1. Integrative Bargaining
Chapter 4
Integrative Bargaining

2. Integrative Bargaining
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Integrative Bargaining
Defined: “A negotiating process in which the parties involved strive to integrate their interests, as effectively as possible in the final agreement”
Based on Mary Parker Follett’s tale of the orange and two sisters AND
1970s labor relations cooperative approach to collective bargaining

3. Integrative Bargaining
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Also called:
“Win-Win” (Getting to Yes by Fisher and Ury)
“Mutual-gains” approach
“Expandable pie” approach
All have in common the integrative approach:
Create as much value as possible for both sides
Claim as much value as possible to meet your interests

4. Negotiation Skills Skill 4.1: Key elements of integrative bargaining
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Skill 4.1: Key elements of integrative bargaining
Skill 4.2: Apply the categorization method
Skill 4.3: Recognize the first step – focus on the interests of the parties involved
Skill 4.4: Practice active listening
Skill 4.5: Utilize the packaging tactic
Skill 4.6: Apply interest-based bargaining (IBB)

5. Differences Between Distributive and Integrative Bargaining
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Integrative
Several issues
“Win-Win”
“Expand the pie” by creating and claiming value
Continuing long-term relationship
Share interests with other party
Create many options per issue to maximize mutual gains
Share information, explain “why” of issue
Distributive
1. One issue (or one at a time)
2. “Win-Lose”
3. Maximize share of “fixed pie”
4. One-time relationship
5. Keep interests hidden
6. One expressed position for each issue
7. Keep information hidden

6. Chapter Case: Labor Contract Negotiations
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Ohio Metals Co. (management) and Local 56 of the Primary Sheet Metal Workers of America, AFL-CIO’s current three-year contract is about to expire
There is a history of a positive labor-management climate
Management shares financial data for the past three years; union shares survey of members’ interests
At the first meeting both share lists of economic and noneconomic issues

7. Thompson’s Pyramid Model
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Thompson’s Pyramid Model
Integrative negotiations is both a process – how to bargain, and an outcome – mutual gain
______________________________________________
Level 3: Pareto Optimal – Maximum value for both parties
Level 2: Superior Agreement – Create additional value for both parties
Level 1: Agreement – Exceeds both parties’ reservation points or BATNA

8. The Categorization Method
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Step One: Identify all issues
Step Two: Classify each issue as
a. compatible
b. exchange
c. distributive
Step Three: Agree on all compatible issues
Step Four: Trade or exchange issues of approximately equal value
Step Five: Use distributive bargaining on all unresolved issues

9. Tactics for Success: Practice Active Listening
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Tactics for Success: Practice Active Listening
Active Listening = focus on what the other person is saying, understanding both the content and emotion

10. Practice Tips for Active Listening
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Practice Tips for Active Listening
#1 Maintain eye contact
#2 Think only about what they are saying, don’t formulate a response
#3 Take notes and use them to reflect their thoughts back
#4 Pay attention to body language
#5 Confirm that you heard and understand by summarizing – ask reflective and probing questions

11. The Five Steps of the Categorization Method of Integrative Bargaining

12. Applying the Categorization Method to the Chapter Case
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Step 1: Thirteen issues identified
Step 2: All issues classified
Step 3: Agreed on three compatible issues (length of contract [1]; drug testing [5]; no strike/no lockout [8])
Step 4: Exchanged
Union’s job security [11] for management’s subcontracting [10]
Union’s pension proposal [2] for management’s shift differential [9]
Union’s clothing allowance [12] for management’s funeral leave [7]
Management’s profit sharing [4] for union’s overtime [13]
Step 5: Distributive bargaining used to settle wage increase [3] and health care insurance [6]

13. Keys to Successful Integrative Bargaining
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1. Willing participation: Open discussions, explore new options and mutual gains
2. Relationship: Positive long term is valued
3. Collaborative atmosphere: Avoid “fighter pilot lock-on” over an issue or position
4. Packaging: Combine two or more issues into one proposal of equal gains for both

14. Labor Contract Negotiations Through Integrative Bargaining

15. Tactics for Success: Use Questions to Advance Negotiations
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Open-ended  “What type of clientele would this advance course attract?”
Open-ended with explanation  “The basic course targets entry-level employees. What type of clientele would this advance course attract?”
Moving from debate to dialogue  “What profit margin do you need for the advanced course to be successful?”
Broad-based, clarification  “You’re clearly concerned about taking on additional risks, so what exactly do you see as the risk to you in offering the advanced course?”

16. Tactics for Success (cont.)
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Circular  “How do you conduct a marketing campaign?” “What is the difference between a basic and advanced course?”
Leading  “Can you see that my firm is taking all the risks in this proposal?”
Loaded  “Are you saying these unfair payment terms are the only ones you will accept?”
Underlying concerns  “What type of payment arrangement would reward you for the risk and provide your firm an adequate profit?”
Seeking creative solutions  “Why is it essential to offer classes on different days?”

17. Limitations of the Categorization Method
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Limitations of the Categorization Method
Parties believe they use “win-win,” but in reality use distributive method on each issue
Imbalance of power causes one party to use “win-lose”
Overconfidence in knowledge of other party and failure to actively listen

18. Traps to Avoid: How to Respond to a Loaded Question
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“Are you telling me those unfair terms are the only ones you will accept?”
Possible responses: (don’t respond in anger, instead evaluate the emotions)
1. Silence: followed by returning to the prior issue
2. Humor: “I have other demands you will like even less!”
3. Take a break: “We need to go outside for some fresh air”
4. Call it what it is: “I consider that a loaded question, are these the only terms I will accept…?”

19. Interest-Based Bargaining (IBB)
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Interest-Based Bargaining (IBB)
Increasing in popularity, but
subject of debate: Is IBB a critical negotiation improvement or a new label for “integrative bargaining” (“principled negotiation” from Getting to Yes)?
2004 study: IBB effective, but negotiators also return to distributive bargaining on tough issues

20. Principles of IBB
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Negotiators view the process as one of problem solving
IBB steps (according to FMCS)
Sharing of information
Willingness to forgo power or leverage
Brainstorming to create options
Focusing on issues, not personalities
Leaving past issues behind
Expressing interests, not positions
Both parties, committing to IBB

21. Advantages and Disadvantages of IBB
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Advantages
Focus is on underlying interests
Brainstorming leads to more options, better solutions
Parties seek out new options rather than defend portions
Disadvantages
May waste time seeking more options
Proposed options may not be realistic
Standards agreed to may be vague and subjective

22. Union and Management Negotiators’ Reports on IBB Activities