Practical Approach for Negotiations

Workshop on negotiations

This case study should be conducted in the class by dividing the class into four groups as follows.1. Trade Union 2. Management 3. Federation of Trade Unions 4. Employers Federation

Then you have to advice the roles of each group. Then group representing the Trade Union should be coupled with Group representing the Federation of Trade Union. Then the group representing the management should be coupled with group representing the Employers Federation. Finally you should have two groups for discussion. Initially the facilitator should talk with all four groups about the negotiation scenario. Then he or she should separately talk with each group highlighting their roles. Then the groups should be coupled. Then they should be sent separately into different locations to analyse and discus the case and develop their own game plan. One hour should be allowed for the individual group discussions. Once the discussions are finished, the negotiation should be started and 60 to 90 minutes could be allowed for the negotiation.By this exercise, the facilitator should be able to analyse and show the problems related with positional bargaining in negotiations. If the negotiation process can be video filmed and shown to the participants it would be very useful. That is what I do with my students in Sri Lankan universities.Once you have an analysis of the negotiation, you can start a discussion on “ Win win negotiations” It is provided in the slide share with the topic name “ win win negotiations” for your use. It would take about two more hours. Then after that, ask students to discuss again as two groups separately to sort out the problem this time on “win win method” Once the discussion is done, you can have a fresh negotiation session with the two groups on “win win method” You can video record this too. Then you will observe a vast difference on the first round of negotiations on positional bargaining and the second round of negotiations on win iin method. Gotabhaya Corporation is a Sri Lankan company established in 1975. It deals in machinery and equipments for industrial use. It has a very good reputation as a supplier of quality products.

The Director Marketing, Mr.Gotabhaya Jayaratne is a respected marketer in the field of machinery and equipments. He improved the business of Gotabhaya Corporation with two salesmen from a very low scale. The average sales were around Rs. 10,000 per day at the initial stages when he assumed office. In order to encourage the sales staff Mr. Jayaratne adopted a system where every member of the marketing team in the company gets a commission of 3% of the sales income. This commission was shared among them equally. However 25% of the commissions will be deducted per day if an employee gets absent for work. Even an employee gets absent from work for sickness his or her commissions were deducted. Anyway the company did not retain that deducted commission, but was paid to other workers who came for work. Therefore the employees who worked in excess of their normal work during the absence of other workers were able to get a better commission than the absentees. Although the employees were allowed to take leave without any restrictions, this commission system made workers take less leave. Certain workers reported to work even they were not really fit to work. By this approach company has been able to minimize absenteeism and Mr. Jayaratne boast about his strategy of motivating workers in his department with the heads of other departments.

The Marketing Department did not bother about increasing the salary as employees earnings automatically increased with the increasing sales income. The average earnings of an employee are around Rs. 10,000 to Rs. 15,000. This rate was about 25% more than the standard salaries of the similar businesses. The commission component was about 30% to 40% of the salary. Employees were quite happy with their take home salary and did not complain until they experience a drop in the sales.

The company has a Sales Manager, Mr. Gunawardene and he is a very loyal and efficient person. However, he is also a disciplinarian and certain workers did not like his way of handling employee’s problems.

The marketing division employs about 50 workers and the Salary bill comes to about Rs. 550,000 per month. The competitive environment, the slow growing economy has put a lot of pressure on the company sales and profits. The operational cost of the company has started rising and the sales income has dropped during the past few years. The employees have found that their sales commissions are falling down and their income is reduced. Therefore their salaries are much lower than the salaries of other divisions.

Marketing staff have organized as a Trade Union and have put forward many suggestions to increase their salary as they have found that they cannot depend on the sales commission any longer to increase their salary. They have had few discussions with the Sales Manager without any positive results. In a recent discussion, the Sales Manager lost his patience when sales representatives were shouting in the discussion and he said “One donkey at a time”. This really irritated the Sales staff and they walked out of the room saying that we cannot talk to a person who has no respect to employees and having a superiority complex. Mr. Diyabalanage the Trade Union leader had heated arguments with the General Manager over this issue and finally threatened to strike work if following demands were not met. Trade Union members have put up posters indicating “ Gunawardene has no heart ” in the canteen and entrance to the premises. Furious Mr. Gunawardana has called the trade Union Leader Mr. Diyabalanage and has told him that very soon he will become “ a homemaker” as he will be chucked out from the job sent home

1. Increase their basic salary by 30%. ( before commission)2. Increase the sales commissions up to 5% of the sales.3. Not to deduct sales commission for sick leave.

The company earns a net profit of around Rs. 250,000 per month. However as a prudent businessman, Mr. Gotabhaya Jayaratne wants to develop company’s financial reserves to fall back on difficult times ahead. He has even reduced his own salary to be an example for his employees. He rejects all the demands and says that he cannot increase the salary due to the loosing sales and increase in overheads. Further he says that he cannot pay a higher commission than 3% as the profit margins have come down. Further he says that if he relaxes commission-paying method the absenteeism will rise and that will make things very difficult for the company. He wants workers to work hard, bear with the situation and help him to overcome the problem. He says that workers have become lazy and they want everything to be done by the management to improve sales.

Even if workers strike, they will not be able to find alternative jobs in the stagnating economy. Sales Staff are very well aware of this fact even they have threatened to strike.Further they know that it is very difficult to negotiate when Mr. Jayaratne and the Sales Manager team up. However, Sales Staff do not wish to give up and they think this is the most opportune

time to win their demands. Trade Union is also backed by a leftist political party who has wider political agendas. They are present nationally in many companies and their support can be obtained if a negotiation to take place. They are pressing the trade Union to go ahead with the demands and not to bow down to the employer. Mr. Jayaratne knows that even if he hires new workers, it is very difficult to train a person within a short period to sell specific machinery that they sell. On the other hand if workers strike, he will have a lot of problems in paying the short-term loans obtained from banks and pay the suppliers in time. This will destroy the good name of the company. However, the management does not wish to bow down for the workers as they think that it will set a wrong precedence as all members of the other divisions also will resort to this type of demands and action. The company is a member of the Employers Union and the support of them can be obtained at any time for a negotiation or other wise. The Employers Union has strictly advised them not to yield to trade Union demands as it would affect the other businesses around the country.

Negotiate the problem and find an answer.

Contact Maxwell for further clarifications : maxran1@yahoo.com