voluntary negotiation between management and union. The second type is known as a settlement, while the third type of collective agreement is consent award. These are discussed below:

1. Bipartite Agreements: These are most important types of collective agreements because they represent a dynamic relationship that is evolving in establishment concerned without any pressure from outside. The bipartite agreements are drawn up in voluntary negotiation between management and union. Usually the agreement reached by the bipartite voluntarily has the same binding force as settlement reached in conciliation proceedings. The implementations of these types of agreements are also not a problem because both the parties feel confident of their ability to reach the agreement.

2. Settlements: It is tripartite in nature because usually it is reached by conciliation,

i.e. it arises out of dispute referred to the appropriate labour department and the conciliation officer plays an important role in bringing about conciliation of the differing view points of the parties. And if during the process of conciliation, the conciliation officer feels that there is possibility of reaching a settlement, he withdraws himself from the scene. Then the parties are to finalise the terms of the agreement and should report back to conciliation officer within a specified time. But the forms of settlement are more limited in nature than bipartite voluntary agreements, because they strictly relate to the issues referred to the conciliation officer.

3. Consent Award: Here the negotiation takes place between the parties when the

dispute is actually pending before one of the compulsory ad judicatory authorities and the agreement is incorporated to the authorities, award. Thus though the agreement is reached voluntarily between the parties, it becomes part of the binding award pronounced by an authority constituted for the purpose.

The idea of national or industry-wide agreements and that too on a particular pattern may appear to be a more ideal system to active industrial relation through collective bargaining, but the experience of various countries shows that it is not possible to be dogmatic about the ideal type of collective bargaining, because it largely depends

upon the background, traditions and local factors of a particular region or country. Now that is well said!!

Article 1 What Is Good Faith? Good faith bargaining A term that means both parties are communicating and negotiating and that proposals are being matched with counterproposals with both parties making every reasonable effort to arrive at agreements. It does not mean that either party is compelled to agree to proposal. Bargaining in good faith is the cornerstone of effective labor management relations. It means that both parties communicate and negotiate. It means that proposals are matched with counterproposals and that both parties make every reasonable effort to arrive at agreement. It does not mean that either party is compelled to agree to a proposal. Nor does it require that either party make any specific concessions (although as a practical matter, some may be necessary.) When Is Bargaining Not in Good Faith? As interpreted by the courts, a violation of the requirement for good faith bargaining may include the following:

1. Surface bargaining. This involves merely going through the motions of bargaining without any real intention of completing a formal agreement.

2. Concession. Although no one is required to make a concession, the courts’

definitions of good faith suggest that willingness to compromise is an essential ingredient in good faith bargaining.

3. Proposals and demands. This is considered as a positive factor in determining

overall good faith.

4. Dilatory tactics. The law requires that the parties meet and ‘confer at reasonable times and intervals.’ Obviously, refusal to meet at tall with the union does not satisfy the positive duty imposed on the employer.

5. Imposing conditions. Attempts to impose conditions that are so onerous or

unreasonable as to indicate bad faith will be scrutinized by the board.

6. Unilateral changes in conditions. This is viewed as a strong indication that the employer is not bargaining with the required intent of reaching an agreement.

7. Bypassing the representative. An employer violates its duty to bargain when it refuses to negotiate with the union representative. The duty of management to bargain in good faith involves, at a minimum, recognition that this statutory representative is the one with whom the employer must deal in conducting bargaining negotiations.

8. Commission of unfair labor practices during negotiations. Such practices may

reflect poorly upon the good faith of the guilty party.

9. Providing information. Information must be supplied to the union, upon request, to enable it to understand and intelligently discuss the issues raised in bargaining.

10. Bargaining items. Refusal to bargain on a mandatory item (one must bargain over

these) or insistence on a permissive item (one may bargain over these) is usually viewed as bad faith bargaining. (We will present these items in the following discussion.)

Article 2 (Source: http://www.ilr.cornell.edu) Barriers to Change: The following list is a sampling of the barriers to change generated separately by union and management representatives at the Network meeting; they were then shared with all participants

Union

• Not skilled in redesign

• Redesign seen as union busting effort

• Rules and goals keep changing

• Age differences within workforce

• Union structure slows down teams

• Workers want to know “what’s in it for me?”

• Mid-management doesn’t buy in

• Lack of resources to support change

• Inadequate training, especially for supervisors

• Outsourcing

• Seniority/mature workforce

• Decisions made without union input

Management

• Leadership disagrees over team responsibilities

• Fear loss of control with continued accountability

• Supervisors abdicate responsibility/withhold involvement

• Employees don’t believe reasons to change

• Believe union not holding up its end

• High cost expectations may exceed reality

• Islands of redesign lead to internal equity problems

• Image problems with corporation (not team players)

• Lack respect for union principles • Mid-management ignores hourly workers who want responsibility

Now let us discuss the details of the collective bargaining process All right let us get on with our topic for today that is the process of collective bargaining. The actual process followed in the organisations may be complicated. However there are certain fundamental procedures and stages that are followed in the organisations. That standardisation is as follows:

Process of collective bargaining and negotiation The process can be divided into four main phases:

• Organising and Recognition • Preparation for Negotiation • Negotiation • Contract administration

Let us discuss them one by one.

I. Organising and Recognition. The first thing to be done by the employees is to form a group of seven persons or more (as per Trade Unions Act, 1926) and get the trade union registered under the Act.

The registration of the union is advisable, because there are certain advantages of getting the union registered. It can use its general funds for certain specified purposes; it can create a separate fund for political purposes; it gets immunity from civil suit in certain cases; it can have representation of its members to the works committee; etc. I hope you have read something on the registration and recognition of trade unions. If you have not, please do so. As students of Human Resources you should be aware of these terms. And don’t forget that you have a full paper on Industrial relations as

the HRM elective in the next semester. If you get your facts right, it will certainly help you in the next semester! After getting the union registered, efforts should be made to increase its membership; it should enjoy the support of the majority of workers in the plant. In case, it is not the only union in the plant, efforts should be made to make it the most representative union so that it s is recognised as the exclusive bargaining representative for all the employees within the specified bargaining unit by the employers. Once the union is recognised as the bargaining agent, each worker is covered by the negotiated contract as must abide by the governance. The second stage is the preparation for the negotiation.

II Preparation for Negotiation. After a union has been recognised as the exclusive bargaining agent, both the union and management begin preparation for negotiations.

The preparation for negotiation is basically composed of three activities:

a. Fact gathering b. Goal setting c. Strategy development. Facts are gathered from both internal sources and the external sources. The internal data would include things like:

• Grievance and accident record • Employee performance report • Overtime figures • Reports on transfers • Turnover • Absenteeism etc.

Now tell me why do you think this data is needed? External information should include:

• Statistics on the current economy • Economic forecasts for short and intermediate terms • Data on communities in which the company operates • Industry labour statistics

This information helps management in knowing its position and the position of similar other organisations under the existing circumstances, and in anticipating the same in the near future.

On the basis of these data, the management sets tentative goals for achieving in the negotiations.

Please understand that when the management has the above data in hand the management is in a better position to develop a strategy for dealing with the union’s demands. This includes assessing the union’s power and specific tactics. The degree of union influence is affected by factors like the labour market, economic conditions, rates of inflation, and recent contract settlements. Also understand in the process of negotiations, management’s ability to tolerate a strike will also be crucial. If the company’s products are highly demanded, the management will be against a strike, even for a short period. On the other hand, if the sales have been low, management may be prepared even for a lengthy strike, and, therefore, will be unwilling to concede to union’s demand. What do you think is the above discussion complete as regards the preparation is concerned? Are you sure that nothing is left out? Yes, we have not talked about the preparations made by the union representatives. After all they also need to prepare! So, what do they prepare themselves with? The workers’ representatives should be clear about what they want and what are they willing to give up in return? They should be united and the true representatives of the workers. By the way have you read something on negotiations? If you have, you will understand better and if you haven’t, then let me tell you that there are four outcomes that can be achieved in negotiations. They are:

• Lose-Lose • Lose-Win • Win-lose • Win-Win The first situation is where both the parties lose. In the second and the third situation, only one party wins and the other one loses. The fourth situation is in which both the parties win.

Which do you think is the best? Win-Win!

Please don’t assume that it is not achievable. This situation is where there is give and take that meets the interest of both the parties. These outcomes can be applied to collective bargaining as well. Now coming on to the third phase that is negotiation.

III. Negotiation. For negotiating a contract, the first meeting between labour

and management negotiation teams usually establishes rules, policies, and schedules for future meetings.

Sometimes, at the first meeting, the representatives of labour formally

present their specific proposals for changes in the existing labour agreements.

At succeeding meetings, management submits counter-proposals. Both

groups seek opportunities to suggest compromise solutions in their favour until an agreement is reached.

If labour and management find it impossible to come to an agreement, a

third-party (a fact finder, a mediator, or an arbitrator) may be brought in from outside.

If, even with the assistance of the outsider, no viable solution can be found

to resolve the parties’ differences, there may be a strike or lockout. It should be clearly understood that strikes and lockouts should not be resorted to!

We have already seen the ill effects of these weapons. Weapons! , Now don’t give that lost look! We have read this in Industrial disputes.

This brings us to the last phase in negotiations and that is contract administration

IV. Contract Administration. The final phase in the process of collective

bargaining is contract administration. Once a contract is agreed upon, it then must be administered. The way it will be administered is included in the contract itself.

For effective administration of the contract and to have harmonious industrial relations in the organisation, the contract must spell out a procedure for handling contractual disputes. Almost all collective bargaining agreements contain formal procedures to be used in resolving grievances over the interpretation and application of the terms of contract.

I am sure you will agree that the grievance procedures should be designed in such a way that makes it possible to resolve grievances as quickly as possible and at the lowest level possible in the organisation. The grievances should be referred to higher levels, and, ultimately, to arbitration, only when they cannot be resolved at the initial level. This is essential for speedy resolution of grievances and for creating and efficient and effective working climate in the organisation!

Article 1

(Source: http://www.spea.indiana.edu)

GETTING PAST NO: NEGOTIATING WITH DIFFICULT PEOPLE, by William Ury (Harvard Negotiation Project)

A. Five-Step Breakthrough Strategy to turn adversaries into partners:

1. Don’t React: Go to the Balcony.

2. Disarm them: Step to Their Side.

3. Change the Game: Don’t Reject ... Reframe.

4. Make it Easy to Say Yes: Build Them a Golden Bridge.

5. Make it Hard to Say No: Bring Them to Their Senses, Not their Knees.

Understanding them one by one:

1. STEP ONE: DON’T REACT: GO TO THE BALCONY

A. Three natural reactions: Strike Back, Give In, or Break Off

B. The Dangers of reacting: Escalating conflict, agreeing when you shouldn’t, or failing to reach an advantageous agreement.

C. Go to the Balcony: Take a break, caucus, mentally detach, and breathe deeply.

Imagine yourself on a high balcony overlooking the scene.

D. Keep Your Eyes on the Prize:

Identify your interests.

Identify your BATNA*

Decide if you should negotiate.

Stay focused on your goal.

* BATNA has been explained at he end of this article

E. Name the Game: A tactic loses its effectiveness if you can name it. Recognize it as one of three kinds of tactics:

1. Stone Walls

2. Attacks (personal and professional)

3. Tricks (good cop bad cop)

Know your hot buttons (sexism, racism, ethnic slur?)

F. Buy Time to Think.

Pause and say nothing.

1. Rewind the tape: Get them to restate or you restate their position.

2. Take a time-out, request a caucus.

3. Don’t make important decisions on the spot.

G. Don’t Get Mad, Don’t Get Even, Get What You Want.

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2. STEP TWO: DISARM THEM: STEP TO THEIR SIDE

A. Listen Actively

Give your opponent a hearing

Paraphrase and ask for corrections.

B. Acknowledge the Point

Acknowledge your Opponent’s Feelings

Offer an Apology

Project Confidence

C. Agree Wherever You Can

Agree without conceding

Accumulate yeses

Tune in to your opponent’s wavelength

D. Acknowledge the Person

Acknowledge his authority and competence

Build a working relationship.

E. Express Your Views - Without Provoking.

Don’t say "but"; say "yes...and"

Make I-statements, not you-statements

Stand up for yourself.

Acknowledge your differences with optimism.

F. Create a Favorable Climate for Negotiation

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3. STEP THREE: CHANGE THE GAME: DON’T REJECT ... REFRAME

A. To Change the Game, Change the Frame

B. Ask Problem-solving questions

Ask why.

Ask why not.

Ask what if.

Ask for your opponent’s advice.

Ask, "What makes that fair?"

Make your questions open-ended.

Tap the power of silence.

C. Reframe Tactics

Go around stonewalls.

Ignore it.

Treat it as an aspiration.

Take the stonewall seriously, but test it.

Deflect Attacks

Ignore the attack.

Reframe an attack on you as an attack on the problem.

Reframe a personal attack as friendly.

Reframe from past wrongs to future remedies.

Reframe from "you" and "me" to "we."

Expose Tricks

Ask clarifying questions.

Make a reasonable request.

Turn the trick to your advantage.

D. Negotiate About the Rules of the Game.

Bring it up.

Negotiate about the negotiation.

E. The Turning Point.

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4. STEP FOUR: MAKE IT EASY TO SAY YES: BUILD THEM A GOLDEN BRIDGE.

A. Obstacles to Agreement

Not his/her idea

Unmet interests.

Fear of losing face

Too much too fast

B. Build a Golden Bridge

C. Involve your Opponent

Ask for and build on your opponent’s ideas

Ask for constructive criticism

Offer your opponent a choice

D. Satisfy unmet interests.

Don’t dismiss your opponent as irrational

Don’t overlook basic human needs

Don’t assume a fixed pie.

Look for low-cost, high-benefit trades.

Use an if-then formula.

E. Help your Opponent Save Face.

Help him back away without backing down

Show how circumstances have changed

Ask for a third party recommendation

Point to a standard of fairness.

Help write your opponent’s victory speech.

F. Go Slow to Go Fast.

Guide your opponent step-by-step

Don’t ask for a final commitment until the end.

Don’t rush to the finish

G. Across the Bridge.

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5. STEP FIVE; MAKE IT HARD TO SAY NO: BRING THEM TO THEIR SENSES, NOT THEIR KNEES.

A. Use power to educate

B. Let your Opponent Know the Consequences

Ask reality-testing questions

"What do you think will happen if we don’t agree?"

"What do you think I will do?"

"What will you do?"

Warn, don’t threaten

Demonstrate your BATNA

C. Use Your BATNA, Defuse the Reaction

Deploy your BATNA without provoking

Use the minimum power necessary

Use legitimate means

Neutralize your opponent’s attack

Tap the third force

Build a coalition

Use third parties to stop attacks

Use third parties to promote negotiation

D. Keep Sharpening your opponent’s Choice

Let your opponent know he/she has a way out.

Let your opponent choose

Even when you can win, negotiate

E. Forge a Lasting Agreement

Keep implementation in mind

Design the deal to minimize your risks

Build in a dispute resolution procedure

Reaffirm the Relationship

F. Aim for Mutual Satisfaction, not Victory

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BATNA

Best Alternative to a Negotiated Agreement

I. ALTERNATIVES TO AGREEMENT or the limits of negotiation A. The BATNA, or Best Alternative to a Negotiated Agreement: The

BATNA is the best outcome you can achieve without negotiating. It must be an action you can take unilaterally, without the cooperation or input of the other party. You may have a number of other options if you cannot reach an agreement with your partner in the negotiation; the BATNA is the one that is best or most effective. It may overlap with, but is not always the same as the reservation price.

1. Parties often have inflated perceptions of their BATNA. This is one way a

mediator may bring about agreement, by providing a reality check. 2. Parties can change their BATNA by seeking out other alternatives. E.g. Printing press as scrap, $500. New press $12,000. Initial offer by new printer $1,000. BUT Printing press as tax deduction $2,500. Deb improved BATNA, and settles at $3,500. 3. BATNAs are a function of environmental and institutional constraints, which too may change. Bargaining occurs 'in the shadow of the law.'

B. The Reservation Price: The reservation price is that price that marks the outer bound of the bargaining range. It is the walk away price. The party 'reserves' decision on the deal, and may seek other offers. It is a product of the subjective perceptions and goals of the parties.

1. Often, a seller will not take less for something than what he or she paid for it; the reservation price is the lowest price the seller will accept without seeking other offers or alternatives. E.g., in an auction, sellers may set a minimum or reservation price on the property; if the auctioneer gets no bids at or above that price, the property is not sold but is taken off the auction block. 2. However, the property might decline in fair market value. Fair market value is what a buyer will pay the seller. Thus, the reservation price may change with assessments of changing market values.

C. The Bargaining Range or set. This is the difference between the parties' reservation prices. Thus, we could depict it as a range of possibilities, like the Pareto frontier curve. D. The Exchange Surplus. If there is a possible lawsuit, parties may save transaction costs by negotiating a settlement rather than litigating the case to its conclusion. The exchange surplus is the difference between the parties' costs if they litigate to a conclusion, versus their costs if they settle without litigation. E.g., if the parties retain counsel, the plaintiff may end up paying a contingency fee of 1/3 of the recovery to his/her lawyer. Without lawyers, this amount is part of the exchange surplus. If the parties are paying their lawyers an hourly rate, the number of hours it would take to complete discovery and litigation may be the exchange surplus in negotiations for settlement taking place immediately after the lawsuit is filed.

II. FOUR CLASSIC POINTS OF SETTLEMENT: A. 85-90% of all cases filed settle before a trial: 1. BEFORE THE COMPLAINT IS FILED, 2. IMMEDIATELY AFTER THE COMPLAINT IS FILED, 3. AFTER DISCOVERY IS COMPLETED, 4. ON THE EVE OF TRIAL.

B. Note that transaction costs, and hence the amount of the exchange

surplus, alter over time as the parties invest more and more in the case. In addition, their knowledge of the merits of the case and the information about their BATNA alters. The BATNA is usually litigation in any legal claim or dispute resolution negotiation as opposed to a planning negotiation. If the assessment of the strength of the legal case was in error, there has likely been an inflated assessment of that party's BATNA.

III. PROBLEMS FOR IDENTIFYING THE BARGAINING RANGE: A. Cost Reduction Arguments: "The Quality of Settlement" by Marc Galanter, Evan Bascombe Professor of Law, University of Wisconsin

1. One Argument for Settlement is Party Savings: The parties will save time, money, and aggravation. Settlement saves the parties transaction costs, i.e., the money they would spend litigating. What does this assume about the outcome of settlement compared to the outcome of litigation?

B. Problems

1. If the parties litigate, A will win and B will lose $100, and each will spend $20, but A will lose and B will keep $5 in interest while the lawsuit is pending. What is the settlement range? 2. If the parties litigate, A thinks A will win $110, and B thinks B will lose $90 and there are no transaction costs. What is the settlement range? 3. If the parties litigate, A thinks A will win $110, and B thinks B will lose $90, but A and B will each spend $20, and A will lose and B will keep $5 in interest while the lawsuit is pending. What is the settlement range? 4. What might influence how the parties allocate the savings of transaction costs in a settlement (the exchange surplus)? Is it always divided evenly in settlement?

IV. RESISTANCE POINT: That point within the bargaining set or settlement range at which a party may break off negotiations and walk away from an agreement as a function of psychological or political factors, not plain economics.

A. Distinguish Reservation Price, which is a function of economic information, however imperfectly perceived. 1. The Reservation Price should be a function of a rational economic calculus based on the best available information about fair market value. 2. Example: In public sector negotiations, either the union or management might feel they would be better off politically by letting an arbitrator order a wage increase, rather than agreeing to it voluntarily. The union committee may not want to take the heat from the membership for a low wage increase, and the city council may not want to face taxpayers with a high wage increase and resultant higher taxes. This may create a resistance point, even though based on objective economic information, either party may realize that a proffered settlement is reasonable.

B. Note relationship of resistance points to the parties' interests as conceived by Fisher, Ury and Patton: "Identify interests by basic human needs. 1. Security 2. Economic Well-being 3. Belonging 4. Recognition 5. Autonomy"

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• According to Dale Yoder, “Collective bargaining is the term used to describe a situation in which the essential conditions of employment are determined by bargaining process undertaken by representatives of a group of workers on the one hand and of one or more employers on the other.”

• In the words of Flippo, “Collective bargaining is a process in which the representatives of a labour organisation and the representatives of business organisation meet and attempt to negotiate a contract or agreement, which specifies the nature of employee-employer union relationship.”

Subject matter• The Indian Institute of Personnel Management”

• Purpose of agreement, its scope, and the definition of important terms

I. Rights and responsibilities of the management and of the trade union

II. Wages, bonus, production norms, leave, retirement benefits, and terms and conditions of service

III. Grievance redressed procedureIV. Methods and machinery for the settlement of possible

future disputesV. Termination clause.

Pre-requisites

• Recognition of Bargaining Agent

• Deciding the level of bargaining

• Determining the scope and coverage of bargaining

Problems

• Multiplicity• Political motives• Lack of definite procedures• Easy Access to adjudication• Association between trade unions and political

parties

Solutions

• Strong Trade Unions• Recognition of Trade Unions• Mutual Accommodation• Mutual Trust and confidence• Efficient Bargaining Mechanism• Emphasis on problem-solving• Conducive political climate

Collective Bargaining in India

• Bipartite Agreements

• Settlements

• Consent Awards

Process of Collective Bargaining

1. Organising and Recognition2. Preparation for Negotiation

Fact gathering

Goal settingStrategy Development

Internal Data

External Data

Outcomes of Negotiations:

• Lose – Lose

• Lose – Win

• Win – Lose

• Win - Win

Negotiation

• Negotiation

• Contract Administration