Monday, October 18, 2021

Heuristic: Airing dirty underwear in public is toxic

Another barrier to effective negotiations from Bazerman and Neale

Most negotiations involve two parties with conflicting goals.

Picture a company that is reasonably successful in its market at the current time. Consequently, it is profitable.

Now consider the workers who believe that they should have a larger share of that profit.

Traditional collective bargaining (unions) will survey their membership to create a list of priorities for negotiations. Then they will put together a list of "demands" and present them to management.

Since it is generally believed that all negotiations end up somewhere in-the-middle, the increase in wages, for instance, is doubled or tripled before being published as a "demand".

For example:

Let's say a union shop is making $20 an hour. Furthermore, suppose the membership looks at the recent rate-of-inflation and determine that they want increases of 10% a year for the life of the contract (nominally three years). And while the want 10% most of them would settle for 7%.

From Management's perspective, while they would be more profitable if they gave NO wage increases, they are mature enough to realize that they will have excessive employee turnover. That turnover is expensive from both a recruiting, training and quality standpoint. 

So Management is reconciled to the fact that they will have to make SOME wage concessions. Perhaps even 10% a year.

To beat a dead horse, the members of the union want 10%, expect 7% but will grudgingly settle for 5%. Management realizes they have to make some concessions and would accept 10% if linked with other efficiency gains.

No problem, right? There is 5% of overlap between the minimum the union will settle for and what Management can afford.

What really happens

Since the union bargainers believe that you never get all of what you ask for, they "demand" is that the company commit to raises of 30% the first year (to make up for inflation not comprehended in the years covered by the previous contract), 20% the second year and 10% the third year. That is an average increase of 20% a year or exactly twice as much as the union's true target.

The fatal flaw is that the union invariably PUBLISHES their demands. By making the information public knowledge, they set themselves up into a win-lose scenario.

Any potential gains from gaining public support are vastly outweighed by the fact that the potential for public loss-of-face causes negotiators to entrench and to not consider alternative positions. The negotiations lock-up.

A negotiation that had the potential for smooth and harmonious interactions becomes toxic and riddle with acrimony and rancor.


  1. The problem with Union's is that they are invariably led NOT by competent people but by people who are inherently political. The same type of people who gravitate toward governmental politics. They seldom have any useful real world skills to go along with their lust for power over others. That is a dangerous that is on display virtually every time a union decides it's time to go on strike.

  2. I've never had a union job and I'm not going to pretend I know beans,,but I do have a question.
    The car companies and their employees were a big news item often. I'm talking back in the seventies and eighties,and I remember thinking they were hurting themselves by forcing so much money out of the manufacturers. It just seemed to me they were costing them so much money that it made it hard for them to develop and design and stay competitive.

    Anyone have anything that would help me know if that is wrong?

    I've been wanting to ask about that for decades.

    1. The companies were run by bean-counters who were obsessed with their performance on Wall Street. It was all about the quarterly profit reports.

      Even to the point of running overtime on weekends to push as many units out-the-door so they were booked as profit. They scoured the back-lots for units waiting for repair and ran the repair garage around-the-clock all so they could book another $30k-to-100K per unit that went out the back gate.

      The unions used pattern bargaining. They picked the most vulnerable (or greedy) company and wrestled them down to the floor. The other two makers quickly signed the "National" agreement. Every local had their own, supplemental agreement.

      The union was also strategic. They focused on wage issues with Chrysler who had less labor content in their products because they purchased more outside parts. They focused on GM for lay-off benefits because GM had deeper pockets and steadier sales.

      When the market was hot they demanded a lot. The threat of a strike and lost market share caused the manufacturers to roll over.

      Was it suicide for the unions to do that? Maybe. Maybe not.

      The management of the companies was egotistical to the point of blindness.

    2. "The companies were run by bean-counters who were obsessed with their performance on Wall Street. It was all about the quarterly profit reports."

      You said a mouthful there, Joe. The same thing happened to the oil business in the mid 1980's, and it took 15 years to recover as much as it ever will. And the same thing is happening right now with the Medical Care industry. Bean Counters know nothing about the principle of Value.

  3. This post is a gold nugget. I understand now why certain issues I've faced have blown up into disaster.

    I'm perfectly willing to negotiate in good faith, but it seems my opposite goes public, then gets entrenched in their position. Gravy sakes, that is so perfectly clear now.

    I crave clarity, and you delivered yet again.


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