Frontbrand Supplies Limited Negotiation

Negotiation is a common terminology when it comes to having different parties involved in cooperation to enable each stakeholder gain from an undertaking. This process takes place in the entire society irrespective of the social, political, or economic setup (Lewicki, Barry, & Saunders, 2014). For instance, a family that wants to go for a holiday in a new place might discuss and agree on a particular proposed destination based on some facts that are favorable to all the participants. Additionally, an organization might have to negotiate with its employees to reach acceptable terms of employment such as hours spent working, wages, and leave periods. Politically, different potential electoral candidates might have their representatives negotiate to decide on whoever they support in the case where just one individual has to run for an elective office. Therefore, negotiation is widespread across all aspects of the societal settings (Ramsbotham, 2016). This essay involves a negotiation that took place between the junior employees and the management of Frontbrand Supplies Limited over salary increment. The consultation occurred after a conflict over the feeling of being underpaid, and it led to a resolution that was agreeable to both the parties.

Source of Conflict

Front brand Supplies Limited operates in the US where it obtains household products from various manufacturers and supply to the retailers and wholesalers. The goal of the firm is to help the clients obtain trade products without having to take a lot of time locating the producers. Besides, it assists in finding the best quality products for stocking by the customer businesses. Having been in operation for about ten years by 2017, the workers felt that the company was stable and could afford to pay salaries and wages just like the rest of the big corporations within the industry. Until the year 2017, the organization paid an average annual salary of $36,000 and the wage rate per hour was $10 for those who were paid on hourly basis. These rates were applicable just to the subordinate workers. However, a crisis occurred when one day a junior employee accessed the payroll of a similar company and discovered that the average annual salary was $45,000 and the wage rate per hour was $14. Being part of the casual team that only received $10 per hour; I felt that Frontbrand Supplies Limited was underpaying us. The rest of the workers were also not happy with the discovery.

The junior employees passed the information to each other before the management could know of it. Given the level of disgruntlement, the workers one day decided to report to work, but not undertake any operation activity until the managers could address the issue. The planned took place, and the top leaders were surprised at what was happening because there had not been any formal complaint from the workers who protested. Therefore, they called for a crisis meeting where the workers presented the problem leading to such scenario.

In order to keep the operations of the company in progress, the managers promised to consult and handle the issue after two weeks. Everyone felt that it was a reasonable promise and they reported to work. However, the leaders started to layoff those who possibly coordinated the go slow, citing that it was not proper for the workers to refuse to work just because they wanted additional payments. At least six people were sacked while the rest were warned against such a behavior. Nevertheless, the two weeks passed without any resolution from the management. Thinking that the action of laying off some of the workers was meant to threaten the remaining individuals not to ask for an additional payment, the rest of us decided to pursue the issue further by boycotting work on a particular day. None of us reported to work, and the organization was forced to call for a temporary closure of operations for two days through posters which were put on the premises as well as on the website. That was when the shareholders knew of the happenings even though the leader cited that the decision was to allow for maintenance of systems and stock taking.

The top management held a meeting with the principal shareholders and decided to call back the employees on the second day for negotiations on the issue. However, the workers only came back on the third day with an excuse that they had been informed of a temporary closure of two days. The action did not go well with the investors, but they did not take any disciplinary measure for fear of creating additional problems. Therefore, the talks for a possible resolution took place starting on the third day after the temporary closure. The primary issue of contention was that the workers felt being underpaid while the management was adamant to increase payment rate because that would significantly reduce the net profit levels to the extent that the owners of the business could complain.

Initiation of Negotiation

The management together with the shareholders pleaded with the workers to resume work before they could start to undertake the negotiation process. They claimed that stopping operations was not suitable to the management, owners, and even the workers because the firm could make losses and lose its customers that would put the future of the company in jeopardy. However, managers promised that the talks were to begin the very day that the workers resumed work. The plea was sensible, and the employees continued with their usual tasks until the managers called for an assembly later in the afternoon of the same day. At the meeting, the management requested that the workers chose two representatives from every department to enable for an adequate discussion. The top managers together with some four representatives from the investors also formed a team that would negotiate with the workers’ representatives. The reorganization was to take place for one week and then pave the way for discussions.

The workers later held departmental meetings and selected those who would lead the discussions. After that, the representatives met and held meetings from where they decided on the acceptable minimum salaries and wages and further collected evidence from other firms that paid their employees better than Frontbrand Supplies Limited. Also, they checked the company’s ability to offer additional payment. In the course of those meetings, the rest of the workers also gave their inputs regarding what could help with the negotiation process. For example, the employees consulted and agreed to demand a 32% increase in salary. On the other hand, the investors also chose their four representatives that teamed up with the top managers and prepared their negotiation details.

Typically, it was the investors who initiated the negotiation after they enquired from the management what led to the temporary closure for two days. Moreover, they were the most affected of the stakeholders because failure to have the company continue with its operations would translate to losses while an increase in salary would see them forfeit part of their potential net profits.

The concern by the shareholders then led to the initial meeting where the management met with the employees to chat the way forward and later on the negotiation through the representatives from both the teams. The first meeting by the negotiating parties involved the presentation of the issues concerning the problem at hand, and surprisingly, every party was adamant to compromise with the other. The management and investor team pleaded that the demands were not reasonable because the organization already met the minimal wage (which is $15,080 annually and $7.25 per hour) requirement as placed by the federal government. Meanwhile, the employees also felt that they were to be paid at the same rate with the rest of the professionals from other companies.

The opponent team further cited that the company could not manage honor the demands because it would not generate sufficient profits to pay dividends and even conduct further expansion which should be for the benefit of the investors, management, and the workers (Lewicki, Barry, & Saunders, 2014). However, the workers’ representatives challenged the idea claiming that the company had been profitable and the demanded increase in rates of payment would not have an adverse effect on the investors. At that point, there was no agreement, and each party only listened to the concerns from one another for further investigation into validity in such arguments.

Notably, the outcome of the first meeting was a disappointment to the workers because we expected the management and investor team to have decided on a possible margin of increase in salaries. The workers were confident that they would have to quote even a marginal improvement and not necessarily agree with the proposal from the workers (Lewicki, Barry, & Saunders, 2014). Moreover, they had seen that the employees were not happy with the payment rates and were capable of conducting further boycotts.

Alternatives

Workers’ Option

As we approached the negotiations, the workers had several options to the process. One, the workers agreed to continue working, but later look for employment opportunities elsewhere and quit the company. This possible course of action would not be pleasing to the opponent because it will mean losing the already experienced team of employees within the potentially short period. Moreover, they would fear damage of reputation for mistreatment of workers. On the other hand, the staff was contended that it would be a way of getting to earn just like the other professionals who work within the industry.

Second, we thought of reporting the issue to the professional bodies for intervention because every profession expected the range of salary given to an individual. This alternative would help advocate for an increase in payment because the professional bodies such as Certified Accountants would advise the company of acceptable wages even after they already meet the minimal requirements as set by the remuneration authorities (Kegley & Blanton, 2017). The fact that the organization would not likely accept such a move because of potential damage in reputation would increase out bargaining power.

Third, we had the option of negotiation for a sharing of some percentage of profits upon attainment of a minimal amount. This course of action will see the workers get some additional pay which could be more or less than the required increment of 32% based on the operations. However, the investors would possibly not agree because it would be hard to reach an agreement over the surplus for sharing. Besides, the workers would appear as if they have shares in the firm, thus, guaranteeing later crisis on possible adjustments on the rates of sharing the surplus income.

Opponent Options

The opponents had the option of laying off all its employees and hiring new people to continue with work. The alternative appeared critical to fostering favorable resolutions because the workers would not want to be rendered jobless without having thought of their next undertakings. From the perspective of the workers, the company would likely fear to take such an option because it cannot want the scenario where it employees new people who will be learning the operations without existing staff to guide them. Moreover, the action could be publicized, and the company suffers damage in reputation for failing to keep its workers comfortable. To that extent, even the potential worker in the market will hesitate to take up jobs in the company.

The opponent and investor team would also promise a later date for the increment to enable the firm make some adjustments. The move would possibly allow them to increase the sales income to the extent that the company will manage to meet the salary and wage demands. Besides, it could be a way to take more time on deciding on the right course of action. Well, the staff might perceive this alternative as a way to make them forget about their current demand. Also, it could be a strategy to replace the current negotiation hardliners with new workers to invalidate the demands.

Lastly, the opponent could decide to add a little increase in salaries and wages to make the employees drop their demand for 32% rise. According to the management and investor team, the action will be a show of concern and that it will help retain most of the workers in case they had decided to quit. Besides, it would give hopes of future increment. On the other hand, the workers could not accept a salary increment that does not put them in the same earning scale as the rest of the professionals within the industry. Also, the employees could see it as a way of retaining them to organize for their replacement with new workers.

Communication Barriers

The negotiation process faced a challenge from communication biases that originated from several cognition aspects.

Group Think

The group this bias emanated from the workers’ representatives given the common goal of attaining a salary increment. In most cases, they maintained that they had to achieve the aim without even thinking of a compromise for fear of disappointing the rest of the people that they represented (Lewicki, Barry, & Saunders, 2014). Therefore, it was hard for the opponents to convince them on particular facts.

However, the opponents intervened by explaining to them that it is not possible that they have the perfect ideas because even the companies that pay a higher rate still have significant differences in average annual payment. The explanation made sense and the workers gave some room for reasoning with the opponents.

Ambiguity Effect

The ambiguity effect further rose in the process, especially where both the teams did not have sufficient information. For instance, the opponent did not see sense in having the employees earn like the rest of the professionals within the industry because no data shows particular salary and wage scale in the private sector (Lewicki, Barry, & Saunders, 2014). However, it was possible that there was a standard embraced way of rewarding employees. On the other hand, the representatives of the workers only based their argument of the potentiality of the company to increase the pay based on the information from the financial statements and not from the likely environmental events such as inflation that could affect the operations of the business.

Both the teams realized lack of belief on each one’s source of information, and they decided to do further research to authenticate the information. The move worked well because the groups took time to analyze the ideas and opinions of one another based on the used data.

Anchoring

There was also the element of anchoring where the employees believed so much on the payroll that one of them obtained as a basis to judge that they are underpaid without giving room for payment data from other companies as was presented by the opponent.

Regarding this misconception, the opponent team brought forth other payment data from a variety of companies, some of which paid lower rates than Frontbrand Supplies Limited. Therefore, the workers gave room to think of the payroll not being a reason for citing underpayment.

Base Rate Fallacy

Base rate fallacy featured from the management and investor team side when they ignored the evidence of payrolls that were presented for other companies (Lewicki, Barry, & Saunders, 2014). Instead, they claimed that the minimal wage rate and the company’s ability to pay employees is what determined the rate of salaries.

However, the bias was resolved when the employees threaten not to participate in the negotiation and to call upon the professional bodies such as Certified Public Accountants to help intervene. The opponent did not want to involve the outside parties, and they acknowledge the validity of the payroll.

Authority Bias

Authority bias was also evident as most of the management personnel believed on what the investors said than what the workers narrated. The reason for such misconception was because the leaders thought that the investors have more knowledge in the field of business operations as compared to the employees who are just used to routine tasks.

Even though authority bias reigned in most arguments, the workers also threatened that they believed in their collective knowledge and that they were ready to resign if the opponent disregarded them (Lewicki, Barry, & Saunders, 2014). Therefore, the management and investor team was forced to accept some of the opinions that the employee representatives presented.

Power vs Reason

The sources of power that were evident in the negotiation process were legitimate power for the opponents and coercive power from my team members.

Typically, one derives legitimate power from being in an organization’s hierarchical position where other people have to report or be answerable to them. In this case, this kind of power prevailed from the opponent because they are the only ones that had the mandate to make the final decision. They could either decide to increase the salaries and wages or fail to do so. Nevertheless, their actions were also influenced by the behavior of the workers’ representatives. To a large extent, the opponent used this power because they gave directions on how the negotiations would take place as well as making the final decision.

On the other hand, coercive power involves the use of threat or punishments to influence a particular action. With regards to the negotiation process, the employees utilized this power as they regularly threatened to resign or involve third parties in the event (Lewicki, Barry, & Saunders, 2014). They knew well that the management could not withstand such scenarios and that made the power prevail. Therefore, this type was considerably significantly utilized.

Distributive/Integrative Elements (Creating/Claiming Value)

The negotiation process involved both the distributive and integrative elements given the reasoning of the two teams. The distributive aspect was evident when the employees insisted that they want an increase without allowing for any though of how to make that one possible. The same was seen from the opponent that first insisted that the current level of profits could only sustain whatever the workers are earning (Miller & Miller, 2017). To that extent, every party seemed to have wanted just a fair share of the income from the company and not consider improving the terms for one another.

The alternative move by the opponent to have the employees wait until it adjusts on the earning capacity so as to increase the payment rate portrayed an integrative approach to negotiation. It seemed that they employer and the management were willing first to improve the current situation and then make better terms for both the workers and the investors who depend on net profits (Malhotra, 2016). On the other side, my team showed the same technique by proposing a sharing of some portion of profits as an alternative. At least such a plan would see the personnel work hard to increase profits so that they can obtain additional earning and at the same time benefiting the shareholders.

Outcome

At the end of the negotiation, the teams agreed that the company would increase the salary, but bit by bit. Therefore, they bargained to a favorable terms that would make each party comfortable. An increase of 15% would take effect after three months and another rise of 8% after one year. After that, the employees will get an annual increment of 5% based on one’s salary or wage. The resolution was acceptable to both the parties as it allowed the company sufficient time to create the capacity to pay an increased salary, while at the same time enabling the workers to get their desired increment in a while. Critically, the element of an integrative approach to negotiation took place because the decision is based on the idea that the company could only increase the salary after having the ability to do so. Moreover, the staff team saw it as an optimal idea that will eventually lead them to earn their demanded rate of pay. The idea to keep on increasing the salary by 5% after every year further points at the commitment to expanding the earning capacity by the firm and at the same time sharing the gains with the employees.

Evaluation

Following the success of the negotiation, I would not still maintain the process from start to end. However, I would prefer to act differently from the issues that were witnessed before the call for dialogue. Notably, I would not advocate that employees refuse to work just because of an abrupt discovery of some form of exploitation (Dévényi, 2016). Such a behavior could lead to losses such as losing the already acquired customers, thereby, hindering the success of both the company and its personnel.

As a result, I will advise fellow workers to initiate a formal report to the management to allow them to look into the matter first. In most cases, a competent administration will not just sit without reacting to such information. Therefore, the call for negotiation will start from such point without having the process influenced by complaints or boycott of work (Hong & van der Wijst, 2017). Otherwise, even the investors might pool out their resources and render the workers jobless after closing the company.

The rest of the process was adequate because both the parties were given sufficient time to prepare for the negotiation. The workers were also advised to choose representatives, and that was a necessary undertaking because the entire workforce could not sit to engage the opponent efficiently or even reach an agreement on precise details of presentation (Hong & van der Wijst, 2017). In as much as there were still challenges such as communication bias, the negotiation process was done appropriately because each party gave room to the other, though with some application of power.

The conflict over salary increment between the management and junior staff of Frontbrand Supplies Limited is a typical occurrence of a problem that requires a proper negotiation. Notably, the source of the problem was also in the magnitude of bringing such a challenge to the organization because the personnel felt underpaid. If left unresolved, the problem would undoubtedly escalate to further mishaps such as failure to make timely delivery and to organize the workers. For the case of Frontbrand Supplies Limited, the issue could lead to adverse outcomes such as withdrawal of investors that they did not intervene on time. For a reasonable discussion, the disgruntled parties should be allowed into the negotiation even through representation as was in the case of Frontbrand Supplies Limited. The entire process should also be free with the participants trying to convince the opposing party until an agreement is reached. Most importantly, an integrative approach to negotiation seems to be the most feasible because the elements of distributive technique did not succeed. For example, both the parties could only agree to adjust the capacity to pay and then beginning to increase the wage rates. However, they all failed to agree to any of the initial demands by another party where the employees wanted an instant 32% increase whereas the management and investor team refused to make any rise.

References

Dévényi, M. (2016). The role of integrative strategies and tactics in hr negotiations. Strategic Management, 21(2), 32-36.

Hong, A. P., & van der Wijst, P. J. (2017). Getting to yes at the beach or in the office? The Role of Location Formality and Negotiation Type on Negotiation Process and Outcomes. HOHENHEIM DISCUSSION PAPERS IN BUSINESS, ECONOMICS AND SOCIAL SCIENCES, 87.

Kegley, C. W., & Blanton, S. L. (2017). World politics: Trend and transformation. Boston, MA Cengage Learning.

Lewicki, R. J., Barry, B., & Saunders, D. M. (2014). Negotiation: Readings, Exercises and Cases. New York: McGraw-Hill Education.

Malhotra, D. (2016). Negotiating the impossible: How to break deadlocks and resolve ugly conflicts (without money or muscle). Oakland, CA: Berrett-Koehler Publishers.

Miller, L. M., & Miller, L. M. (2017). Negotiating conflict resolution from “the eye of the storm”. International Journal of Conflict Management, 28(2), 166-181.

Ramsbotham, O. (2016). When conflict resolution fails. S.l: John Wiley.