Negotiation and Collective Bargaining by Bikash Bajracharya

Negotiation and Collective Bargaining {1}

Purpose of this booklet The purpose of this booklet is to strengthen the capacity of managers and employees/workers in negotiation. With this booklet, the reader should have a better understanding of what is negotiation all about and how negotiation process can be transformed into better relationships with different stakeholders of business. Specific objectives of this booklet are to make the reader aware of: the concept, approaches (integrative/cooperative in particular) and issues in negotiation, the negotiation process in a productive way, the principles of principled negotiation in negotiation practice, other aspects of successful negotiation and its implementation for a win-win situation and an improved relationship among stakeholders.

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FNCCI is conducting various types of trainings or tailored enterprise in-house trainings on request. For interested employers or other people – please go to our website – www.fncci.org – Employers’ Council or contact FNCCI directly.

What is negotiation? We negotiate all the time in our daily life â&#x20AC;&#x201C; at home, in society, in work wherever and whatever comes in our way. In fact, all human interactions are characterized by some sort of negotiation between or among people trying to give and take from one another. Negotiation occurs in business, nonprofit organizations, legal proceedings, among nations, in personal situations etc... {5}

What is negotiation? In precise terms, negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue. Mainly because of the private sector has diverse types of stakeholders to deal with different issues, negotiation skills are extremely important for them. Negotiations can be distributive/competitive or integrative/cooperative. But, it is always better to look for an integrative/cooperative negotiation leading to a mutually beneficial outcome; that way the door is left open for you to do business again in the future. Thus, we want to focus here on an integrative approach of negotiation which aims at preserving or even improving relationships for the future and creating win-win situation for all involved parties.

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Why do we negotiate? Because the parties have a common interest in reaching a settlement, and negotiation

is generally inexpensive and can resolve disputes quickly. is informal and private. results in a solution controlled by the parties negotiating. is less adversarial (and therefore preserves - and may strengthen â&#x20AC;&#x201C; the ongoing relationship).

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3 criteria for successful negotiation (Harvard Concept)

The negotiation should lead to a reasonable agreement.

The negotiation should be efficient.

The negotiation should improve the relationship between the parties involved or at least not destroy it.

Bargaining over positions â&#x20AC;&#x201C; as frequently practiced â&#x20AC;&#x201C; does not fulfil these criteria, because

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it provokes unwise agreements, which do not really serve the interests of the parties,

it is inefficient,

it comprises threats for future relationships.

Negotiation and Collective Bargaining Collective bargaining consists of negotiations between an employer and a group of employees that determine the conditions of employment. Often employees are represented in the bargaining by a union or other labor organization. The result of collective bargaining procedure is called the Collective Bargaining Agreement (CBA). Collective agreements may be in the form of procedural agreements or substantive agreements. Procedural agreements deal with the relationship between workers and management and the procedures to be adopted for resolving individual or group disputes.

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Negotiation and Collective Bargaining This will normally include procedures in respect of individual grievances, disputes and discipline. Frequently, procedural agreements are put into the company rule book which provides information on the overall terms and conditions of employment and codes of behavior. A substantive agreement deals with specific issues, such as basic pay, overtime premiums, bonus arrangements, holiday entitlements, hours of work etc. In many companies, agreements have a fixed time scale and a collective bargaining process will review the procedural agreement when negotiations take place on pay and conditions of employment.

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What kind of negotiations are in industrial relations? Negotiations between an individual worker and his/ her employer

Negotiations between a union or group of workers and an employer

Negotiations between a group of unions and a group of employers

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Where negotiations can take place? At workplace or enterprise/ plant level

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At industry level

At national and international level

What kind of negotiation outcomes are there? Example: Workers/union demand a pay raise of NRs 500 per month.

Win – win situation Both parties will achieve not all of their demands, but will receive some of them. In response to the demand, the employer requested no illegal strikes and offers NRs 200. Through negotiations, there will be an agreement to increase wages NRs 280 per month. The worker agreed that there should be no strikes during the period of agreement on any matter covered by the agreement. In case of other issues the union will follow the dispute settlement procedure before taking industrial action. Both parties compromised their original positions.

But note: Never forget to focus on the interests Workers interest – more money in hand, bonuses, incentives, safe workplace, etc… Employer interest – productivity, company performance, cost reduction etc… If the interests and concerns of both parties have been addressed, a win win result is reached. {13}

What kind of negotiation outcomes are there? Win â&#x20AC;&#x201C; lose situation

The final outcome is no increase in wages. The workers/unions donâ&#x20AC;&#x2122;t have bargaining power and accept the employerâ&#x20AC;&#x2122;s position.

One party achieves all or most of their demands while the other party achieves nothing or a little of theirs. In response to the above demand, the employer offers nothing. {14}

The employer has won, the workers/unions have lost and this will lead to dissatisfaction, frustration and mistrust which are detrimental to good relations and can manifest in the form of loosing worker cooperation and industrial action including strikes.

Lose â&#x20AC;&#x201C; lose situation The parties cannot reach an agreement. The negotiations become deadlocked. The conflict will escalate to a strike or lockout.

In response to the above demand, the employer offers nothing. Both parties donâ&#x20AC;&#x2122;t want to move from their positions. The negotiations become deadlocked. The workers/ unions are going on strike. The workers and the employer will lose income because during the strike there will be no production. This result will also have a deleterious impact on the further development of long term cooperative and harmonious relations in the workplace. {15}

Five core steps in negotiations Step 1

Preparation phase

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Preparation is an important stage in the negotiation process. This phase involves composition of a negotiation team. The negotiation team should consist of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase both the employer and the union representatives examine their own situation in order to develop the issues that they believe will be the most important. The first thing to be done is to determine whether there is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and intimate knowledge of operations, working conditions, production norms and other relevant conditions is required.

Example: In a wage negotiation the workers require more money in their hands. The workers interest is not to bankrupt the company which would result in a failure to pay the wages. On the other hand the company is not interested in depriving more money to the workers but is also concerned regarding the competitiveness and stability of the enterprise. This aspect should be of interest to the workers as well. For the preparation of the negotiation the parties should

think about how to address issues relating to competitiveness, how to enhance the productivity, how to improve the company performance, how to reduce production costs and how new job arrangements can be created etcâ&#x20AC;Ś These are matters on which an agreement can be reached as relevant with workers/unions and the resultant gains can be shared to ensure more money in the hands of the workers. Thus the interests and concerns of both parties have been addressed, a win-win result is reached. {17}

Five core steps in negotiations Step 2

Before starting negotiation Discuss and agree on ground rules

Here, the parties decide the ground rules that will guide the negotiations. A process well begun is half done and this is no less true in case of collective bargaining. An environment of mutual trust and understanding is also created so that the collective bargaining agreement would be reached. {18}

Example: Parties agree not to interrupt each other. Parties agree not to blame, attack, or engage in putdowns and ask questions only for the purpose of getting clarity and understanding. Parties agree to listen respectfully and sincerely try to understand the other personâ&#x20AC;&#x2122;s needs and interests.

Step 3

Proposal and counter proposal phase

Workersâ&#x20AC;&#x2122; proposal

The workersâ&#x20AC;&#x2122; demand to increase the wage by NRs 500 per month. They argue that the living costs have increased by 30 % from 2009 to 2011.

The opening statement of a negotiation involves both sides presenting their starting positions to one another.

Employerâ&#x20AC;&#x2122;s proposal

The employer rejects the workers demand. The employer argues that the production costs have also increased by 10 % in recent years and that there were low productivity through illegal strikes during the past 2 years. The employer argues if the productivity and the product quality could be enhanced and the overall company performance could be topped he would be able to increase the monthly wage by NRs 200. {19}

Five core steps in negotiations Step 4

Bargaining phase (face to face negotiations)

NOTE:

In the bargaining phase the aim is to narrow the gap between the two initial proposals NRs 500/200, to match the different interests of the parties and/ or persuade the other side that the case is so strong that they must accept different amounts than they had planned. In order to do this, both parties should use clearly thought out, planned and logical debate to present their case. {20}

Talk in a clear and open way and use eye contact. Use your normal voice and do not speak too quickly. Avoid negative postures/ Avoid personnel attacks. When you are listening you should listen actively!

Step 5

Agreement and closing phase The closing phase of a negotiation represents the opportunity to capitalize on all of the work done in the previous phases. This stage is described as consisting of effective joint implementation of the agreement through shared visions, strategic planning and negotiated change.

Some points are very important and should be integrated in the written agreement. Effective date of enforcement Validity period of the agreement The procedure for settling disputes regarding the interpretation, as well as other disputes. The consequences and remedies in the event of breaches of the agreement

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Five core steps in negotiations Example:

Through negotiations the parties come to an agreement that the wage will be increased by NRs 280 per month. The workers agreed on not to participate in illegal strikes and to establish a workplace cooperation committee which should concentrate on how to increase the productivity and the work performance. The new wage will be paid out from the date as agreed by the parties. Also the validity period of the agreement is fixed for two years from the effective date of enforcement. To solve any misunderstandings out of the agreement the parties have agreed to discuss and determine an appropriate settlement procedure within a fixed period as agreed by the parties.

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If the other party says NO to your proposal, do not protest immediately you should ask for reasons and try to negotiate again based on interest rather than position. To determine a â&#x20AC;&#x153;Best Alternative To a Negotiated Agreementâ&#x20AC;? (B.A.T.N.A.) develop a list of options. If there is no agreement in negotiations, then select the option that looks the best.

Negotiation skills Separate the people from the problem! Each party in a negotiation process has two basic interests. One is related to the issue, the other to the personal relationship involved. Very often we find these two interests mixed together â&#x20AC;&#x201C; for several reasons. Often people hear personal criticism where it is not intended. This happens especially in situations where we donâ&#x20AC;&#x2122; t directly tell the other party how we feel about them. Already by haggling over positions, people imply through their behavior that they value their position more than the relationship. Anger about a situation easily leads to expressions of anger about people who are connected to that situation. {23}

Listening skills (LADDER) Look at the person who is speaking and maintain comfortable contact.

Ask questions to obtain information

and to show interest in what is said.

Don’t interrupt or let others

interrupt. Allow the speaker to express their ideas and their views.

Don’t change the subject Be

sensitive to the speaker’s agenda so you can learn where it fits into your agenda.

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Be aware of Emotions as you listen. Reframe, restate and reflect what you heard and change it to neutral language.

Respond to the speaker by using your eyes, positive

body language, and words to show empathy and understanding. Summarize and let the speaker know that you respect the speaker and that what s/he has said. This stage comprises the time when ‘what ifs’ and ‘supposals’ are set forth, clarified and the drafting of agreements take place. Note: The key to success at this stage is also to bring the willingness to compromise!

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Focus on interests and not on positions Often conflicting parties have different positions which cannot be reconciled. If one side gets through with their position, the other side will lose. However, very often solutions would be possible which would allow for all parties to win (win-win situation). For behind the positions, we may identify interests which may not be irreconcilable at all. Furthermore, behind the interests we may identify deeper needs, which might possibly be satisfied in ways quite different from the positions originally taken.

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Communication skills â&#x20AC;&#x201C; Assertive speaking Communication is a two way process. The other active side from active listening is assertive speaking. There are 2 techniques which might be helpful: Technique 1:

Respectful assertion The purpose of respectful assertion is to:

encourage to exchange ideas, reduce misunderstandings, clarify areas of agreement and of disagreement, promote common understanding, invent options for mutual gain lâ&#x20AC;&#x201A; look for win-win solutions l increase the number of options for solution. {27}

Communication skills – Assertive speaking Technique 2:

The 'I message' has 4 parts:

‘I messages’ The purpose of 'I messages' are to allow people to express conflict in a respectful manner that minimizes the chances of making the other person feel guilty, angry or resistant to change.

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A statement of your feelings n I feel upset …… A description of the behavior that upsets you n …when you arrived 30 minutes too late to our meeting…. A statement of the consequences of that behavior to you n ….because I was not able to attend another meeting on time. and the change you expect n I would really appreciate if it would be possible to start with meetings on time

Legal framework Provisions in the Labour Act 1992 and Labour Rules 1994 where negotiation plays an important role:

Minimum Wage Fixation Committee â&#x20AC;&#x201C; tripartite (Section 21) Fixation of minimum wage for workers/employees

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Legal framework

Central Labour Advisory Committee â&#x20AC;&#x201C; tripartite (section 62) Negotiation on formulation of labour related policies and laws Labour Relations Committee in enterprise â&#x20AC;&#x201C; bipartite (section 63) Negotiation on the operation of welfare fund, provident fund, housing facility and fund and productivity and service growth

Individual disputes settlement process (section 73) Collective disputes settlement process (section 74)

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Collective bargaining process at the enterprise level where negotiation has a major role to play : Section 74 (1),(2),(3),(4),(5),(6) and (7) has an elaborate provisions on settlement of collective claims of the workers/employees related to their collective rights, interests and benefits through collective bargaining. Some steps before opting to go on strike or lockout or to agree on arbitration or tripartite committee for settlement of disputes involve intensive negotiation between the management and the workers/ employees. They are provided as follows:

Step 1

Submission of collective claims by the workers/ employees through representatives or authorized trade union to the management â&#x20AC;&#x201C; negotiate and settle the claims within 21 days from the date of submission of claims (section 74).

Step 2 Failing which, the parties must settle the claims through bilateral negotiation in presence of labour office within 15 days (section 74). Step 3 Failing which the claims may be settled through an arbitrator â&#x20AC;&#x201C; negotiate for an arbitrator (section 74). {31}

This booklet was developed by FNCCI Employers’ Council with the support of the ILO and funded by the Norwegian Government

for Further information please contact:

Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Employers’ Council Pachali Shahid Shukra FNCCI Milan Marg Teku Kathmandu, Nepal, Tel.: 4262061 Email: employers@fncci.org Web: http://www.fncci.org

Illustration & Layout by Print Communication Pvt. Ltd, 4782746

NRs 100

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