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Negotiations: Author Hal Stack for Chelst and Canbolat million already paid, as well as 30 million in damages. After reviewing the
contract with the hospital, the IT company counter-sued for breach of contract for the 4.2 million it had not yet received. The company’s attorneys were
confident that they would prevail in court but noted that the legal fees would be 275,000. The attorneys also noted that winning the suit might push the hospital
into bankruptcy and therefore recommended exploring an out-of-court settlement. Thus, although the IT company was in a strong legal position, its
bargaining power was considerably weakened due to the hospital’s financial position..
Table 15-8: Interests of the hospital and the IT company In negotiating a settlement, the parties identified their issues and interests,
summarized in Table 15-8. The key to such negotiations is finding a solution that furthers both parties’ interests more than the legal alternative. This might
include the hospital agreeing to use the IT company’s generic software program and the IT company using the hospital as a beta site for its wireless clinical
information system. This arrangement would enable the IT company to establish a leadership position in a key market and would enable the hospital to quickly
gain financial solvency. In addition, the partnership would enable both parties to gain a marketing advantage from promoting the new system.
Distributive issues remain before the parties can close the deal. The IT company has already invested 250,000 in the development of the generic date
entry software and estimates that it would take three months and another 250,000 to complete the development. How much, if any, of this cost should the
hospital pay? Using the generic software would increase training costs for the hospital by 250,000 to 300,000. Would the IT company help defray this cost?
The parties might also agree to a profit-sharing arrangement on the generic data entry software, or agree on linking the hospital payments to the savings that will
accrue with the implementation of the system. Whatever the final form of the agreement, both parties have significant reasons to ensure its success.
15.7 Agents and Multiparty Negotiations Hospital
Computer Company
Working system Profitability
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Negotiations: Author Hal Stack for Chelst and Canbolat The negotiations examined thus far have been two-party negotiations
carried out directly. Many negotiations, however, are conducted by agents or third parties. Agents can bring specialized knowledge and expertise to the table.
Think of the agent negotiating on behalf of an athlete or the real estate agent representing the seller of a house. They understand their industry, its rules and
regulations, and market values, and they may possess far more information about the negotiation than one or both of the parties involved. Agents, however,
must be compensated. This means that the bargaining zone between a buyer and a seller is reduced when an agent is involved. More important, an individual
employing an agent should be aware of the agent’s goals and interests relative to their own interests. While the seller is interested in selling the home at the
highest price, the real estate agent’s interest is for the buyer and the seller to reach an agreement. Since the seller’s agent typically gets half of the 6 percent
commission, each additional 1,000 in the sale price is worth only 30 to the agent. Understanding the agent’s incentive structure helps to inform the seller’s
bargaining strategy.
Negotiations can also involve more than two parties, a phenomenon that is becoming more common within and among organizations, involving budget
negotiations, product teams, regulatory decisions, or treaty negotiations. Consider, for example, the different stakeholders involved in the congressional
tobacco negotiations. They included state attorneys general, the tobacco companies, tobacco growers, the American Lung Association, the American
Cancer Association, the FDA, the Clinton administration, and various members of Congress.
Multiparty negotiations typically make it more difficult to reach an agreement. They complicate social interactions, increase information processing
demands, and can lead to formation of coalitions. Coalitions enable the coalition partners to have a greater influence over outcomes, often to the disadvantage of
other groups and the overall organization.
To effectively manage these negotiations, the parties should use the same interest-based problem-solving process as in two-party negotiations, but they
should be aware of the traps often used to simplify the process of reaching agreement. A common approach is majority vote. While majority rule is easy and
efficient, it provides little opportunity or reason to learn of others’ interests and priorities. Without this information, it is harder to tradeoff issues and find
integrative agreements. A better approach is to strive for unanimous agreement. While time consuming, unanimous agreement forces the parties to find tradeoffs
Increased net revenue Future sales to health systems
System in place quickly Tested generic data entry software
Reputation Reputation
Staff acceptance and use of system Staff acceptance and use of system
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Negotiations: Author Hal Stack for Chelst and Canbolat that will satisfy the interests of all parties. While majority rule may make sense
because it helps to forestall an impasse, it should be avoided whenever possible. Another consideration is how to organize the discussion. There is a
natural tendency to address issues serially; issues are considered individually and not visited again once the group has moved on to a new topic. This strict
issue-by-issue agenda limits the parties’ abilities to discuss issues simultaneously, which enables the identification of beneficial tradeoffs. To
minimize this, keep the agenda itself open to discussion and be willing to reconfigure it if doing so will facilitate beneficial tradeoffs.
A key challenge in multiparty negotiations is the formation of coalitions. Coalitions occur when parties seek to add the resources or the support of others
to increase the likelihood of achieving their individual outcomes. While coalitions are one way otherwise weak group members can marshal a greater
share of resources, they are inherently unstable. They often lead to no agreement or agreements that are not in the best interest of the organization. The 2003
World Trade Organization negotiations in Cancun, Mexico, collapsed when the United States and its usual partners from the developed nations were not
prepared to respond seriously to the concerns of developing nations that they reduce farm subsidies.
Instead of working to reach an integrative agreement that serves all groups and the best interests of the overall organization, coalitions try to get
what they want using majority rule. This reinforces the importance of requiring unanimity or consensus rather than majority rule in any multiparty negotiations.
Effective multiparty negotiations require coordination, establishment of decision rules, and anticipation of the possible formation of coalitions.
15.8 Negotiating Across Borders
