Understanding the Art of Negotiation

The study of famous historic negotiations is an important aspect for developing project management skills. They provide the resources from which the project manager can draw strategies, philosophies and ethical issues to use as guidelines for improving business processes.

Through careful case studies of negotiations that have taken place in history, salient and critical points of business strategies that give rise to disputes can be addressed during the conceptualization stage. That way, human resource managers and stakeholders alike can be assured that threats or risks from complaints or lawsuits arising from unsound and unethical business practices have been minimized if not totally eliminated.

Case studies of at least five famous historic negotiations presented in this article represent different scenarios. That way the significance of delving into models of past bargaining agreements can be fully emphasized, as essential to project management learning disciplines.

The UPS Strike of 1996 Win-Lose Negotiation

Background

The United Parcel Service (UPS) is a US messengerial company founded in 1907, which evolved into becoming one of today’s largest global provider of package delivery and logistic services as well as specialized transport.

A major business strategy of this company was to hire mostly part-time workers, which was quite attractive to young workers. The latter was provided work at off-time shifts earning union-negotiated wages and benefits. However, part-time work at UPS presented very little chances of job advancement regardless of the length of time rendered as a short-term contract worker.

By 1996, UPS’s workforce comprised 182,000 part-time workers, working an average of 26-28 hours per week spanning durations of five years that could be more or less at part-time compensation rates. The Teamster Union, handling the bargaining negotiations for UPS worker-members, made a careful study of this particular issue and decided to launch a major offensive strike against UPS. They were, at the same time, banking on public support for their cause.

Image Credit: Oxyman for Wikimedia Commons

The Negotiation Plan and Strategy

Union negotiators and UPS union members carefully researched the statutory rights of part-time workers and what the UPS–Teamster Union contract contained. They analyzed the ratios and proportions related to part-time workers versus full-time employees, including disparities in salaries, retirement fund benefits and limited opportunities for full-time hiring. They proceeded in building-up a campaign platform that manifested the imbalance of economic conditions between part-time and full-time UPS workers.

In presenting a clearer picture of how UPS exploits the hiring of part-time workers to cut on costs and employer obligations mandated by federals in maintaining regular employees, the Teamster Union and UPS union members’ call for strikes were able to garner workers’ support and of that of the international union organizations.

E-mails about the planned strike were sent out, thus enabling UPS workers to understand the causes for which the unions would call a work-stoppage. This enabled them to save and financially prepare for the temporary job loss.

The international labor union was able to set up funds to augment the union-workers’ strike fund in case it became depleted during the process of long-term negotiations.

The Negotiations

Hence, the union negotiators were able to come up with a definitive list of their demands and arguments, for which the main agenda was the creation of full-time jobs for part-time workers, reduction of the salary differential between part-time and full-time workers, job security against outsourcing and improvement of work safety conditions.

As an example of the union’s preparedness, a UPS concessionary offer of sub-contracting big-rig driver jobs, instead of hiring on a part time status, was immediately rejected by the union team. This only meant delimiting job positions available for advancement of full-time drivers.

The union team was able to defeat this counter-bargain by pointing out that the union-UPS contract contained provisions that sub-contracting could only be allowed if the union would agree to this.

Image Credit: Graham Richardson from Plymouth, England for Wikimedia Commons

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Continuation of the UPS-Teamster Negotiation

The Results of the Negotiation

In no time, a successful bargaining agreement was reached, which included the following settlements among many others:

Ten thousand part-time jobs were converted into full-time occupations at UPS.

Ten thousand job positions available to non-union members and contractors became available to union members.

Union workers became eligible to perform work modified by technological advancements.

Closing the salary gap between part-time and full time workers, by increasing part-time salary rates from $8.00 to $8.50, and providing salary increases that would aggregate a total of $4.10 per hour over the union’s five-year labor contract with UPS.

Replacement of older car fleets with power-steering features and additional ventilations.

Prohibition of mandatory overtime for all workers.

Package car drivers working on holidays are guaranteed to receive remuneration for at least eight hours.

Expansion of maternity and paternity leaves as approved under the Family and Medical Leave Act.

Prohibition of disciplinary actions against employees involved in on-the-job accidents and injury cases.

These are only some of the successful outcomes of the UPS–Teamster Union famous historic negotiations to end a labor strike that caused UPS million-dollar financial losses as the strike lasted for two weeks. Prior to the 1996 year-end closing, only 40,000 out of the 182,000 part-time employees remained under the short-term status.

Image Credit: Oxyman for Wikimedia Commons

The 1994 Major League Baseball Strike

Background

America’s major league baseball contract negotiations had been the subject of constant battle over contract terms between unions representing the baseball players and the team owners. The beleaguered negotiations finally culminated in a work stoppage when the baseball players walked off and packed their bags, which resulted in the cancellation of the World Series. The games resumed as a result of a court injunction that restored the rules of the old labor contracts but, eventually, the entire season was canceled.

The root cause of the problem was that the union negotiators could not strike up a collective bargaining agreement that could protect the baseball players from the shrewd manipulations of the team owners. At the end of each season, the owner had the privilege of ending each of the players’ contracts and any renewal was subject to the terms and agreement for the new season.

Image Credit: Baseball Bugs for Wikimedia Commons

Resistance to Compromise

It was only with the advent of the Major League Baseball Association that union leaders were able to make some progress as they were able to enter into basic agreements with the team owners. By 1968, baseball players were receiving higher-than-minimum salaries, better insurance plans and higher retirement benefits. However, the basic agreements did not prevent the occurrence of strikes among players.

However, in 1994, the team owners went into agreement about revenue sharing among them but with the condition that there was a limit or salary cap on how much the team would spend in order to win. That way owners of smaller teams would not lose their best players to teams who had the most capacity to pay. Highly paid players meant higher team values and increasing sponsorship revenues, as well as more advertising endorsements.

This also meant that a highly paid player could be traded by the big team owner for a favored player coming from the smaller teams. That way, a highly paid player could bring in higher revenues to a smaller team, while the process would allow the major team to conform with the salary cap. Hence, the team owner’s sharing of team sales would have the semblance of fairness, as team players would eventually be playing without any disparity in their salaries.

However, this did not sit well with the players who refused to be used as pawns of their team owners. Under a free agency, team players are greatly motivated by having their own leverage for salary negotiations, since they can choose to play when, for whom and for how much.

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Continuation of the 1994 Major League Baseball Strike

Negotiation Failures

Inasmuch as the team owners themselves had no exact formulation on how revenues were to be shared under the salary cap scheme, the mediation efforts of the Federal Mediation and Conciliation Service were unable to convince all parties to come to an agreement or settlement. Accordingly, all parties came ready to disagree with whatever concessions offered.

As negotiations continued to fail and with team contracts working under the old contract rules, baseball players decided to walk off to drive home their point. Team owners who had considered working under the old rules as a deadlock or stalemate situation, the salary cap had been put into effect. Thus, by refusing to be drawn into the owners’ manipulations, the players emphasized their point that there would be no revenues to contend with or squabble over, if there were no players.

The union filed an unfair labor practice against the team owners. The National Labor Relations Board arrived at a decision in 1995, which sided with the players by seeking court rulings that would reinstate the old basic agreements. The presiding judge ruled in favor of the players, by ordering the owners to restore free-agency bidding, salary arbitration and to adhere to anti-confusion laws in recognizing the provisions of the old contract agreements.

Arriving at an Agreement After Suffering the Losses

Finally, a new agreement was drawn, which had very few modifications from the old one. The only addition was the graduated luxury tax on team payrolls that exceeded $51 million for 1997 to reach $58.3 million by 1999. Said tax was planned to end by 2000, the proceeds of which were to be placed in a revenue-sharing pool. The revenue pool, which was augmented by donations from wealthy clubs, was to be apportioned to thirteen smaller teams to provide them with additional means to compete with major players.

Team owners accordingly bore losses amounting to $700 million, while team players’ average salaries dropped by 5%; and as the scenario was finally straightened out, the high-paid veterans were forced to accept cuts in their pays because team owners were recruiting from the affordable minor league players. Both owners and teams were basically starting off from scarred conditions.

This particular example of negotiation was made famous not by the success of the negotiating parties’ efforts to arrive at a mutually beneficial agreement. Each party failed to recognize the benefit it derived from an interdependent relationship. Hence, both parties suffered losses as a result of their refusal to come up with workable solutions.

Louisiana Purchase – Negotiations Tainted with Deceit

Napoleon Bonaparte, as history have it , was known to have violated the French constitution by selling France’s territory without legislative approval. The sale of the Louisiana territories to Spain was clouded because there were different boundaries defined under Spanish deeds compared to those of the deeds used by the French.

Years later, after the seemingly successful negotiation entered into by James Monroe and Robert Livingstone to purchase French-owned Louisiana properties from France, it was established that West Florida was not included in the purchase negotiations previously entered into by the two gentlemen. West Florida,as it turned out, was included among the Spanish-owned Louisiana properties sold by France to Spain.

This resulted to a quasi-war between Spain and the US, as the latter tried to impose its claim over West Florida. The heightening war in Europe gave the US government an opportunity to acquire the left-out West Florida, when Napoleon tried to convince the US to help them seize Spain into becoming its territory. However, Napoleon’s deceitfulness once again surfaced when he changed his mind. Napoleon’s brother came to occupy Spain and refused to give up Florida to the US. As history continued to unfold, the territorial conflicts led to civil wars within the US boundaries.

The Louisiana Purchase was monumental in its significance as it broadened US territories, but it remained as a questionable chapter in Louisiana’s history.

The inclusion of the Louisiana Purchase, as one of the examples of famous historic negotiations, provides an actual depiction of negotiations tainted with deceit. Trust is an important part of entering into agreements, while the integrity of the party to the negotiations must be above reproach or suspicion, as the consequences of botched-up negotiations are often costly.

Image Credit: Image from U.S. National Archives and Records Administration from Wikimedia Commons

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Enron’s State Witnesses - Forceful Negotiations

One of the most difficult aspects of the Enron investigations was the refusal of the Chief Financial Officers to provide the information that the investigating bodies needed. CFO Chief Fastow held on to his statement that there was nothing shady with Enron’s deals, since there was not enough evidence (previously destroyed), to show that there were accounting manipulations. If ever, Enron’s only violation would have been purely accounting misconceptions and the destruction of evidence.

What Made Enron’s CFO Fastow Change His Mind about Testifying Against CEO Kenneth Lay?

CFO Fastow’s wife, Lea, had earlier received an expensive jewelry gift from Fastow, but it was not among those she declared in her income tax returns. Hence, the investigating team sensationalized this issue, by declaring Lea’s failure to pay gift taxes as tax evasion, which resulted in her immediate sentencing for a one-year imprisonment.

The reality of his wife being sent to prison under harsh conditions finally sunk in CFO Fastow’s head. This made him change his mind about not turning state witness against Enron’s CEO Kenneth Lay. CFO Fastow entered into a plea-bargaining negotiations for a reduced term of imprisonment for himself, the sale of his properties as part of investors settlement claims, and the reduction of prison terms for his wife, Lea.

The Moscow Theater Hostage - Crisis Negotiation

In 2002, about fifty armed Chechens belonging to an Islamic militant group took hostage 850 of the civilians who were at the theater at the time of the siege. They demanded Russia’s withdrawal from the province of Chechnya in order to end the Chechen War.

Although the Russian forces tried to negotiate, authorities were firm with their demand for release of all hostages regardless of nationality. The negotiation efforts were successful in some ways because some 150 to 200 children, pregnant women, and those requiring health care treatment were released. The Russian government, on the other hand, offered the hostage takers to seek asylum in any third world country they would choose.

As negotiations continued, another set of 39 hostages were released plus a promise of releasing all foreign nationals whose ambassadors had joined in the negotiations. As the string of events unfolded, hostages were being released in trickles. However, the situation inside the theater had worsened since the hostages were under stress and were said to be making their own moves in attacking their captors.

A siege was finally put into action on the third day, where an aerosol anesthetic was pumped into ventilation shafts. The handling of the hostage crisis was regarded as successful because the storming of the theater produced only 129 casualties out of the 850 original number of hostages plus 33 of the Islamic terrorists.

As among the famous historic negotiations, this example presented the element of collateral damage, wherein all efforts exerted deemed as reasonable produced little results and where casualties could not be avoided.

Image Credit: A.Savin for Wikimedia Commons

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