This is a greatly reduced and edited version of a negotiation carried out in Spain using the Harvard University PON model. Certain details have been changed to preserve the confidentiality of the client.
Definition of Dovetailing: Something that is low cost for you and high value for the other side OR high value for you and low cost for them.
- An International food and drink company.
- A Spanish union negotiating the yearly contract for a factory workforce.
The union made a demand for a pay rise higher than the cost-of-living increase stipulated by the Spanish government. The Human Resources Director wanted to find some way to offer more to the union without exceeding the proposed budget.
The company is part of an international group of food and drink manufacturers. This factory produces pre-packaged food and has a staff of approx. 350 employees. It is located in a small town in rural Spain. It is the principal employer in the area. The parent company has a worldwide commitment to ethical and professional treatment of its employees.
The company and the union had a long history of confrontational negotiations. This has changed over the past few years and although there is still a certain degree of distrust between the company and the union, the relationship is getting better every year. Both the union, the employees and the company management recognize that the only way to guarantee the future of the company is to have “Social peace” which means negotiations instead of bargaining and no threats, etc. The factory involved is the principal employer in the town and recognizes its civic responsibility to the town, citizens and staff.
Interests of the Human Resources Department:
1. Stay within the H.R. budget for the next year.
2. Maintain & improve relations with the union and its representatives.
3. Stay within Government guidelines regarding pay and benefits.
4. Not create a negative precedent for future negotiations.
5. Negotiate the best possible deal for both the company and the union/employees.
6. Obtain a two or three year contract if possible.
7. Avoid social “unrest” in the company and outside.
8. Comply with the publicly stated H.R. policy of the company of “Productive & cooperative Negotiation”.
Interests of the union negotiators:
1. Public recognition of their skills as effective negotiators.
2. Obtain the maximum possible from the company.
3. Enhance their possibilities of promotion within the union.
4. Avoid a confrontation with the company.
5. Maintain & improve relations with the company and its representatives.
Interests of the company employees:
1. Obtain the maximum possible from the company.
2. Avoid a confrontation with the company.
3. Maintain & improve relations with the company and its representatives.
4. Obtain a fair agreement.
1. Avoid a confrontation.
2. Maintain & improve relations.
3. Obtain a fair agreement.
4. Obtain recognition of their negotiation skills.
How the Human Resources Manager used “Dovetailing” to achieve the desired outcome:
The H.R. manager discovered that a large number of employees had mortgages. The majority of the mortgages were for periods of between 10 & 15 years and varied from 48.000€ to 60.000€ (approx. US $53,000 to $67.000). Each person was paying between ($87.00) and (US $113.00 ) per month per million interest on the capital.
1. For a person with a 60.000€ mortgage for 15 years paying 102€ per million, this worked out to approx. 1020€ per month.
2. For a person with a 60.000€ mortgage for 10 years paying 78 € per million, this worked out to approx. 780 € per month.
(Please note the figures used are illustrative only)
On the basis of this information, the H.R. manager contacted the bank used by the company – initially by telephone – and arranged for the bank to offer the employees of the company preferential mortgages. The bank was delighted and made the following offer to the employees:
1. Free transfer of their current mortgage to the bank. The bank assumed ALL the costs of early cancellation, transfer fees, etc.
2. A guaranteed special interest rate (much lower than commonly available) for the first two years of the mortgage and then written guarantees about future interest rate rises.
This represented the following savings for the two examples given above:
1. After the transfer of the mortgage, a person with a mortgage for 60.000 € for 15 years would pay only 42€ per million, this worked out to approx. 420€ per month. This produced an additional 600€ available for use by the employee at NO additional cost to the company.
2. After the transfer of the mortgage, a person with a 60.000 € mortgage for 10 years would pay only 24€ per million, this worked out to approx. 240€ per month. This produced an additional 540€ available for use by the employee at NO additional cost to the company.
More than 80% of the employees in the company opted for the offer of the new mortgage which proved extremely beneficial for all concerned.
Obviously, there were many other elements included in the negotiation – the majority included Dovetailing whenever possible.
- On the basis of the number of mortgages presented to the bank, The company was able to negotiate an extremely beneficial agreement on Bank commissions & service charges with the bank.
- The company received preferential treatment in all financial matters.
- The company achieved all its objectives and covered all its interests.
- The union negotiators covered their interests.
- The employees covered their interests.
- The interests of the Human Resources Manager were covered.
My objective is presenting this case to you all is to show fellow negotiators that we need to “Think outside of the box” in all of our negotiations and use our individual or team creativity to ensure that we get the best outcomes possible for all the parties involved.
The basic information in this case study is real. Certain elements have been changed to protect the identities of the organizations involved.