Integrative BargainingIntegrative Bargaining

Integrative BargainingIntegrative Bargaining Defined: “A negotiating process in Defined: “A negotiating process in

which the parties involved strive to which the parties involved strive to integrate their interests, as effectively integrate their interests, as effectively as possible in the final agreement”as possible in the final agreement”

Based on Mary Parker Follett’s tale of Based on Mary Parker Follett’s tale of the orange and two sisters ANDthe orange and two sisters AND

1970s labor relations cooperative 1970s labor relations cooperative approach to collective bargainingapproach to collective bargaining

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Integrative BargainingIntegrative Bargaining Also called: Also called:

““Win-Win” (Win-Win” (Getting to YesGetting to Yes by Fisher and Ury) by Fisher and Ury) ““Mutual-gains” approachMutual-gains” approach ““Expandable pie” approachExpandable pie” approach

All have in common the integrative All have in common the integrative approach:approach: CreateCreate as much value as possible for both as much value as possible for both

sidessides ClaimClaim as much value as possible to meet your as much value as possible to meet your

interestsinterests

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Negotiation SkillsNegotiation Skills Skill 4.1: Key elements of Skill 4.1: Key elements of integrative integrative

bargainingbargaining Skill 4.2: Apply the Skill 4.2: Apply the categorization categorization

methodmethod Skill 4.3: Recognize the first step – Skill 4.3: Recognize the first step – focus focus

on the interests of the parties involvedon the interests of the parties involved Skill 4.4: Practice Skill 4.4: Practice active listeningactive listening Skill 4.5: Utilize the Skill 4.5: Utilize the packagingpackaging tactictactic Skill 4.6: Apply Skill 4.6: Apply interest-based bargaining interest-based bargaining

(IBB)(IBB)

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Differences Between Distributive Differences Between Distributive and Integrative Bargaining and Integrative Bargaining

DistributiveDistributive1.1. One issue (or one at a One issue (or one at a

time)time)2.2. “Win-Lose”“Win-Lose”3.3. Maximize share of Maximize share of

“fixed pie”“fixed pie”4.4. One-time relationshipOne-time relationship5.5. Keep interests hiddenKeep interests hidden6.6. One expressed position One expressed position

for each issuefor each issue7.7. Keep information Keep information

hiddenhidden

IntegrativeIntegrative1.1. Several issuesSeveral issues2.2. ““Win-Win”Win-Win”3.3. ““Expand the pie” by Expand the pie” by

creating and claiming creating and claiming valuevalue

4.4. Continuing long-term Continuing long-term relationshiprelationship

5.5. Share interests with other Share interests with other partyparty

6.6. Create many options per Create many options per issue to maximize mutual issue to maximize mutual gainsgains

7.7. Share information, explain Share information, explain “why” of issue“why” of issue

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Chapter Case: Labor Chapter Case: Labor Contract NegotiationsContract Negotiations

Ohio Metals Co. (management) and Ohio Metals Co. (management) and Local 56 of the Primary Sheet Metal Local 56 of the Primary Sheet Metal Workers of America, AFL-CIO’s current Workers of America, AFL-CIO’s current three-year contract is about to expirethree-year contract is about to expire

There is a history of a positive labor-There is a history of a positive labor-management climatemanagement climate

Management shares financial data for Management shares financial data for the past three years; union shares the past three years; union shares survey of members’ interestssurvey of members’ interests

At the first meeting both share lists of At the first meeting both share lists of economic and noneconomic issueseconomic and noneconomic issues

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Thompson’s Pyramid Thompson’s Pyramid ModelModel

Integrative negotiations is both a process – how Integrative negotiations is both a process – how to bargain, and an outcome – mutual gainto bargain, and an outcome – mutual gain

____________________________________________________________________________________________

Level 3: Pareto Optimal – Maximum value for both partiesLevel 3: Pareto Optimal – Maximum value for both parties

Level 2: Superior Agreement – Create additional value for Level 2: Superior Agreement – Create additional value for both partiesboth parties

Level 1: Agreement – Exceeds both parties’ reservation Level 1: Agreement – Exceeds both parties’ reservation points or BATNApoints or BATNA

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The Categorization The Categorization MethodMethod

Step One: Identify all issuesStep One: Identify all issuesStep Two: Classify each issue asStep Two: Classify each issue as

a. compatiblea. compatibleb. exchangeb. exchangec. distributivec. distributive

Step Three: Agree on all compatible issuesStep Three: Agree on all compatible issuesStep Four: Trade or exchange issues of Step Four: Trade or exchange issues of

approximately equal valueapproximately equal valueStep Five: Use distributive bargaining on Step Five: Use distributive bargaining on

all unresolved issuesall unresolved issues

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Tactics for Success:Tactics for Success:Practice Active ListeningPractice Active Listening

Active Listening = focus on what the Active Listening = focus on what the other person is saying, other person is saying, understanding both the content and understanding both the content and emotionemotion

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Practice Tips for Active Practice Tips for Active ListeningListening

#1 Maintain eye contact#1 Maintain eye contact#2 Think only about what they are #2 Think only about what they are

saying, don’t formulate a responsesaying, don’t formulate a response#3 Take notes and use them to reflect #3 Take notes and use them to reflect

their thoughts backtheir thoughts back#4 Pay attention to body language#4 Pay attention to body language#5 Confirm that you heard and #5 Confirm that you heard and

understand by summarizing – ask understand by summarizing – ask reflective and probing questionsreflective and probing questions

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The Five Steps of the Categorization Method of Integrative Bargaining

Applying the Categorization Applying the Categorization Method to the Chapter CaseMethod to the Chapter Case

Step 1: Thirteen issues identifiedStep 1: Thirteen issues identified Step 2: All issues classifiedStep 2: All issues classified Step 3: Agreed on three compatible issues (length Step 3: Agreed on three compatible issues (length

of contract [1]; drug testing [5]; no strike/no lockout of contract [1]; drug testing [5]; no strike/no lockout [8])[8])

Step 4: Exchanged Step 4: Exchanged Union’s job security [11] for management’s subcontracting [10]Union’s job security [11] for management’s subcontracting [10] Union’s pension proposal [2] for management’s shift differential Union’s pension proposal [2] for management’s shift differential

[9][9] Union’s clothing allowance [12] for management’s funeral leave Union’s clothing allowance [12] for management’s funeral leave

[7][7] Management’s profit sharing [4] for union’s overtime [13] Management’s profit sharing [4] for union’s overtime [13]

Step 5: Distributive bargaining used to settle wage Step 5: Distributive bargaining used to settle wage increase [3] and health care insurance [6]increase [3] and health care insurance [6]

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Keys to Successful Keys to Successful Integrative BargainingIntegrative Bargaining

1. 1. Willing participationWilling participation: Open : Open discussions, explore new options and discussions, explore new options and mutual gainsmutual gains

2. 2. RelationshipRelationship:: Positive long term is Positive long term is valuedvalued

3. 3. Collaborative atmosphereCollaborative atmosphere: Avoid : Avoid “fighter pilot lock-on” over an issue or “fighter pilot lock-on” over an issue or positionposition

4. 4. PackagingPackaging: Combine two or more issues : Combine two or more issues into one proposal of equal gains for bothinto one proposal of equal gains for both

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Labor Contract Negotiations Through Integrative

Bargaining

Tactics for Success:Tactics for Success:Use Questions to Advance Use Questions to Advance

NegotiationsNegotiations1.1. Open-endedOpen-ended “What type of clientele “What type of clientele

would this advance course attract?”would this advance course attract?”2.2. Open-ended with explanationOpen-ended with explanation “The “The

basic course targets entry-level employees. basic course targets entry-level employees. What type of clientele would this advance What type of clientele would this advance course attract?”course attract?”

3.3. Moving from debate to dialogueMoving from debate to dialogue “What profit margin do you need for the “What profit margin do you need for the advanced course to be successful?”advanced course to be successful?”

4.4. Broad-based, clarificationBroad-based, clarification “You’re “You’re clearly concerned about taking on clearly concerned about taking on additional risks, so what exactly do you see additional risks, so what exactly do you see as the risk to you in offering the advanced as the risk to you in offering the advanced course?”course?”

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Tactics for Success Tactics for Success (cont.)(cont.)

5.5. CircularCircular “How do you conduct a marketing “How do you conduct a marketing campaign?” “What is the difference between a campaign?” “What is the difference between a basic and advanced course?”basic and advanced course?”

6.6. Leading Leading “Can you see that my firm is taking “Can you see that my firm is taking all the risks in this proposal?”all the risks in this proposal?”

7.7. Loaded Loaded “Are you saying these unfair “Are you saying these unfair payment terms are the only ones you will payment terms are the only ones you will accept?”accept?”

8.8. Underlying concernsUnderlying concerns “What type of “What type of payment arrangement would reward you for the payment arrangement would reward you for the risk and provide your firm an adequate profit?”risk and provide your firm an adequate profit?”

9.9. Seeking creative solutionsSeeking creative solutions “Why is it “Why is it essential to offer classes on different days?”essential to offer classes on different days?”

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Limitations of the Limitations of the Categorization MethodCategorization Method

1.1. Parties believe they use “win-win,” Parties believe they use “win-win,” but in reality use distributive method but in reality use distributive method on each issueon each issue

2.2. Imbalance of power causes one Imbalance of power causes one party to use “win-lose”party to use “win-lose”

3.3. Overconfidence in knowledge of Overconfidence in knowledge of other party and failure to actively other party and failure to actively listenlisten

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Traps to Avoid:Traps to Avoid:How to Respond to a Loaded How to Respond to a Loaded

QuestionQuestion““Are you telling me those Are you telling me those unfair termsunfair terms are the only are the only

ones you will accept?”ones you will accept?”Possible responses: (don’t respond in anger, instead Possible responses: (don’t respond in anger, instead

evaluate the emotions)evaluate the emotions)1.1. Silence: followed by returning to the prior issueSilence: followed by returning to the prior issue2.2. Humor: “I have other demands you will like even Humor: “I have other demands you will like even

less!”less!”3.3. Take a break: “We need to go outside for some Take a break: “We need to go outside for some

fresh air”fresh air”4.4. Call it what it is: “I consider that a loaded Call it what it is: “I consider that a loaded

question, are these the only terms I will question, are these the only terms I will accept…?”accept…?”

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Interest-Based BargainingInterest-Based Bargaining(IBB)(IBB)

Increasing in popularity, butIncreasing in popularity, but subject of debate: Is IBB a critical subject of debate: Is IBB a critical

negotiation improvement or a new label negotiation improvement or a new label for “integrative bargaining” (“principled for “integrative bargaining” (“principled negotiation” from negotiation” from Getting to YesGetting to Yes)?)?

2004 study: IBB effective, but 2004 study: IBB effective, but negotiators also return to distributive negotiators also return to distributive bargaining on tough issuesbargaining on tough issues

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Principles of IBBPrinciples of IBB Negotiators view the process as one Negotiators view the process as one

of problem solvingof problem solving IBB steps (according to FMCS)IBB steps (according to FMCS)

1.1. Sharing of informationSharing of information2.2. Willingness to forgo power or leverageWillingness to forgo power or leverage3.3. Brainstorming to create optionsBrainstorming to create options4.4. Focusing on issues, not personalitiesFocusing on issues, not personalities5.5. Leaving past issues behindLeaving past issues behind6.6. Expressing interests, not positionsExpressing interests, not positions7.7. Both parties, committing to IBBBoth parties, committing to IBB

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Advantages and Advantages and Disadvantages of IBBDisadvantages of IBB

AdvantagesAdvantages Focus is on underlying interestsFocus is on underlying interests Brainstorming leads to more options, better Brainstorming leads to more options, better

solutionssolutions Parties seek out new options rather than defend Parties seek out new options rather than defend

portionsportions DisadvantagesDisadvantages

May waste time seeking more optionsMay waste time seeking more options Proposed options may not be realisticProposed options may not be realistic Standards agreed to may be vague and subjectiveStandards agreed to may be vague and subjective

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Union and Management Negotiators’ Reports on IBB Activities