Cqotiating bectrntta Lr Hom : Heats Mu ttipte EQUIVALENT SIMULTANEOUS OFFers (IMIESOs) When setting the agenda for negotiation, you can narrow the focus on specific issues, identify alternatives, and establish the criteria for evaluating those alternatives. By making SUTe there are a number of alternatives, you increase the odds that the other side will be satisfied with one of them, and that an agreement will be reached. Multiple equivalent simultaneous offers (MESOs) provide a versatile strategy that allows you to create a scoring system to compare qualitatively different issues so that the best option can be identified 5 ‘The MESO technique involves three basic steps: (1) Identify and then prioritize three or more issues in the negotiation, determining their weights or relative value to the parties. (2) Identify the different outcomes or options available for each issue, establishing one as the standard and thus worth 100 “points,” and then consider the relatice value of each other option by comparison to that standard. (3) Create three dif- ferent but approximately equal offers by multiplying the weights by the values and generating the point total of the offer. Why three different offers? Research indicates that parties can effectively compare three offers without feeling overwhelmed by too" ‘many options."® Now let’s apply the MESO strategy to a situation in which an employee is preparing for a meeting with her employer abouta possible career change. This situ- ation is summarized in Table 63 and you may find it helpful to refer to the table as you read the following description ‘The employee knows that there are various options to be discussed at the meet- ing. She wants to quantify the options and determine which are most important to her, and then determine how the different options will impact their relative impor- tance. First she identifies what she believes to be the four most important issues: compensation, promotion opportunity, job responsibilities, and job location. She also assigns weights to each of the four issues: compensation at 40%, promotion opportu nity at 30%, responsibilities at 20%, and location for the new position at 10%. Second, he identifies possible alternative outcomes for each issue and assigns a rela value to each. For example, the compensation could range from $155,000 to $200,000. Also, being located at an office within her hometown has mote value to her than being assigned to a neighbosing state. Third, she creates three packages of options, which arc of approximate equal value in terms of points. The first, MESO #1, com- bines the highest compensation with lower values of the other three options. MESO #2 and MESO #3 include lower compensation with higher values of the other three ‘options. Using this matrix, the employee will be able to emphasize the options that are most important to her and give the employer a number of opportunities to come toa satisfactory agreement.Table 6.3 Calculating MESO Options MESO #1 MESON +s20000 + simiom sSmumwinconaa + Nucee Woot Vawe — earovees wou oo wo emnce wv x¥) envy 100 sop % 5 2 ‘opportunity Ltnhome office 200 2. Inregion B 0 3.Inanother state Responsibilities 1. Manage a unit 200 2. Manage an office 3. Supervising other cemployess| Location 1. Hometown 2. Home atfice 75 pts (company) 3. Another state Spits Pickage values 725 pts 725 pt. 725pts ‘Sour Adapted from Visora Husted Medvecand Adam D Galinsy "Pang More onthe Table How Maing Multiple Otes Can Increase tho Fina Val of3he Del” Neotton 8 (Api 25) 4-6 This strategy enables the employee to frame three offers of approximately equal value to the employer, all of which represent approximately equal value to her ( points). The strategy also enables her to anchor the negotiation in her favor! How? Because she set high and low anchor points on four issues. The émployer can, of course, reject all three options, add additional issues, or change the values assigned to options. However, if that occurs, the employee has gained valuable information about the employer's interests, and it is very likely that some version of a MESO option will be accepted by both parties. Thus the MESO strategy has provided a valuable tool for shaping the negotiation process. In general, a MESO strategy might be successful in the following instances: 1. When the other party has made a first offer and you need to reframe the negoti- ation in terms of the issues and options that are important to youand his employees, due to fiscal realities the employer had no choice but to demand that the employees make economic concessions in health care coverage. Over the years and through mostly good economic times, the employees had entered into each new contract negotiation with the understanding that all prior benefits would stay’in place and that the negotiation was only about wage increases or new benefits. But a downturn in the economy and the rising cost of health care insurance had stretched the employer's resources to the limit. To avoid layoffs and actual wage decreases, the employer believed the union should be forced to accept only modest ‘wage increases and a reduction of employee benefits. “The negotiating pattern established by this employer and the union was typical distributive bargaining. The parties would start with basic ground rules, including, agreement to negotiate all noneconomic issues before tackling economic issues. The ‘employer would propose modest changes in operational ateas, which the union would object to just iong enough to justify multiple negotiating sessions. This set the stage for the union to bring in its “economic package,” which was always much higher than the union anticipated receiving. The employer would offer much less than he believed he would have to pay to reach agreement. ‘The employer believed that in order to get the union to accept lesser economic benefits, he would have to dramatically change the negotiating process the parties had followed for years. His strategy was to come to-the initial meeting with a com- plete economic and noneconomic package, which included significant operational changes to the grievance and arbitration process in the coritract as well as no increase in wages for the first year of the multiyear contract and very modest increases in the subsequent years. More importantly, the economic package pro- posed reducing and/or eliminating a number of employee benefits including eliminating or reducing annual bonuses based:on years of service, eliminating free family health care coverage, reducing the benefits of the health care coverage, reducing the number of paid holidays, eliminating a clothing and equipment allowance, restricting the use of paid sick leave, and increasing employee contri- butions to the pension plan. The employer proposed in his ground rules that the parties agree on economic issues before starting on nonecoriomic issues. And the employer's negotiator let the union know that he had a complete proposal to give them when they were ready. The initial reaction from the union’s negotiating team was surprise, quickly fol- lowed by annoyance. The union’s negotiator was not prepared to make an economic proposal and did not want to change the way the parties had negotiated in the past. He did not know why the employer wanted to start with the economic package, so he was unwilling to agree to the ground rules. Howevei, the union members on his, negotiating team wanted to know what was in the employer's proposal. Seeing it sitting on the table across from them was just too tempting. By the end of the day, the parties had agreed to discuss economic issues first before going on to noneco- nomic issues. ‘The initial proposal from the employer was certainly what the union could have expected—that is, far below what the employer could anticipate the union would accept. However, it became clear after more than two months of negotiating that the union was not taking the employer's proposal seriously. The employer hoped to have a contract in place when the existing contract expired at the end of the calendar year.2. When the other party isa novice or unskilled negotiator who cannot easily pack- age and compare all the issues : 3. When you realize that you are in a lower power position and need a strategy that might level the playing field In the example just discussed, the employee might easily believe sheis in a lower power position than her employer, especially in terms of discussing salary, but the MESO strategy is likely one she would feel more comfortable presenting, Why might the MESO strategy appeal to a negotiator? When one negotiator pre- sents options of equal value instead of a single fixed position, the second party is likely to respond positively to the strategy because, for one thing, people like having, choices—they generally prefer being able to choose among options rather than being, asked to “accept or reject” one offer. Moreover, one of the MESO options is likely to have greater perceived value to the second party, and since they all are of equal value to the offering party, the preferred option may easily be acceptable to both, or atleast provide a starting point to develop a settlement. Another reason MESO is successful is because most negotiators prefer to have input into a settlement. This strategy enables them to choose a preferred option or at least to provide additional issues and/or change the point values of options—all of which are significant inputs.” ‘The MESO strategy, however, does have disadvantages that you should consider before adopting it. First, itis a somewhat complex strategy that requires that several legitimate issues and options for each be developed. Second, astute opponents may try to “cherry-pick” the options they prefer for each issue and create their own MESO alternatives, which you may find unacceptable. In our example (refer to Table 6.3), the employer might respond with, “I prefer the §155,000 salary, promotion in another state, supervising other employees, and moving to another state”—which would, have a combined point value of only 35 and thus not be nearly as attractive to the employee. The employee in that situation would need to respond with a new set of MESO combinations. A third potential disadvantage of the MESO strategy is the need fo reveal much about one’s own interests, pethaps more than is desired. 8 THe Economic Matrix ‘The MESO strategy can be taken one step further when a negotiation situation involves several issues of economic value (usually approximate dollar values) and a fixed amount of resources available for the parties to negotiate. By estimating the dollar value of each option for each issue, the subjective assigning of points required in the MESO strategy is eliminated. The MESO strategy is likely to be more useful if some issues (such as location and responsibilities, in our previous example) are not easily reduced to dollar amounts. The economic matrix strategy, however, if appropri- ate, offers the potential advantages of the MESO strategy and the advantage of easier, direct comparisons of options measured by dollars instead of points. In many cases, longtime negotiating, partners develop bargaining patterns that can facilitate reaching an agreement quickly. However, such patterns developed after years of interactions can also work against the parties when one or the other wishes to change the bargaining relationship. In a recent negotiation between an employerAfter several months with no progress, the employer's negotiator decided that some- thing drastic had to be done to get the union’s attention. A totally new strategy was needed, and thus the negotiator created a new strat egy called the economic matrix. In general, the strategy contains three core elements: 1. Bringing together several economic issues into one proposal 2. Limiting the total value of the economic issues, so that an increase in one requires a decrease in another 3. Providing options of equal value to the other party. Therefore the economic matrix strategy, like the MESO strategy, contains three Potential advantages. First, instead of trying to negotiate the economic issues indi- vVidually, the focus is shifted to the fofal value or cost of the economic issues. Second, the other party is likely to respond more positively because generally people prefer having choices, and one of the options might be of greater perceived value to the other party, whereas the first party (who created the matrix) doesn’t have a prefer. ence among the choices and is only concemed with the total value or cost associated with each option. Third, a matrix of options gives the other party significant input into the negotiated decision—even if it is only choosing, among options. In this par- ticular example, the total cost represented a decrease from the current value of the employee benefits, but the same strategy could also be utilized if the total repre~ sented an increase. ‘The employer's negotiator put together an economic matrix (see Figure 6.2), Which in essence was a review of the economic variables on the table, and a fore cast of future conditions to show the union why economic concessions were nec- essary: He also identified the amount of savings from the employees to balance the budget. Thén the employer laid out a number of options on how to reach that goal in a matrix design with each option costed-out for the union negotiators to ana- \yze. The employer's negotiator gave the matrix to the union's negotiating team. and explained that the employer would Tet the union decide where to make the cuts to reach the necessary savings. The parties caucused and when they returned to the negotiations, the mood of the union's negotiating team was significantly different. Seeing the anticipated cuts in benefits laid out as choices in a matrix had a sober- ing effect on the union. [t became clear that the employer's intent to negotiate signif- icant reductions in benefits was the reason he insisted on discussing the economic issues first, why he had a complete proposal at the initial negotiations, and why he had initially proposed such a lean total package. 4 The union ignored the employer's economic matrix at the next negotialing ses- sion, so at the subsequent session the employer proposed the matrix again, this time with some of the options removed. There was only one more negotiating session after that one. Then the union’s chief negotiator and the union president began “back room” meetings with the employer's CFO and an agreement was reached, ‘The agreement froze wages for one year and then allowed a modest 2% increase in subsequent years. All employee benefits stayed in place, except that in the second year of the contract the employees began to contribute to the cost of health insurance premiums and their contributions would increase each year of the contract after thatFigure 6.2 An Employer's Economic Mat ‘November 15, 2008 EMPLOYER ECONOMIC PROPOSAL, Employee personnel average increase over four years was 52% Employer average goss revenue increase a that came period was 25%. And, the CPLaverage increase was 2.15%, TT personne oats ha gone upto match rene increases of 25% it would have reduced ecuring oO eee 400/90. To dow the growth ofthe employee personnel cost, personnel cots should be reduced by Se tbann Sine the growth occurred ver a four-year period four-year contra would Be nest appropriate Te ee gcons of nearing cont ofan average of approximately $1,300,000 a year. The Union was given the pun to selec reductions inte categorie recognizing thst any increases would abo have fo bei oy eae fhat na cost ving eaise (COLA) would increase the need for more concessions, An example of) ‘what the Union mighthave selected appearsbeiow: ee es Solsry/Annual| Fiealth Care Fringe Benahts [Yeart Year? Year3 Year [Bonus Options Options (HCO) Options (FBO) AB) 1LReduce annual 1. Reduce benefits 1. Eliminate equipment Mitoprincreases of health care allowance (employer by a% plan none year provide as needed) Stings $450,000 Savings Erving: $500,000 $1,000,000 2. liminate 2.Reduce benefits 2 Equipment FBo-2 anal ‘step’ Ofhesltheare allowance reduced | $500,000 increases Savings: plans over by 50% $900,000 foro years Stings $500,000 Sev: $250,000 perycar J.ForgoCOLA 3. mplojees con- 3. Vacation/haliday | HCO—3 FBO"3 of Pe Cost Tabute 15% for triple overtime {$750,000 $1,500,000 (2,400,000) family coverage eliminated Soin Swot: $750,000 $1,500,000 4 Fongo halfof 4 Employees con 4. Vacation/boliday SABA HCO COLA=1% trivute 50% for double overtime $1,200,000 $750,000 Sroing family coverage eliminated $1,200,000 Savings Savings: 51,500,000, $750,000 5. Employees con- 5. Eliminate clothing tribute 7% for allowance family coverage (employer provide savings: seneeded) Savings: $2,250,000, $860,000 6 Employees con- 6 Clothing allowance FHO—6 tribute 100% for reduced by 50% $950.00 family coverage Savings: Savings: $450,000 $3,000,000 ‘Total projected 2s sis st SIZ savings by year mimi mil, needed wet year 25% savings on Family health coverage oft his reduction 100