Conflict at New Horizons New Horizons Corporation, a drug manufacturing company,
ID: 2433424 • Letter: C
Question
Conflict at New Horizons New Horizons Corporation, a drug manufacturing company, manufacturing Lixon, a drug to prevent heart attacks which is the best selling product in market. According to the facts and figures company is unable to earn profits as it is at breakeven point. The CEO of the company thinks that it is because of the high salaries of the employees. He says that major part of the earnings of the company is used in the salaries. Two years earlier, Mr. Usman the CEO of that company decided to decrease the average salary from 3 million per year to 2.2 million per year which is almost 28 percent decrease. This decision resulted in great conflict between the employee union and the management of the company. After facing the great resistance, the management decided to present the offer to the union to accept the salary of 50 percent of the revenues of the company but it will link the employees to the revenues which could swing up or down. But the both ideas were rejected by the union and neither party agreed on the amount. The CEO gave them the final offer to lessen the decrease from 28 percent to 26 percent, to take it or leave it. But the union wanted this decrease up to 20 percent. As a result the events grounded to a halt. Which affected the operations of the company and as a result production was stopped. After bearing huge losses Mr. Usman offered 27 percent decrease in salaries of employees. Union was really unhappy with this decision but they felt that fighting on this issue will result in nothing but the wastage of time as the CEO has brought them at the position of no win situation. The lack of an agreement at new Horizons was a loss to everyone, employees, company, CEO and of course to the end consumer. Questions: In the above scenario which negotiation perspective has been used (distributive/ integrative)? Give logical reasons to support your answer. What factors do you believe lead to the lack of settlement in the negotiation of New Horizons?Explanation / Answer
1. In above scenario, Integrative nego is used. Integrative Negotiations - Everybody Wins Something(usually) The word integrative means to join severalparts into a whole. Conceptually, this implies some cooperation, ora joining of forces to achieve something together. Usually involvesa higher degree of trust and a forming of a relationship. Bothparties want to walk away feeling they've achieved something whichhas value by getting what each wants. Ideally, it is a twofoldprocess. In the real world of business, the results often tilt infavour of one party over the other because, it's unlikely that bothparties will come to the table at even strength, when they beginthe talks. Nonetheless, there are many advantages to be gained by bothparties, when they take a cooperative approach to mutual problemsolving. The process generally involves some form or combination ofmaking value for value concessions, in conjunction with creativeproblem solving. Generally, this form of negotiation is lookingdown the road, to them forming a long term relationship to createmutual gain. It is often described as the win-win scenario. Integrative NegotiationBasics Multiple Issues - Integrative negotiations usually entailsa multitude of issues to be negotiated, unlike distributivenegotiations which generally revolve around the price, or a singleissue. In integrative negotiations, each side wants to getsomething of value while trading something which has a lesservalue. Sharing - To fully understand each other's situation, bothparties must realistically share as much information as they can tounderstand the other's interests. You can't solve a problem withoutknowing the parameters. Cooperation is essential. Problem Solving - Find solutions to each other's problems.If you can offer something of lesser value which gives yourcounterpart something which they need, and this results in yourealising your objective, then you have integrated your problemsinto a positive solution. Bridge Building - More and more businesses are engaging inlong term relationships. Relationships offer greater security. Distributive Negotiations - the FixedPieThe term distributive means; there is a givingout; or the scattering of things. By its mere nature, there is alimit or finite amount in the thing being distributed or dividedamongst the people involved. Hence, this type of negotiation isoften referred to as 'The Fixed Pie'. There is only somuch to go around, but the proportion to be distributed is limitedbut also variable. How many times has somebody shouted out, 'Whowants the last piece of pizza?' Everyone looks at each other, thenthe pizza slice, and two or more hands rush to grab it. In the real world of negotiations, two parties face off with thegoal of getting as much as possible. The seller wants to go afterthe best price they can obtain, while the buyer wants to pay thelowest price to achieve the best bargain. It's really just good oldplain haggling, which is not all that much different from playing atug of war. A distributive negotiation usually involvespeople who have never had a previous interactive relationship, norare they likely to do so again in the near future.Simple everyday examples, would be when we're buying a car or ahouse. Purchasing products or services are simple business exampleswhere distributive bargaining is often employed. Remember, evenfriends or business acquaintances can drive a hard bargain just aswell as any stranger. Secondly, when we are dealing with someoneunknown to us, and it's a one time only occurrence, we really haveno particular interest in forming a relationship with them, exceptfor the purpose of the deal itself. We are generallyless concerned with how they perceive us, or how they might regardour reputation. Ours and their interests are usually selfserving. Distributive Bargaining Basics Play your cards close to your chest - Give little or noinformation to the other side. The less they know about ourinterests as to why we want to make the purchase, our preferences,or the point at which we'd decline to deal, the better ourposition. Expressing eagerness or need, reveals a weakness whichcould be exploited to our disadvantage. The opposite is equally true - Try to pry as muchinformation from the other side. Any additional information that weuncover can be used as leverage to negotiate a better deal. The only thing you should ever tell - The only information weshould ever reveal are those alternative options, such as othersellers, which shows we are prepared to walk from the negotiationwhenever it suits us. Let them make the first offer - Whatever is used as thefirst offer will generally act as an anchor upon which the rest ofthe negotiation will revolve. Try to get the other side to set thestage from which to start. Be realistic - Being too greedy or too stingy will likelyresult in no agreement, so keep it real. 2. Factors affecting No Settlement.CEO was toorigid in his approach. He should have worked in a Bridge Buidlingapproach by agreeing to a 20% decrease in Salary in place of 28%.He could have reasoned with the workers that if this doesn'timprove things we may again have to come to nego table. Also as& when situations improve, CEO will restore the benefits ingradual manner & also reward the workers for their Team work ingoing with the Mgt in times of need. Such a Team approach would have resulted in a settlement, increasein production & faster turning around of teh company. By takinga rigid stand, CEO not only suffered addl Losses but lost the trustof the workers also.