Posts Tagged ‘contract’

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How Do You Deal With The Rest Of The Iceberg During A Negotiation?

Tuesday, January 6th, 2009
When Negotiating, It's Important To Deal With Unstated Issues In Order To Be Successful

When Negotiating, It's Important To Deal With Unstated Issues In Order To Be Successful

As the captain of the Titanic, Edward John Smith, did a fairly good job of looking out for the parts of icebergs that were above water. What got him in the end is when the Titanic hit a part of an iceberg that he couldn’t see because it was below water. In negotiating, all too often we can fool ourselves into thinking that we know all of the issues that are being negotiated. How wrong we are…

When we negotiate with the other side of the table, the issues that are really being negotiated are often a lot more subtle than those issues that were listed on the agenda at the start of the negotiations. In fact, the issues that originally appeared to be big issues, more often than not turn out to not be all that big of a deal after all.

The things that we often spend the most time talking about, services, goods being sold, and price are of course important. However, the clever negotiator realizes that these are only the tip of the proverbial iceberg.

As a negotiator you need to realize that there will be a large collection of issues that need to be addressed but which will never get written into the final contract. What are these issues you ask? Simple – they are personal issues that the other side holds dear. Neither side can make these personal demands out loud during the negotiation; however, if you don’t address and resolve them, then you won’t be reaching an agreement.

If these personal negotiating issues are so important, then what are they so that we can start to look for them? They take many different forms during each negotiation and you are going to have to do some digging to find the ones that relate to your current talks, but here are some examples for you to keep your eyes open for:

  • Personal Schedules: “I need to get this negotiation completed by tomorrow because my wife wants to go visit her mother this week.” Both sides of the table have schedules that they need to meet and this can influence the negotiations.
  • Internal Organizational Issues: “My boss has been fired and I now work for someone who has a different agenda.” The world is a dynamic place and even as a negotiation goes on, things change. These changes can impact the direction that the negotiation is heading in.
  • Physical Health: “I’ve got a pounding headache.” We need to be constantly reminding ourselves that negotiating has a physical side to it. How either side is currently feeling can have a significant impact on how the negotiations progress.
  • Social Status: “I need this negotiation to be successful so that I can show my boss that I’m valuable to the company.” A negotiation does not occur in a bubble – it has visibility and has impacts. Both sides of the table want to be seen in a favorable light when the negotiations are over.
  • Workload: “I am already swamped and I need to be careful to not take on any more work.” This is the curse of the modern workplace – too much to do and never enough time to do it. You need to watch the other side to determine if they are dragging their feet because they fear an increase in their workload.

These types of personal issues are a critical part of every negotiation. If you can remain sensitive to these types of issues and are prepared to help the other side find a way to deal with them, then you will be that much closer to successfully concluding the negotiation.

Have you ever been involved in a negotiation in which a personal issue became a big deal? When did you first discover that there were non-agenda issues on the table? Did you have your own personal issues that needed to be addressed? How did this all turn out? Leave me a comment and let me know what you are thinking.

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Boeing Uses Negotiation To Dodge Yet Another Strike

Monday, November 17th, 2008
Boeing Used Negotiation To Avoid A Strike With Its Engineering Union

Boeing Used Negotiation To Avoid A Strike With Its Engineering Union

Boeing’s commercial aircraft division just wrapped up the longest strike that Boeing has had in over a decade. Its Machinists have agreed to go back to work after 57 days off of the job. The press was saying that the strike was costing Boeing over $100M a day because of delays in the 3,000+ orders that they have for new aircraft from their customers. Coming on the heels of that was the ugly fact that Boeing’s contract with the 21,000 strong Society of Professional Engineering Employees in Aerospace was running out as of December 1st. Needless to say, it was time for Boeing to start to do some fast negotiating…

Already pre-negotiating posturing had started. On Thursday the engineering union had stated that it wanted its members to vote to authorize a strike. The purpose of this was to raise the pressure on Boeing’s management. Things had started to get hotter as the engineers accused Boeing of stalling the talks. In all honesty, this is probably correct because Boeing was focused on trying resolve the machinists strike and probably had dedicated only minimal resources to starting talks with the engineers. However, things had gotten so rocky that a federal mediator had already been brought in. It’s not known if this mediator was the same one that was helping out with the discussions between Boeing and the machinists.

In negotiations, timing is everything. The engineering union had started their negotiations with Boeing last month AFTER the machinist’s strike had already halted production at Boeing. There were differences between what the two unions were negotiating with Boeing for. The machinists were most concerned about having their jobs replaced with contract workers. The engineers on the other hand realized that they had more specialized talents that could not easily be replaced. This meant that their major concerns revolved around pay and benefits.

Boeing was most interested in negotiating to create a four year contract instead of the traditional three year contract. The reason for this is because in three years they are going to be at the peak of their production schedule for their new 787 Dreamliner airplane and they didn’t want to have to worry about a strike crippling their ability to deliver planes to their customers – that would damage their reputation and hurt their bottom line.

I’m quite surprised that considering that the union was preparing to take a strike vote on Thursday that they were somehow able to resolve their differences with Boeing so quickly that they were recommending to their members over the weekend to accept the tentative deal that had been reached (apparently on Friday). What the heck happened? Details are not currently available; however, the union’s negotiators were getting ready to present the deal to union management on Friday evening.

Since the union had such a strong hand and since Boeing was still reeling from the machinist’s strike, I can only guess that Boeing basically gave in to the engineering union’s demands. If that is true, then there is a big question as to if the union was truly asking for enough? This is a unique time in history for Boeing – they’ve got more orders for planes than they know what to do with. From a negotiating point-of-view the unions are in a much stronger position during this round of negotiations than they will be in four years when there is not such a large backlog of orders. As a confirmation of this, Randy Tisseth who is Boeing’s VP of commercial marketing has announced that the company “will probably feel downward pressure in terms of orders next year…”. Only time will tell if everyone got what they were looking for out of this negotiation.

What do you think: should the engineers have held out for more? Do you think that it was wise of them to agree to a four year contract instead of the standard three year contract? Do you think that asking for a strike vote was a good idea or was it too heavy handed? Leave a comment and let me know what you are thinking.

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Boeing Strike Is Over: Did Negotiation Save The Day?

Thursday, November 6th, 2008
The Strike Is Over At Boeing, But Who Got What?

The Strike Is Over At Boeing, But Who Got What?

Just in case you had not heard, the Association of Machinists and Aerospace Workers has settled its strike with Boeing. The machinists had been off the job and on the picket lines for 52 days – a very long time for a Boeing strike. Both sides are calling the agreement that they came to as being a “fair compromise”. But was it? Let’s take a closer look at how things worked out from a negotiating point-of-view and see what we think happened…

One of the key components of the negotiated agreement is that this contract will cover 4 years unlike previous contracts which have covered only 3 years. This was very important to Boeing because in three years they will just be reaching the peak of production for their new 787 jet and the possibility of having another cripling strike occur then could damage the company’s bottom line as well as their reputation.

The machinists union is actually fairly small – only 27,000 workers. However, they were negotiating from a position of strength. Boeing currently has 3,725 orders for new airplanes that need to be filled. It was rumored that the strike was costing Boeing $100M a day. The machinists were also helped by the fact that the type of work that they perform is highly specialized and not easily replaced. The work done by the machinists has a direct bearing on the final safety of the finished product and this is something that Boeing needs to make sure never gets compromised.

Boeing had bigger issues to consider during their negotiations with the machinists. Boeing is getting ready to face another contract renegotiation with the 21,000 strong Society of Professional Engineering Employees in Aerospace (SPEEA). This contract expires on December 1st so Boeing really needed to get the machinist strike wrapped up before they potentially had another strike on their hands. This also meant that Boeing could not just cave in to the machinists because then the SPEEA would be expecting the same.

Boeing has some other issues that had to be weighing on their decision making team. They were already going to have problems meeting their goal of delivering the first 787 Dreamliner planes in 2009. The lead time for getting a new plane design approved to be sold is quite lengthy. After Boeing has been able to assemble several of the first 787 planes, they will then need to start almost a year of around-the-clock flight testing.

So who walked away with what in the final contract?

It sure looks like the machinists got what they wanted. Specifically, Boeing agreed to limit its use of contractors doing work that machinists had previously done. Contractors will still be able to deliver parts to the production lines; however, the machinists will be in charge of tracking and distributing those parts once they enter the factory. I believe that this was the key point of the negotiations – if Boeing had been able to expand the role of contractors, then they would have been able to use fewer machinists. However, it looks like in order to end the strike quickly, Boeing backed away from this demand.

What’s a negotiator to learn from all of this? Your negotiating power is not always obvious. The machinists were in a powerful situation and they knew it. They used this as leverage to prevent Boeing from reducing their importance and ensured that the next time they enter into a negotiation, they will be well positioned to get what they want.

Who do you think came out ahead in this negotiation? Do you think that Boeing erred in settling the strike without getting the ability to use more contractors? Do you think that the machinists should have held out to remove contractors from delivering parts to the production line? Leave a comment and let me know what you are thinking.

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It’s Negotiation Time At Boeing: Plane & Simple

Wednesday, October 29th, 2008
Boeing And Its Union Can't Seem To Agree On One Key Issue

Boeing And Its Union Can

Even as the rest of the world is going through a financial melt-down, out in Seattle there is still strike going on at Boeing that is costing the company roughly $100M in missed revenue per day. Ouch! Just in case you have not been following this story, the 27,000 members of the International Associaition of Machinists and Aerospace Workers who work for Boeing are out on strike and have been so for since September 6th. Doesn’t this seem like just the kind of problem that a good negotiator could step in and solve?

Currently, both sides are feeling the pain from the strike. On this past Wednesday Boeing had to announce to the press that their 3rd quarter net income sank by 38% due to the strike. Now you’ve got to remember that Boeing is sitting on a stack of orders for their planes right now: they have a backlog of orders for 3,725 planes of which about 900 are for the eagerly anticipated new 787 Dreamliner. Keep in mind that a new airplane costs roughly about $100M to buy and you start to understand that if only Boeing could build new airplanes, then they would be making money hand over fist.

The union folks are also hurting. On average the union workers bring home about $65,000 / year. While the strike is on, they are getting $150 / week from the union in strike pay. This means that everyone is scrambling to pick up part-time jobs in order to stem the bleeding.

The main players in this negotiating drama are well known. On the union side they have Mark Blondin who is a former Boeing machinist who is serving as the lead negotiator for the union. On Boeing’s side, Doug Kight who is Boeing’s lead negotiator. Kight is also Boeing’s vice president of human resources, a position that he took over in late 2006. During previous negotiations, Kight provided legal counsel to his predecessor, Jerry Calhoun, who was formerly Boeing’s lead negotiator.

When we talk about negotiating deals, we often focus on price. However, in this case the price issue is well hidden by another issue: job security. At the heart of the debate is a single question: can Boeing expand the types of jobs that outside contractors perform in assembling airplanes. From Boeing’s point-of-view they are trying to cut costs and reduce the time required to build a plane. In order to do this they are outsourcing jobs to other firms. As a result of the last contract that was negotiated between these two parties, outside firms are now allowed to deliver parts directly to the assembly line. The union is concerned that their members are going to lose their jobs to outside firms if this trend continues. Boeing says that they need to retain flexibility and are unwilling to make any job guarantees. Can you say deadlock?

What can be done to resolve this issue? Remember, the ultimate goal is to make sure that both sides of the table leave the negotiations with a feeling of satisfaction. Additionally, both sides need to give something up in order to feel that they’ve “earned” a negotiated settlement. There are lots of ways that this issue can be resolved. Here’s one that would work for both sides.

I’m sure that there are a lot of other issues on the table like health care, pension benefits, etc. Let’s assume that the core negotiating concept of expanding the discussion has been done and that this issue of job security is really, really a key sticking point. If you focus for a moment on the end game, Boeing really wants to start making planes again so that they can keep their customers and make lots of money. The union members really want to start making planes again because they miss their paychecks and they are proud of their work. This is great news – both sides want the same final goal. Now the trick is to see what can be done in order to get them there.

One thing that makes solving this issue just a bit easier is that Boeing is sitting on a pile of money. Boeing has two issues with the union: the immediate issue of job security for 27,000 workers as well as the long term life of the union itself (will a union be needed in the future?). Both needs have to be met. The union has two issues with Boeing: Boeing wants to lower it’s production costs by using less expensive outsourced labor and Boeing is getting tired of having to deal with a strike and work stoppage every three years. The strikes are playing havoc with Boeing’s ability to compete with Airbus because Boeing can’t honor its contracts to its customers.

So here’s one possible solution. Boeing has 27,000 current employees who basically (just like all of us) only really care about their jobs. What Boeing should agree to is that they will keep these employees working until such time as they no longer need them. At that point in time, Boeing will pay them off to go away. Specifically, Boeing will pay them 1/2 their current salary though retirement age. This will free the worker up to go get retrained and get another job if they want to. Potentially they could earn a great deal of money for the rest of their career. Oh, and they could pretty much pick any job that would make them happy because they would still be getting paid by Boeing. This would cost Boeing some serious cash. If they terminated all 27,000 workers who were making $65,000 / year and everyone was 30 years old, then Boeing would have to pay out $30B over the next 35 years. Now that sounds like a lot of money, but it turns out that it really isn’t. Remember we’re really talking about a long-term solution here. Boeing is going to be paying a lot in salary no matter what. Having the flexibility to further streamline their production process while potentially paying half of that would save the company a lot of money.

Now from the union’s position, they are going to have to change how they operate in the future. Clearly the number of machinists needed by Boeing has been and will continue to decrease over time. However, it can be argued that the remaining machinists will become even more important to the company – they will be doing things that no outsourcing firm can do. The role of the union is going to have to evolve and change. Specifically, over time the machinist union will need to merge with another union in order to maintain it’s bargaining strength. Realizing this earlier than later will be the key to resolving the current issues.

What would your next step be if you were the lead negotiator for Boeing? What would your next steps be if you were the lead negotiator for the union? Who do you think is feeling the most pain right now? Leave a comment and let me know what you are thinking.

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Do You Want To Play A Game? EA & Take-Two’s Negotiating Failure

Tuesday, September 23rd, 2008
EA Tried To Negotiate To Buy Take-Two Software

EA Tried To Negotiate To Buy Take-Two Software

At this blog, we firmly believe that the best negotiating learning comes from observing the real world – not from just reading yet-another-book-on-negotiating. Thankfully, there continue to be a number of fantastic stories in the news that provide key lessons on how companies negotiate with each other and, all too often, what goes wrong…

Set the scene. The players in this particular ongoing drama were Electronic Arts (EA) and Take-Two Interactive Software. EA is a well known developer of video games for a number of different platforms. EA has a number of very popular titles including the best selling “Madden Football“. Take-Two is a young upstart firm that sells the insanely popular “Grand Theft Auto” games. Our story really starts seven months ago when EA made an unsolicited bid of $2B for Take-Two.

So what happened? Take-Two basically said “Thanks, but no thanks.” They stated that they thought that the EA offer of $25.74/share was too low. One reason that they said this was because their most recent game, Grand Theft Auto iV, had already sold over 10M copies.

What happened next? EA ended up letting its hostile takeover bid expire. However, as recently as this August it still seemed as though a deal might be had. EA announced that they were entering into confidential discussions with Take-Two during which EA would have access to non-public info about Take-Two’s business plans.

Where do things stand now? EA has announced that they will not make another offer for Take-Two.

What happened here? Underneath all of the discussions of how to merge two large software firms was a ticking time-bomb: the 2008 Christmas season. From the beginning, EA had made it clear that in order for the deal to make sense for them, they would have had to have been able to integrate the Take-Two product catalog into the EA catalog in time for the Christmas season. What this meant is that a deal would have had to been inked by mid-September in order to allow enough time for this to happen.

What can we learn from this failed deal? If there is a schedule issue, then you need to stay aware of it during the entire negotiation. The other side of this coin is that if you don’t want a deal to happen (like Take-Two) then simply by dragging your feet you can cause the deal to go away.

How important have dates been in your negotiations? Have you ever had a chance to use a looming date to help move one of your negotiations along? Has a negotiation ever been derailed by an inability to wrap things up by a given date? Leave a comment and let me know what you think.

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