Robert Collard Scott Rafferty Han DJ Sullivan

Josh Dunford Sun

Cynthia Nguyen Kristine Taylor

Adam Baxter Company/Local 190 Final Case Debriefing Analysis

I. Introduction

In the heated exchange of difficult business disputes, the need to navigate negotiation strategies becomes paramount to any successful business venture. The need to understand the aspects of emotional exchanges that shift from Interest, Rights, and Power as both sides tango in Distributive or Integrative approaches represent the core of modern academic research in negotiations. Whether engaging in zero-sum game Distributive approaches or a value-adding Integrative focus, the crux of good negotiations still calls for a need to build trust. This paper represents a debriefing case study analysis of Adam Baxter Company (ABC) with its opposing labor union Local 190, both sides simulate actual negotiations that took place between Hormel and Local P9 in the mid- 1980s. Unlike real life negotiations where intense emotions dangerously lace rational decision-making, our case study allows both sides of our opposing teams to reflect on our mistakes during the negotiation and also to provide hindsight to the dispute between Hormel and Local P9. Following these thoughts, we have organized our paper as follows: Part I is the Introduction, II elaborates on a more theoretical discussion of Interests, Rights, and Power in the Distributive versus Integrative framework, Part III provides an in-depth

discussion of the pivotal role of trust in the negotiations, Part IV summarizes the lessons learned in our negotiations and hindsight on Hormel and Local P9. Lastly, Part V concludes.

II. Interests, Rights, and Power

Our negotiation has a historical basis in Hormel and Local P9s contentious battle so a discussion of their dispute is needed first. Located in the then union friendly city of Austin, Minnesota, Hormels management and Local P9 were established partners for many decades prior to the bitter wage negotiations of 1985-86. Hormel had one interest throughout the negotiation with Local P9 and that was to reduce wages. Hormels management also knew they had the upper hand in negotiations because of the prevailing business friendly climate that favored corporate rights to labor. While in the process of creating a new contract, there was little legal recourse if the company chose not to rehire current workers, offer specific wages, or to find new employees for replacement. Lastly, Hormel had all of the power in this negotiation due to their position, control of financial resources, and ability to move production to other facilities.

Local P9 had exactly opposite interests as Hormel. They wanted wages to increase in order to restore the pay cuts they had received a few years earlier. Local P9 felt they had the right to ask for increased wages in the negotiation of their expiring contracts because Hormel was profitable and did not need any more belt-tightening from its employees. Unfortunately, Local P9 had almost no power in this negotiation except to strike. They were driven by emotions and wanted a specific outcome that did not take into account their substantially weaker power position. Thus, they did not pursue a more integrative approach during the negotiations.

The actual negotiation between Hormel and Local P9 was resolved through use of a very powerbased approach by both sides. Hormel had made an offer just slightly below the unions desired rate but Local P9 quickly rejected this first offer and was unwilling to budge. It appeared that neither party was interested in solving the issue in an integrative approach; this led to both parties relying on power.

Hormel was unwilling to discuss or consult with the union before the decision to drop wages was made. It appeared that Hormels management knew they were going to drop wages long before the new contract negotiation even began. Hormel was able to reap the benefits of a power-based approach and the outcome was ultimately in their favor. The final wages they paid employees was $10.25, lower than the initial offer of $10.69.

Local P9 may have been more willing to discuss interests initially but retaliated severely after Hormels insultingly low second offer. The power move by Hormel resulted in a similar power move by Local P9, resulting in a strike. Local P9s power move made it very difficult to return to interests as the strike prolonged and Hormel was standing strong. Use of a power-based approach at such an early stage was a dangerous move for Local P9 because they used up their biggest leveraging chip in the negotiations. However, Local P9 did not have a lot of options and were almost required to use a power-based approach as Hormel was unwilling to make concessions.

Given the final resolution of Hormel and Local P9s dispute, our negotiations followed a similar path. Round One of our negotiation was resolved through a mostly interests-based approach to resolving the dispute which was taking place. The negotiation began with Local 190 and ABC both revealing their key interests, or most important issues, related to the negotiation. Local 190

may have had some additional power in round one due to the legal contracts that were already in place. However, Local 190 was not interested in using power during the negotiation and focused on using an interests-based approach to keep the new plant locally. Local 190 was also willing to make some concessions related to worker autonomy and the escalator clause in exchange for concessions by ABC related to wages, bonuses, and future wage increases. Both sides taking an interests-based approach to the negotiation resulted in a much more integrative agreement in Round One of the negotiation.

During Round Two, the negotiation became purely distributive because it was based solely on wages. Luckily, there was a positive bargaining zone between $8.67/hour and $10.69/hour. Although there was a bargaining zone, Local P9 wanted wages higher than $10.69/hour, but only had a BATNA of $8.67/hour because of the Me-Too-Clause while ABCs BATNA was $10.69/hour. Three facts lead to the clause to favor ABCs management team: the wording was too ambiguously written, the wages of the top three competitors were lower than ABCs wage offer, and that other ABC unions wages were lower. This led ABC to have even more power in the negotiation through legitimacy since it was now legal to make Local P9s wages be close to the other unions wages. Hence, there was no chance of Local P9 to negotiate a wage increase. ABCs good BATNA led them to have more power during the negotiation and thus negotiate a wage lower than $10.69/hour.

The final round of negotiations was a heated dispute. This is no surprise considering ABCs and Local P9s BATNAs were linked. If an agreement could not be negotiated, Local P9 would go on strike and ABC would hire cheap labor to replace those union workers. Additionally, it seemed as though there was no bargaining zone. Therefore, it was difficult for each party to keep interests at
4

the center of the negotiation and both parties eventually resorted to rights and power in a last attempt to come to force an agreement. Once both parties resorted to rights and power, it was difficult to focus back on interests as each side became more competitive and emotional. The absence of a positive bargaining zone made it impossible to end the dispute and focus solely on interests since neither party had similar interests. However, ABC still retained slightly more power since resorting to their BATNA would not cease production. Although ABCs and Local P9s BATNAs were the same, it hurt Local P9 to resort to their BATNA, whereas it had less of an effect (and perhaps even a positive effect) for ABC to resort to their BATNA.

The power distribution between the actual negotiation and the simulated negotiation were quite similar. In both cases, ABC/Hormel seemed to have more power since their plant could still run without Local190/Local P9. One difference is that in the simulated negotiation, we were bound by the instructions as to what we were negotiating for and the limits of the negotiation. In the actual negotiation, neither side was bound by anything, but instead chose to not use an integrative approach for their negotiation. Since each side resorted to power moves too quickly instead of focusing on mutual interests, the negotiation quickly escalated to a power dispute and it is obvious from the real-life negotiation that Hormel had much more power than Local P9. As in the actual negotiation, ABCs BATNA was significantly better than Local 190s BATNA and ABC had the ability to follow through with any power threats made, thus ABC was in a much stronger power position. Also, in the actual agreement, Local P9 was not supported by the larger meatpacking union. This made Local P9s cause less legitimate and further led to their decrease in power. In our simulated negotiation, we did not have as many external factors influencing the negotiation (town support, a union strike leader, a meatpackers union, etc.).

Both during the actual negotiation and in our simulated negotiation, power played a large part in the outcome of the negotiation. This goes to show that it is important to identify which party in the negotiation has more power as well as the importance of knowing ones BATNA. If each party was able to stay focused on interests and had been more willing to increase their negotiating margin, perhaps both Hormel/ABC and Local P9/Local 190 would have reached a satisfactory agreement for both parties. III. Dissecting the Role of Trust in Negotiations

The trust factor between ABC management and Local 190 was fluid throughout the entire negotiation process but definitely deteriorated during Round Three. In the following section, we will discuss the state of the trust between the two parties during each negotiation, the changing contexts between negotiations, and the factors that impacted trust during the negotiations.

The first negotiation between ABC and Local 190 started out with a high level of trust. While both parties had their obvious negotiation goals, both parties started from a position of mutual interest in keeping workers in the factory and ensuring they were happy. Because of this shared interests approach, there was a healthy level of trust between the two parties, and it was much easier to come to an integrative solution.

The more distributive nature of the second negotiation (wages), as well as case-established context, made it much more difficult to start the negotiation with the same high level of trust between the two parties. From the Local 190 perspective, they had to defend the Me-Too-Clause

in the contract, a provision they felt was put in place to protect workers wages but the management team were now using to decrease wages. Local 190 considered this use of the clause a violation of good faith, and put them into a defensive position where trust could not be easily restored. From managements perspective, the clause was a tool they did not necessarily want to use but became a power play as time became a transactional cost constraint. The result of these dynamics was that both parties quickly headed towards a negotiation about rights and power instead of potential mutual interests, which further inhibited the ability for both parties to develop strong trust in each other.

In the third negotiation, by virtue of the fact that ABC had placed barbed wires around the perimeter of the factory, there was a complete lack of trust from both parties. In the beginning, both ABC and Local 190 feigned interest in establishing a mutually beneficial outcome and establishing shared interests. In actuality, lower priority issues for both parties were resolved relatively quickly, but at the cost of avoiding the most important issues. However, this collaborative approach disappeared quickly when discussing layoff notice period and rehiring policies, where both parties moved to a position of power and trust was quickly destroyed between the two parties. Soon after, ABC used their power play of threatening a layoff of all employees and rehiring all non-union employees, while Local 190 used their power play of striking and shutting down ABCs new plant. It was at this point that both parties realized that a solution could not be reached, and Local 190 declared strike with management acknowledging and accepting the action.

Similarly, the ebbing of trust between Hormel and Local P9 followed almost the same path. Much of the breakdown in trust between Hormel and the Local P9 can be attributed to the fact that neither party started from an interest position in their negotiation situation. On Hormels end, they started from a Power position by taking action and lowering wages without consulting the union. While this was in their Rights, the fact that they took unilateral action was a power move by management. When it came time to negotiate the actual contract renewal, Hormel management defended their actions and signaled their intentions by saying it was within their Rights outlined in the current contract to make the cuts that they did, without regard to prior wages and compensation from thereon. It was not until they had an extended period of factory inactivity and the workers were feeling the squeeze that they actually talked about any kind of mutual Interests the two parties may have. This was a late shift to mutually focus on employing the factory with union workers and getting the plant to run at full capacity.

The Hormel/Local P9 situation had many situational factors that stood in stark contrast to how our ABC/Local 190 negotiation played out. Whereas Hormel/Local P9 started out with very little trust and expressed no real interest in fostering an integrative negotiating approach, the ABC/Local 190 negotiations almost always started from a position of interests, regardless of the level of trust in the room. This approach allows us to come to agreements in the first two negotiations, and maintain a civil and respectful dialogue throughout the process. This continued even during the third negotiation when there was not much trust between the parties, but we were still able to have a good dialogue that was sincere in trying to reach an agreement. During the Hormel/Local P9 negotiation there was a clear distrust between both parties, and there was no effort to negotiate from a position of mutual interest that could have led to an agreement.

The similarities between the Hormel/Local P9 and ABC/Local 190 negotiations is that, despite the contrasting approaches, the negotiations eventually digressed to power negotiation style and tactics. Although both of our groups approached the negotiation with the intent of being as integrative as possible, the way the case is written requires both parties to eventually take a power position. Both groups felt that there were few concessions that could be made and, for this reason, resorted to power tactics to attempt to swing the negotiation into their favor after an integrative strategy failed to create an acceptable outcome.

Both Hormel and the Local P9 could have made efforts to build trust within their situation, but their actions leading up to the contract negotiation prevented them from being able to achieve this. The Local P9 attempted to generate a power position by hiring an outside public relations firm to generate bad publicity, framing Hormel as a bad actor in the situation. In addition, they were a house divided in that there were fractures in the local union base, with dissenters being marginalized and no opportunity for a diversity of opinion among the leadership. Hormels actions leading up to the negotiation also poisoned the well and prevented an atmosphere of trust. During the contract period, the companys management leveraged a clause in the contract to lower employee wages, doing so unilaterally without the consultation of Local P9. Had both parties been smarter and more cognizant of the consequences of their actions leading up to the contract negotiation, they could have entered the negotiation with higher levels of trust and greater motivation to take an integrative and collaborative approach to the situation.

IV. Insights on Strategic Errors and Hindsight

The key strategic error made by ABC was unwillingness to give up a few benefits to reach an integrative solution. In the first round, ABC tried to reduce workers benefits in each of the five issues but did not have the equal things to offer. They also relied too much on the financial statements to support their opinion in all three rounds. Because of the companys strong financial position, Local 190s team was not persuaded by ABCs arguments at all.

ABC deployed strategies that were effective coercions to Local 190s demands. In the first round, they offered stock options and thus was able to take more concessions from the union. While in the second round, ABC used low industry wages and arbitration as effective threats in a power move.

Both teams unanimously agreed that another ABC important strategic error in all three rounds was that they refused to break the restrictions in the case in order to come to an agreement that was integrative. Local 190 was willing to deviate from their negotiated restrictions in Round One and Two. But in Round Three, Local 190 was perhaps too willing to go on strike and not negotiate a deal. The first negotiation seemed very integrative. Second negotiation was strictly distributive, which made it tough. By Round Three, it was clear that Local 190 felt animosity toward management. BATNAs were also tied in this last round, which made it a dispute negotiation that was embroiled in greater emotions.

During the course of the negotiation, Local 190 made a key strategic error in the second round when they backed down on the negotiated wage. Round two was a strictly distributive negotiation and Local 190 was attempting to claim as much value as possible. However, in the last moments of the negotiation Local 190 reduced the price they demanded due to opponent
10

bias. The union expected the company to be much more aggressive because they believed ABC was in a much more powerful position. Local 190 feared that ABC could force a strike and cause them to lose big on the deal.

Local 190s most successful strategy in the first round that impacted the remaining negotiations was focusing on the interests of ABC Company and presenting them as mutually compatible. Local 190 focused on how the success of the company was a result of treating the employees well. By tying compensation and other benefits to high output and industry leading performance, Local 190 was able to frame the negotiation in a positive way for both parties.

Based on our experiences and hindsight, the key strategic error made by Hormel Management is their excessive display of power. They put themselves in the position as an enemy of the workers, rather than a friend and were unwilling to negotiate. They showed disinterest at the beginning of the campaign and made the workers very angry and eventually led to a poor result.

From the negotiation stand point, their best move was to hire replacement. Although this provoked the workers more, it was the best that Hormel could do once trapped in a power strategy. This enforced their strength to negotiate with the union.

In contrast, the decision to wage a campaign against Hormel was Local P9s strategic error that put them in a difficult position from the very beginning. By hiring Ray Rogers and publicly attacking the company, they made a clear power move that proved to be ineffective. Skipping an interests-approach and turning to a power move made an integrative solution extremely difficult.

11

The greatest problem with Local P9s power strategy was they overestimated the power they actually had. When a party undertakes a power strategy, they must be sure that they actually have that power. Local P9 suffered from severe overconfidence bias, fueled by the emotional rhetoric of Ray Rogers. They thought they had the power to inflict significant financial harm and public relations damage that would persuade Hormel to accept their offer; however, Local P9 actually had much more limited power.

Local P9s best move in the negotiation was ending it. The strike had gone on for too long and there was no progress being made. Prolonging the strike and the negotiations was only hurting the union members. Local P9 considered their BATNA in the situation, which was to abandon Hormel completely and leave all of the union workers without a job, and decided to negotiate a deal instead in order to take the remaining positions left in the factory so at least some members were able to retain employment.

Our strategy recommendation for Hormel is to stop the campaign in the beginning before the workers got really mad. They should not act like they did not care about the welfare of the workers. Instead, they should try to maintain the relationship with the employees by showing understanding and empathy. If they were really in a bad financial position (although they actually werent) and had no choice but to cut wages and incentives, they should kindly inform the employees to gain their support.

Hormel should offer alternatives for workers if they intended to take some benefits from the workers. They should think from the workers stand point and find out workers interest. At that time period, maybe workers care more about their security rather than wage. If they told the
12

workers that the company considered them valuable and would like to provide alternatives to satisfy workers interests, the workers could have come to understand the companys situation and be willing to help the company. This new strategy could have avoided the political and emotional rancor of these negotiations. Each party could have come to understand the situation of the other. Rather than going on a strike, the union would be more willing to negotiate and eventually come to a common agreement.

Our strategic insight for Local P9 is that they should be cognizant of the nature of their unrealistic expectations and uncontrolled emotions. Local P9s choice to wage a publicity war against Hormel made two parties who should have been allies turn into enemies. To avoid the drama and damage that resulted from the unsuccessful campaign, Local P9 should have implemented an integrative strategy, focusing on the interests of both parties. Before taking any action, Local P9 should have made a greater effort to determine their BATNA along with Hormels. If they had better understood their position they would have realized that the strike was likely to hurt them more than Hormel.

Local P9 should have come to the bargaining table and focused on the interests of both parties. By focusing on the interests, they could have potentially identified parts of the deal that were integrative, allowing them to obtain a better outcome than what was initially offered. Even if wages were conceded, other aspects such as improved working conditions could have been gained. Hormel would have been much more receptive to this approach because it would have avoided bad publicity and the loss of productivity caused by a strike. An issues based approach instead of a power approach would have significantly helped to maintain the important

13

relationship between the employer and the employee. That is one of the greatest effects of an integrative solution. While Local P9 would likely not have claimed a great deal of value based on the powerful position of Hormel, they would have been much better off than a strike and lost jobs. It would also improve their position in future negotiations to potentially extract greater concessions from Hormel.

The union should only turn to power as a last resort. To ensure that they have as much power as possible, Local P9 must remain united with the international union. The intergroup conflict that existed between the international union and Local P9 significantly weakened their negotiating power. The international union is much larger and has influence over all of the Hormel unions along with other meatpacking unions. That leverage with other groups would have given Local P9 much more power in the negotiation.

V. Conclusion

The experience of negotiating between ABCs management and Local 190 provided many insights into complicated multi-party dispute negotiations. An Interest, Rights, then Power approach is the preferred strategy to achieve an Integrated approach. Knowing that the negotiation was based on the historical one between Hormel and Local P9, however, we learned that an Integrated approach can easily digress into a Distributive approach where everyone suffers prohibitive losses. It becomes important to gain more experience from and to study dispute negotiations better in order to prevent undesirable outcomes.

14