Causes of Conflict in Organizations How does conflict arise in organizations? Here we will examine two aspects of the conflict process. First, several factors that have been found to contribute to conflict will be identified. After this, a model of conflict processes in organizations will be reviewed. Why Organizations Have So Much Conflict A number of factors are known to facilitate organizational conflict under certain circumstances. In summarizing the literature, Robert Miles points to several specific examples. R. Miles, Macro Organizational Behavior (Glenview, Ill.: Scott, Foresman, 1980). These are as follows: Task Interdependencies. The first antecedent can be found in the nature of task interdependencies . In essence, the greater the extent of task interdependence among individuals or groups (that is, the more they have to work together or collaborate to accomplish a goal), the greater the likelihood of conflict if different expectations or goals exist among entities, in part because the interdependence makes avoiding the conflict more difficult. This occurs in part because high task interdependency heightens the intensity of relationships. Hence, a small disagreement can very quickly get blown up into a major issue. Status Inconsistencies. A second factor is status inconsistencies among the parties involved. For example, managers in many organizations have the prerogative to take personal time off during workdays to run errands, and so forth, whereas nonmanagerial personnel do not. Consider the effects this can have on the nonmanagers’ view of organizational policies and fairness. Jurisdictional Ambiguities. Conflict can also emerge from jurisdictional ambiguities —situations where it is unclear exactly where responsibility for something lies. For example, many organizations use an employee selection procedure in which applicants are evaluated both by the personnel department and by the department in which the applicant would actually work. Because both departments are involved in the hiring process, what happens when one department wants to hire an individual, but the other department does not? Communication Problems. Suffice it to say that the various communication problems or ambiguities in the communication process can facilitate conflict. When one person misunderstands a message or when information is withheld, the person often responds with frustration and anger. Dependence on Common Resource Pool. Another previously discussed factor that contributes to conflict is dependence on common resource pools. Whenever several departments must compete for scarce resources, conflict is almost inevitable. When resources are limited, a zero-sum game exists in which someone wins and, invariably, someone loses. Lack of Common Performance Standards. Differences in performance criteria and reward systems provide more potential for organizational conflict. This often occurs because of a lack of common performance standards among differing groups within the same organization. For example, production personnel are often rewarded for their efficiency, and this efficiency is facilitated by the long-term production of a few products. Sales departments, on the other hand, are rewarded for their short-term response to market changes—often at the expense of long-term production efficiency. In such situations, conflict arises as each unit attempts to meet its own performance criteria. Individual Differences. Finally, a variety of individual differences , such as personal abilities, traits, and skills, can influence in no small way the nature of interpersonal relations. Individual dominance, aggressiveness, authoritarianism, and tolerance for ambiguity all seem to influence how an individual deals with potential conflict. Indeed, such characteristics may determine whether or not conflict is created at all. A Model of the Conflict Process Having examined specific factors that are known to facilitate conflict, we can ask how conflict comes about in organizations. The most commonly accepted model of the conflict process was developed by Kenneth Thomas. K. Thomas, “Conflict and Conflict Management,” In M. D. Dunnette, ed., Handbook of Industrial and Organizational Psychology (Chicago: Rand McNally, 1976). This model, shown in , consists of four stages: (1) frustration, (2) conceptualization, (3) behavior, and (4) outcome. Stage 1: Frustration. As we have seen, conflict situations originate when an individual or group feels frustration in the pursuit of important goals. This frustration may be caused by a wide variety of factors, including disagreement over performance goals, failure to get a promotion or pay raise, a fight over scarce economic resources, new rules or policies, and so forth. In fact, conflict can be traced to frustration over almost anything a group or individual cares about. Stage 2: Conceptualization. In stage 2, the conceptualization stage of the model, parties to the conflict attempt to understand the nature of the problem, what they themselves want as a resolution, what they think their opponents want as a resolution, and various strategies they feel each side may employ in resolving the conflict. This stage is really the problem-solving and strategy phase. For instance, when management and union negotiate a labor contract, both sides attempt to decide what is most important and what can be bargained away in exchange for these priority needs. Stage 3: Behavior. The third stage in Thomas’s model is actual behavior . As a result of the conceptualization process, parties to a conflict attempt to implement their resolution mode by competing or accommodating in the hope of resolving problems. A major task here is determining how best to proceed strategically. That is, what tactics will the party use to attempt to resolve the conflict? Thomas has identified five modes for conflict resolution, as shown in . These are (1) competing, (2) collaborating, (3) compromising, (4) avoiding, and (5) accommodating. Also shown in the exhibit are situations that seem most appropriate for each strategy. A Model of the Conflict Process Source: Adapted from Kenneth Thomas, “Conflict and Conflict Management,” in M. D. Dunnette (ed.), Handbook of Industrial and Organizational Behavior (New York: Wiley, 1976), p. 895. (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) The choice of an appropriate conflict resolution mode depends to a great extent on the situation and the goals of the party. This is shown graphically in . According to this model, each party must decide the extent to which it is interested in satisfying its own concerns—called assertiveness —and the extent to which it is interested in helping satisfy the opponent’s concerns—called cooperativeness . Assertiveness can range from assertive to unassertive on one continuum, and cooperativeness can range from uncooperative to cooperative on the other continuum. Once the parties have determined their desired balance between the two competing concerns—either consciously or unconsciously—the resolution strategy emerges. For example, if a union negotiator feels confident she can win on an issue that is of primary concern to union members (e.g., wages), a direct competition mode may be chosen (see upper left-hand corner of ). On the other hand, when the union is indifferent to an issue or when it actually supports management’s concerns (e.g., plant safety), we would expect an accommodating or collaborating mode (on the right-hand side of the exhibit). Five Modes of Resolving Conflict Conflict-Handling Modes Appropriate Situations Source: Adapted from K. W. Thomas, “Toward Multidimensional Values in Teaching: The Example of Conflict Behaviors,” Academy of Management Review 2 (1977), Table 1, p. 487. Competing When quick, decisive action is vital—e.g., emergencies On important issues where unpopular actions need implementing—e.g., cost cutting, enforcing unpopular rules, discipline On issues vital to company welfare when you know you’re right Against people who take advantage of noncompetitive behavior Collaborating When trying to find an integrative solution when both sets of concerns are too important to be compromised When your objective is to learn When merging insights from people with different perspectives When gaining commitment by incorporating concerns into a consensus When working through feelings that have interfered with a relationship Compromising When goals are important but not worth the effort or potential disruption of more assertive modes When opponents with equal power are committed to mutually exclusive goals When attempting to achieve temporary settlements to complex issues When arriving at expedient solutions under time pressure As a backup when collaboration or competition is unsuccessful Avoiding When an issue is trivial, or when more important issues are pressing When you perceive no chance of satisfying your concerns When potential disruption outweighs the benefits of resolution When letting people cool down and regain perspective When gathering information supersedes immediate decision When others can resolve the conflict more effectively When issues seem tangential or symptomatic of other issues Accommodating When you find you are wrong—to allow a better position to be heard, to learn, and to show your reasonableness When issues are more important to others than yourself—to satisfy others and maintain cooperation When building social credits for later issues When minimizing loss when you are outmatched and losing When harmony and stability are especially important. When allowing subordinates to develop by learning from mistakes. (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Approaches to Conflict Resolution Source: Adapted from Kenneth Thomas, “Conflict and Conflict Management,” in M. D. Dunnette (ed.), Handbook of Industrial and Organizational Behavior (New York: Wiley, 1976), p. 900. (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) What is interesting in this process is the assumptions people make about their own modes compared to their opponents’. For example, in one study of executives, it was found that the executives typically described themselves as using collaboration or compromise to resolve conflict, whereas these same executives typically described their opponents as using a competitive mode almost exclusively. K. Thomas and L. Pondy, “Toward and Intent Model of Conflict Management Among Principal Parties,” Human Relations, 1967, 30, pp. 1089–1102. In other words, the executives underestimated their opponents’ concern as uncompromising. Simultaneously, the executives had flattering portraits of their own willingness to satisfy both sides in a dispute. Stage 4: Outcome. Finally, as a result of efforts to resolve the conflict, both sides determine the extent to which a satisfactory resolution or outcome has been achieved. Where one party to the conflict does not feel satisfied or feels only partially satisfied, the seeds of discontent are sown for a later conflict, as shown in the preceding . One unresolved conflict episode can easily set the stage for a second episode. Managerial action aimed at achieving quick and satisfactory resolution is vital; failure to initiate such action leaves the possibility (more accurately, the probability) that new conflicts will soon emerge. Why do organizations have so much conflict? Describe the process of the conflict model. How does conflict arise in organizations? Conflict in organizations can be caused by task interdependencies, status inconsistencies, jurisdictional ambiguities, communication problems, dependence on common resource pools, lack of common performance standards, and individual differences. A model of the conflict process follows four stages. Conflict originates (stage 1) when an individual or group experiences frustration in the pursuit of important goals. In stage 2, the individual or group attempts to understand the nature of the problem and its causes. In stage 3, efforts are made to change behavioral patterns in such a way that the desired outcome, or stage 4, is achieved. Assertiveness Can range from assertive to unassertive on one continuum. Cooperativeness The extent to which someone is interested in helping satisfy the opponent’s concerns. Frustration May be caused by a wide variety of factors, including disagreement over performance goals, failure to get a promotion or pay raise, a fight over scarce economic resources, new rules or policies, and so forth. Jurisdictional ambiguities Situations where it is unclear exactly where responsibility for something lies. Status inconsistencies Situations where some individuals have the opportunity to benefit whereas other employees do not. Consider the effects this can have on the nonmanagers’ view of organizational policies and fairness. Task interdependencies The greater the extent of task interdependence among individuals or groups, the greater the likelihood of conflict if different expectations or goals exist among entities, in part because the interdependence makes avoiding the conflict more difficult.

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Resolving Conflict in Organizations When and how do you negotiate, and how do you achieve a mutually advantageous agreement? We have discovered that conflict is pervasive throughout organizations and that some conflict can be good for organizations. People often grow and learn from conflict, as long as the conflict is not dysfunctional. The challenge for managers is to select a resolution strategy appropriate to the situation and individuals involved. A review of past management practice in this regard reveals that managers often make poor strategy choices. As often as not, managers select repressive or ineffective conflict resolution strategies. Common Strategies that Seldom Work At least five conflict resolution techniques commonly found in organizations prove to be ineffective fairly consistently. Miles, op. cit. In fact, not only do such techniques seldom work—in many cases, they actually serve to increase the problem. Nonetheless, they are found with alarming frequency in a wide array of business and public organizations. These five ineffective strategies are often associated with an avoidance approach and are described below. Nonaction. Perhaps the most common managerial response when conflict emerges is nonaction —doing nothing and ignoring the problem. It may be felt that if the problem is ignored, it will go away. Unfortunately, that is not often the case. In fact, ignoring the problem may serve only to increase the frustration and anger of the parties involved. Administrative Orbiting. In some cases, managers will acknowledge that a problem exists but then take little serious action. Instead, they continually report that a problem is “under study” or that “more information is needed.” Telling a person who is experiencing a serious conflict that “these things take time” hardly relieves anyone’s anxiety or solves any problems. This ineffective strategy for resolving conflict is aptly named administrative orbiting . Due Process Nonaction. A third ineffective approach to resolving conflict is to set up a recognized procedure for redressing grievances but at the same time to ensure that the procedure is long, complicated, costly, and perhaps even risky. The due process nonaction strategy is to wear down the dissatisfied employee while at the same time claiming that resolution procedures are open and available. This technique has been used repeatedly in conflicts involving race and sex discrimination. Secrecy. Oftentimes, managers will attempt to reduce conflict through secrecy. Some feel that by taking secretive actions, controversial decisions can be carried out with a minimum of resistance. One argument for pay secrecy (keeping employee salaries secret) is that such a policy makes it more difficult for employees to feel inequitably treated. Essentially, this is a “what they don’t know won’t hurt them” strategy. A major problem of this approach is that it leads to distrust of management. When managerial credibility is needed for other issues, it may be found lacking. Character Assassination. The final ineffective resolution technique to be discussed here is character assassination . The person with a conflict, perhaps a woman claiming sex discrimination, is labeled a “troublemaker.” Attempts are made to discredit her and distance her from the others in the group. The implicit strategy here is that if the person can be isolated and stigmatized, she will either be silenced by negative group pressures or she will leave. In either case, the problem is “solved.” Strategies for Preventing Conflict On the more positive side, there are many things managers can do to reduce or actually solve dysfunctional conflict when it occurs. These fall into two categories: actions directed at conflict prevention and actions directed at conflict reduction. We shall start by examining conflict prevention techniques, because preventing conflict is often easier than reducing it once it begins. These include: Emphasizing organization-wide goals and effectiveness. Focusing on organization-wide goals and objectives should prevent goal conflict. If larger goals are emphasized, employees are more likely to see the big picture and work together to achieve corporate goals. Providing stable, well-structured tasks. When work activities are clearly defined, understood, and accepted by employees, conflict should be less likely to occur. Conflict is most likely to occur when task uncertainty is high; specifying or structuring jobs minimizes ambiguity. Facilitating intergroup communication. Misperception of the abilities, goals, and motivations of others often leads to conflict, so efforts to increase the dialogue among groups and to share information should help eliminate conflict. As groups come to know more about one another, suspicions often diminish, and greater intergroup teamwork becomes possible. Avoiding win-lose situations. If win-lose situations are avoided, less potential for conflict exists. When resources are scarce, management can seek some form of resource sharing to achieve organizational effectiveness. Moreover, rewards can be given for contributions to overall corporate objectives; this will foster a climate in which groups seek solutions acceptable to all. These points bear a close resemblance to descriptions of the so-called Japanese management style. In Japanese firms, considerable effort is invested in preventing conflict. In this way, more energy is available for constructive efforts toward task accomplishment and competition in the marketplace. Another place where considerable destructive conflict is prevented is Intel. Sustainability and Responsible Management: Constructive Conflict that Leads to Championships Dealing with conflict lies at the heart of managing any business. Confrontation—facing issues about which there is disagreement—is avoided only at a manager’s peril. Many issues can be postponed, allowed to fester, or smoothed over; eventually, they must be solved. They are not going to disappear. This philosophy not only applies to business but to sports dynamics as well. Take two NBA all-stars, Kobe Bryant and Shaquille O’Neal. Although they are world-renowned athletes now, when they first started in the NBA, there was plenty of conflict that could have caused their careers to take a much different path. In 1992, O’Neal was the first play taken in by the NBA draft, he dominated the court with his size and leadership from day one. Four years later, Kobe Bryant, the youngest player to start in the NBA was brought onto the same team: the Los Angeles Lakers. The two were not fast friends, and the trash talk started as Bryant publicly criticized his teammate—and continued for years. Ultimately in 1999, Phil Jackson was brought in to coach the LA Lakers, and his creative approach to their conflict changed everything. Instead of seeing this tension and ignoring it, or chastising the players for their feud, he used their skills to develop a new way of playing the game. O’Neal brought power and strength to the court, while Bryant was fast and a great shooter. Jackson developed a way of playing that highlighted both of these talents, and he built a supporting cast around them that brought out the best in everyone. The outcome: three NBA championships in a row. While many may have just ignored or tried to separate the two superstars, Jackson was innovative in his approach, saw the opportunity in using the conflict to create a new energy, and was able to build a very successful program. Questions: What was the key to the success for Phil Jackson and his team? How would you have approached the two players (or employees) that were in conflict and causing tension on your team? What strategies would have been important to employ with these two individuals to resolve the conflict? Sources: J. DeGraff, “3 Legendary Creative Conflicts That Sparked Revolutionary Innovation,” Huffington Post , September 26, 2017, https://www.huffingtonpost.com/entry/3-legendary-creative-conflicts-that-sparked-revolutionary_us_59c85a9de4b08d66155043d6; K. Soong, “‘I owe you an apology’: Shaquille O’Neal explains why he loves Kobe Bryant years after feud,” Washington Post , February, 17, 2017, https://www.washingtonpost.com/news/early-lead/wp/2018/02/17/i-owe-you-an-apology-shaquille-oneal-explains-why-he-loves-kobe-bryant-years-after-feud/?utm_term=.b9cca63b5761; M. Chiari, “Kobe Bryant Discusses Getting into Fist Fight with Shaquille O'Neal,” Bleacher Report , March 9, 2018, https://bleacherreport.com/articles/2763468-kobe-bryant-discusses-getting-into-fist-fight-with-shaquille-oneal. Strategies for Reducing Conflict Where dysfunctional conflict already exists, something must be done, and managers may pursue one of at least two general approaches: they can try to change employee attitudes, or they can try to change employee behaviors . If they change behavior, open conflict is often reduced, but groups may still dislike one another; the conflict simply becomes less visible as the groups are separated from one another. Changing attitudes, on the other hand, often leads to fundamental changes in the ways that groups get along. However, it also takes considerably longer to accomplish than behavior change because it requires a fundamental change in social perceptions. Nine conflict reduction strategies are shown in . The techniques should be viewed as a continuum, ranging from strategies that focus on changing behaviors near the top of the scale to strategies that focus on changing attitudes near the bottom of the scale. Physical separation. The quickest and easiest solution to conflict is physical separation. Separation is useful when conflicting groups are not working on a joint task or do not need a high degree of interaction. Though this approach does not encourage members to change their attitudes, it does provide time to seek a better accommodation. Use of rules and regulations. Conflict can also be reduced through the increasing specification of rules, regulations, and procedures. This approach, also known as the bureaucratic method, imposes solutions on groups from above. Again, however, basic attitudes are not modified. Limiting intergroup interaction. Another approach to reducing conflict is to limit intergroup interaction to issues involving common goals. Where groups agree on a goal, cooperation becomes easier. An example of this can be seen in recent efforts by firms in the United States and Canada to work together to “meet the Japanese challenge.” Use of integrators. Integrators are individuals who are assigned a boundary-spanning role between two groups or departments. To be trusted, integrators must be perceived by both groups as legitimate and knowledgeable. The integrator often takes the “shuttle diplomacy” approach, moving from one group to another, identifying areas of agreement, and attempting to find areas of future cooperation. Confrontation and negotiation. In this approach, competing parties are brought together face-to-face to discuss their basic areas of disagreement. The hope is that through open discussion and negotiation , means can be found to work out problems. Contract negotiations between union and management represent one such example. If a “win-win” solution can be identified through these negotiations, the chances of an acceptable resolution of the conflict increase. (More will be said about this in the next section of this chapter.) Third-party consultation. In some cases, it is helpful to bring in outside consultants for third-party consultation who understand human behavior and can facilitate a resolution. A third-party consultant not only serves as a go-between but can speak more directly to the issues, because she is not a member of either group. Rotation of members. By rotating from one group to another, individuals come to understand the frames of reference, values, and attitudes of other members; communication is thus increased. When those rotated are accepted by the receiving groups, change in attitudes as well as behavior becomes possible. This is clearly a long-term technique, as it takes time to develop good interpersonal relations and understanding among group members. Identification of interdependent tasks and superordinate goals. A further strategy for management is to establish goals that require groups to work together to achieve overall success—for example, when company survival is threatened. The threat of a shutdown often causes long-standing opponents to come together to achieve the common objective of keeping the company going. Use of intergroup training. The final technique on the continuum is intergroup training. Outside training experts are retained on a long-term basis to help groups develop relatively permanent mechanisms for working together. Structured workshops and training programs can help forge more favorable intergroup attitudes and, as a result, more constructive intergroup behavior. Conflict Reduction Strategies Source: Adapted from concepts in E. H. Neilsen, “Understanding and Managing Conflict,” in J. Lorsch and P. Lawrence, eds., Managing Group and Intergroup Relations (Homewood, III.: Irwin, 1972). (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Describe conflict strategies that seldom work. What are the strategies that managers can use that can reduce conflict? When and how do you negotiate, and how do you achieve a mutually advantageous agreement? Ineffective conflict resolution strategies include nonaction, administrative orbiting, due process nonaction, secrecy, and character assassination. Strategies for preventing conflict include (1) emphasizing organization-wide goals; (2) providing stable, well-structured tasks; (3) facilitating intergroup communication; and (4) avoiding win-lose situations. Strategies for reducing conflict include (1) physical separation, (2) use of rules and regulations, (3) limiting intergroup interaction, (4) use of integrators, (5) confrontation and negotiation, (6) third-party consultation, (7) rotation of members, (8) identification of interdependent tasks and superordinate goals, and (9) use of intergroup training. Negotiation is the process by which individuals and groups attempt to reach their goals by bargaining with others who can help or hinder goal attainment. Negotiation is helpful in three primary instances: (1) a conflict of interest, (2) the absence of clear rules or procedures, and (3) when there is a desire to avoid a fight. Distributive bargaining attempts to resolve a win-lose conflict in which resources are limited and each party wishes to maximize its share of these resources. Integrative bargaining occurs when both parties attempt to reach a settlement that benefits both sides in a dispute. Administrative orbiting An ineffective strategy for resolving conflict. Character assassination An ineffective resolution technique where the person with a conflict attempts to discredit and distance an individual from the others in the group. Due process nonaction The strategy of wearing down a dissatisfied employee while at the same time claiming that resolution procedures are open and available. This technique has been used repeatedly in conflicts involving race and sex discrimination. Negotiation The process by which individuals or groups attempt to realize their goals by bargaining with another party who has at least some control over goal attainment. Third-party consultation An outside consultant that serves as a go-between and can speak more directly to the issues because she is not a member of either group.

Business


Negotiation Behavior How do you recognize and respond to cultural differences in negotiation and bargaining strategies? We have seen the central role conflict plays in organizational processes. Clearly, there are some areas where managers would prefer to solve a problem between two parties before it results in high levels of conflict. This is usually accomplished through negotiation. Negotiation is the process by which individuals or groups attempt to realize their goals by bargaining with another party who has at least some control over goal attainment. Throughout the negotiation process, considerable skill in communication, decision-making, and the use of power and politics is required in order to succeed. We will consider several aspects of negotiation, including stages of negotiation, types of negotiation behavior, and the negotiation process itself. We begin with the reasons why people engage in negotiation and bargaining in the first place. Stages of Negotiation In general, negotiation and bargaining are likely to have four stages. Although the length or importance of each stage can vary from situation to situation or from one culture to another, the presence and sequence of these stages are quite common across situations and cultures. J. Graham, “The Influence of Culture on Business Negotiations,” Journal of International Business Studies, Spring 1985, pp. 81–96. Non-task time. During the first stage, the participants focus on getting to know and become comfortable with each other and do not focus directly on the task or issue of the negotiation. In cultures such as ours, this stage is often filled with small talk. However, it is usually not very long and is not seen as important as other stages. North Americans use phrases such as “Let’s get down to business,” “I know you’re busy, so let’s get right to it,” and “Let’s not beat around the bush.” However, in other cultures such as Mexico or South Korea, the non-task stage is often longer and of more importance because it is during this stage the relationship is established. In these cultures, it is the relationship more than the contract that determines the extent to which each party can trust the other to fulfill its obligations. Information exchange. The second stage of negotiations involves the exchange of background and general information. During this stage, participants may, for example, provide overviews of their company and its history. In Japan, this is an important stage because specific proposals or agreements must be considered and decided in the larger context. The information exchanged during the second stage provides this larger context. Influence and persuasion. The third stage involves efforts to influence and persuade the other side. Generally, these efforts are designed to get the other party to reduce its demands or desires and to increase its acceptance of your demands or desires. There are a wide variety of influence tactics, including promises, threats, questions, and so on. The use of these tactics as well as their effectiveness is a function of several factors. First, the perceived or real power of one party relative to another is an important factor. For example, if one party is the only available supplier of a critical component, then threatening to go to a new supplier of that component unless the price is reduced is unlikely to be an effective influence tactic. Second, the effectiveness of a particular influence tactic is also a function of accepted industry and cultural norms. For example, if threats are an unacceptable form of influence, then their use could lead to consequences opposite from what is desired by the initiator of such tactics. Closing. The final stage of any negotiation is the closing. The closing may result in an acceptable agreement between the parties involved or it may result in failure to reach an agreement. The symbols that represent the close of a negotiation vary across cultures. For example, in the United States, a signed contract is the symbol of a closed negotiation. At that point, “a deal is a deal” and failure to abide by the contents of the document is considered a breach of contract. In China, however, there is not the strong legal history or perspective that exists in the United States, and a signed document is not necessarily a symbol of the close of the negotiations. In fact, to some extent it symbolizes the beginning of the final points of negotiation. The signed document identifies the key issues that still need to be negotiated despite the fact that it may contain specific obligations for the involved parties concerning these issues. Quite simply, even though the document may obligate one party to deliver a product on a certain day and obligate the other party to pay a certain price for delivery, the document itself does not symbolize that the negotiation concerning these specifics is closed. Each of these four stages and the sequence described above are common across most situations and cultures. However, the length of time devoted to each stage, the importance of each stage, and the specific behaviors associated with each stage can vary by situation and certainly do vary by culture. Bargaining Strategies Within the context of these four stages, both parties must select an appropriate strategy that they believe will assist them in the attainment of their objectives. In general, two rather distinct approaches to negotiation can be identified. These are distributive bargaining and integrative bargaining . A comparison of these two approaches is shown in . Distributive Bargaining. In essence, distributive bargaining is “win-lose” bargaining. That is, the goals of one party are in fundamental and direct conflict with those of the other party. Resources are fixed and limited, and each party wants to maximize her share of these resources. Finally, in most cases, this situation represents a short-term relationship between the two parties. In fact, such parties may not see each other ever again. A good example of this can be seen in the relationship between the buyer and seller of a house. If the buyer gets the house for less money (that is, she “wins”), the seller also gets less (that is, she “loses”). This win-lose situation can also be seen in classes where the professor insists on grading on a specified curve. If your friends get an A, there are fewer As to go around, and your chances are diminished. Two Approaches to Bargaining Bargaining Characteristic Distributive Bargaining Integrative Bargaining Payoff structure Fixed amount of resources to be divided Variable amount of resources to be divided Primary motivation I win, you lose Mutual benefit Primary interests Opposed to each other Convergent with each other Focus of relationships Short term Long term (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Under such circumstances, each side will probably adopt a course of action as follows. First, each side to a dispute will attempt to discover just how far the other side is willing to go to reach an accord. This can be done by offering outrageously low (or high) proposals simply to feel out the opponent. For example, in selling a house, the seller will typically ask a higher price than she actually hopes to get (see ). The buyer, in turn, typically offers far less than she is willing to pay. These two prices are put forth to discover the opponent’s resistance price. The resistance price is the point beyond which the opponent will not go to reach a settlement. Once the resistance point has been estimated, each party tries to convince the opponent that the offer on the table is the best one the opponent is likely to receive and that the opponent should accept it. As both sides engage in similar tactics, the winner is often determined by who has the best strategic and political skills to convince the other party that this is the best she can get. Integrative Bargaining. Integrative bargaining is often described as the “win-win” approach. That is, with this technique, both parties try to reach a settlement that benefits both parties. Such an approach is often predicated on the belief that if people mutually try to solve the problem, they can identify some creative solutions that help everyone. A good example can be seen in bilateral trade negotiations between two nations. In such negotiations, participants usually agree that a trade war would hurt both sides; therefore, both sides attempt to achieve a balance of outcomes that are preferable to a trade war for both sides. In doing so, however, the trick is to give away as little as possible to achieve the balance. Ibid. Distributive Bargaining in Buying a Home (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) As shown previously in , this approach is characterized by the existence of variable resources to be divided, efforts to maximize joint outcomes, and the desire to establish or maintain a long-term relationship. The interests of the two parties may be convergent (noncompetitive, such as preventing a trade war between two countries) or congruent (mutually supportive, as when two countries reach a mutual defense pact). In both cases, bargaining tactics are quite different from those typically found in distributive bargaining. Here, both sides must be able and willing to understand the viewpoints of the other party. Otherwise, they will not know where possible consensus lies. Moreover, the free flow of information is required. Obviously, some degree of trust is required here too. In discussions, emphasis is placed on identifying communalities between the two parties; the differences are played down. And, finally, the search for a solution focuses on selecting those courses of action that meet the goals and objectives of both sides. This approach requires considerably more time and energy than distributive bargaining, yet, under certain circumstances, it has the potential to lead to far more creative and long-lasting solutions. The Negotiation Process The negotiation process consists of identifying one’s desired goals—that is, what you are trying to get out of the exchange—and then developing suitable strategies aimed at reaching those goals. A key feature of one’s strategy is knowing one’s relative position in the bargaining process. That is, depending upon your relative position or strength, you may want to negotiate seriously or you may want to tell your opponent to “take it or leave it.” The dynamics of bargaining power can be extrapolated directly from the discussion of power and indicate several conditions affecting this choice. For example, you may wish to negotiate when you value the exchange, when you value the relationship, and when commitment to the issue is high. In the opposite situation, you may be indifferent to serious bargaining. When to Negotiate Bargaining Strategies Characteristics of the Situation Negotiate “Take It or Leave It” * Indicates relative power distribution between the two parties; “low” indicates that one has little power in the situation, whereas “high” indicates that one has considerable power. Value of exchange High Low Commitment to a decision High Low Trust Level High Low Time Ample Pressing Power distribution * Low or balanced High Relationship between two parties Important Unimportant (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Once goals and objectives have been clearly established and the bargaining strategy is set, time is required to develop a suitable plan of action. Planning for negotiation requires a clear assessment of your own strengths and weaknesses as well as those of your opponents. Roy Lewicki and Joseph Litterer have suggested a format for preparation for negotiation. Ibid.; R. J. Lewicki, B. Barry, and D. M. Saunders, Essentials of Negotiation , (New York, N.Y., McGraw Hill, 2016), M. Baserman, “Why Negotiations Go Wrong,” Psychology Today, June 1986, pp. 54–58; J. Graham and Y. Sano, Smart Bargaining (New York: Harper & Row, 1989). According to this format, planning for negotiation should proceed through the following phases: Understand the basic nature of the conflict. What are the primary areas of agreement and disagreement? What exactly do you want out of this negotiation? What are your goals? How will you manage the negotiation process? Here, several issues should be recognized: Identify the primary issues to negotiate. Prioritize these issues. Develop a desirable package including these important issues. Establish an agenda. Do you understand your opponent? What are your opponent’s current resources and needs? What is the history of your opponent’s bargaining behavior? What patterns can you see that can help you predict her moves? Negotiating with the Referee Minnesota Gophers coach, Lindsay Whalen talks to a referee during a University of Minnesota Gophers game against Cornell University. Is this negotiation or persuasion? (Attribution: Laurie Schaul/ flickr/ Attribution 2.0 Generic (CC BY 2.0)) Research indicates that following such procedures does, in fact, lead to more successful bargaining. In , for example, we can see differences in both the planning approaches and the actual behaviors of successful and average negotiators. Preparation clearly makes a difference, as does interpersonal style during the actual negotiation. Differences Between Successful and Average Negotiations Negotiation Behavior Skilled Negotiators Average Negotiators Source: Based on data reported in N. J. Adler and A. Gunderson, International Dimensions of Organizational Behavior 5 th edition (Mason, OH: Cengage Learning, 2008), pp. 165–181. Before the Negotiation Number of options considered per issue 5.1 2.6 Portion of time spent focusing on anticipated areas of agreement instead of conflict 39% 11% During Negotiation Portion of time spent asking questions of opponent 21% 10% Portion of time spent in active listening 10% 4% Portion of time spent attacking opponent 1% 6% (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Cultural Differences in International Negotiations In view of the increased emphasis on international industrial competitiveness, it is important to understand what happens when the two parties to a negotiation come from different cultures or countries. A knowledge of cultural differences can assist the manager both in understanding the other party’s position and in striking the best possible deal given the circumstances. A good way to start this analysis is by recognizing how different cultures approach the art of persuasion; that is, how do people in different countries try to win you over to their side in a dispute? Although we cannot possibly examine all cultures, consider the results of a study of differences in persuasion techniques for North America, the Middle East, and the former Soviet Union. E. Glenn, D. Witmeyer, and K. Stevenson, “Cultural Styles of Persuasion,” International Journal of Intercultural Relations, Fall 1977, pp. 62–66. As can be seen in , Americans, Arabs, and Russians have significantly different approaches to persuasion. Americans tend to enter into a discussion emphasizing facts and figures, whereas Arabs may focus on emotions. The Russians may talk about ideals. Moreover, in a negotiation situation, the American is ever-conscious of deadlines, whereas the Arab takes a more casual approach, and the Russian is often unconcerned about time. Americans make small concessions early in the bargaining process to establish a relationship. Arabs, on the other hand, make concessions throughout the bargaining process, and the Russians try not to make any concessions at all. Clearly, this study has only highlighted trends, and exceptions can be easily found. Even so, a knowledge of such differences, however general, can greatly facilitate improved interpersonal relations and bargaining success for both parties. National Styles of Persuasion North Americans Arabs Russians Source: Adapted from J. S. Martin, Intercultural Business Communication, (Englewood Cliffs, N.J.: Pearson, 2005). Primary negotiating style and process Factual: appeals made to logic Affective: appeals made to emotions Axiomatic: appeals made to Ideals Conflict: opponent’s arguments countered with Objective facts Subjective feelings Asserted ideals Making concessions Small concessions made early to establish a relationship Concessions made throughout as a part of the bargaining process Few, if any, small concessions made Response to opponent’s concessions Usually reciprocate opponent’s concessions Almost always reciprocate opponent’s concessions Opponent’s concessions viewed as weakness and almost never reciprocated Relationship Short-term Long-term No continuing relationship Authority Broad Broad Limited Initial position Moderate Extreme Extreme Deadline Very important Casual Ignored (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) We can also examine the personal characteristics of negotiators from different countries. A study by John Graham focused on the key characteristics of negotiators from different countries, in this case the United States, Japan, Taiwan, and Brazil. Results of the study are shown in , which shows the rank order of the defining characteristics. Data supplied by John Graham, Graduate School of Management, University of California, Irvine. Cited in N. J. Adler and A. Gunderson, International Dimensions of Organizational Behavior 5 th edition (Mason, OH: Cengage Learning, 2008), p. 167. Again, we can see major differences in negotiators from around the world. Each has certain strengths, yet these strengths vary considerably from country to country. Americans are seen as prepared and organized, thinking well under pressure, whereas Japanese are seen as more dedicated and shrewd. Taiwanese negotiators were found in the study to be highly persistent and determined, working hard to win the opponent’s respect, and the Brazilians were amazingly similar to the Americans. Key Individual Characteristics of Negotiators (Rank Order) American Managers Japanese Managers Chinese Managers (Taiwan) Brazilian Managers Source: “Key Individual Characteristics of Negotiators” by John Graham, Graduate School of Management, University of California, Irvine. Preparation and planning skill Dedication to job Persistence and determination Preparation and planning skill Thinking under pressure Perceive and exploit power Win respect and confidence Thinking under pressure Judgment and intelligence Win respect and confidence Preparation and planning skill Judgment and intelligence Verbal expressiveness Integrity Product knowledge Verbal expressiveness Product knowledge Listening skill Interesting Product knowledge Perceive and exploit power Broad perspective Judgment and intelligence Perceive and exploit power Integrity Verbal expressiveness Competition (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Finally, we should note that negotiators from different countries differ markedly in their verbal and nonverbal communication patterns. In one study (again among Americans, representing North America; Japanese, representing East Asia; and Brazilians, representing South America), observers counted the number of times each negotiator did certain things within a given time limit. J. Graham, “The Influence of Culture on Business Negotiations,” Journal of International Business Studies, Spring 1985, pp. 81–96. The results are shown in . As can be seen, these negotiators use both verbal and nonverbal communication in very different ways. Note, for example, that Brazilians on average said “no” 83 times within a 30-minute segment, compared to 5 times for Japanese and 9 times for Americans. On the other hand, Japanese appealed to ideals and societal norms and simply sat in silence more than the others. Such differences affect not only the negotiation process but also, in many cases, the outcomes. That is, if a negotiator from one culture has annoyed or insulted the opponent (intentionally or unintentionally), the opponent may resist doing business with that person or may fail to offer attractive terms. Hence, again we see the value of better understanding cultural variations in negotiations, as in other matters. Communication Patterns during Negotiations for Three Cultures Tactic Japan United States Brazil Source: Based on data reported in J. Graham, “The Influence of Culture on Business Negotiations,” Journal of International Business Studies, Spring 1985, pp. 81–96. Verbal Communication Making promises 7 8 3 Making threats 4 4 2 Making recommendations 7 4 5 Appealing to ideals and norms 4 2 1 Giving a command 8 6 14 Saying “no” 5 9 83 Making initial concessions 6 7 9 Nonverbal Communication Periods of silence 6 3 0 Interrupting opponent 12 10 29 Looking directly into opponent’s eyes 1 3 5 Touching opponent 0 0 5 (Attribution: Copyright Rice University, OpenStax, under CC BY NC-SA-NC-SA 4.0 license) Concluding Thoughts about Conflict and Negotiations One of the classic negotiations approaches that you might encounter is the book, Getting to Yes. This book expound the authors favored method of conflict resolution, which they term principled negotiation . This method attempts to find an objective standard, typically based on existing precedents, for reaching an agreement that will be acceptable to both interested parties. Principled negotiation emphasizes the parties’ enduring interests, objectively existing resources, and available alternatives, rather than transient positions that the parties may choose to take during the negotiation. The outcome of a principled negotiation ultimately depends on the relative attractiveness of each party’s so-called BATNA : the “Best Alternative To a Negotiated Agreement”, which can be taken as a measure of the objective strength of a party’s bargaining stance. In general, the party with the more attractive BATNA gets the better of the deal. If both parties have attractive BATNAs, the best course of action may be not to reach an agreement at all. Roger Fisher,William L. Ury and Bruce Patton, Getting to Yes , (New York: Penguin; 2012); Douglas D. Edwards, De Dicto , March 18, 2013, http://is.gd/ys8Hny. Conflict is most likely to occur when the goals, expectations, and/or behaviors of at least two parties differ and when those differences are difficult to avoid (such as when interdependence among the parties involved is high). Conflict itself is neither good nor bad, productive nor destructive. The key to the outcome of conflict is the manner in which it is managed. Negotiation, as a key means of managing conflict, has four distinct stages. However, the length, importance, and norms for each stage can vary by situation and especially by culture. Negotiating Styles in Malaysia and America One of the emerging countries in Southeast Asia is Malaysia, whose natural resources and stable economic growth are allowing it to develop as an important manufacturing center in the region along with Singapore, Indonesia, and Thailand. What happens when American businesspeople visit Malaysia to do business? In the following example, cross-cultural researcher George Renwick describes major differences between the two cultures as they approach a negotiation. Americans’ patterns of negotiation, like all of their patterns, differ somewhat depending upon their context. The negotiating patterns of government officials working out a treaty, for example, are somewhat different from those of a business executive “hammering out” a contract. The pattern portrayed here will be that of the business executive. The American businessperson usually begins a series of negotiating sessions in a cordial manner, but he is intent on getting things under way. He is very clear as to what he and his company want, when it is wanted, and how he will go about getting it; he has planned his strategy carefully. And he has done what he could to “psyche out” his counterpart, with whom he will be negotiating. From the outset, the American negotiator urges everyone to “dispense with the formalities” and get on with the business at hand. As soon as possible, he expresses his determination, saying something like, “Okay, let’s get down to brass tacks.” The American usually states his position (at least his first position) early and definitely. He plans before long to “really get down to the nitty gritty.” He wants to “zero in” on the knotty problems and get to the point where “the rubber meets the road” (the point, that is, where “the action” begins). Once the negotiations are “really rolling,” the American usually deals directly with obstacles as they come up, tries to clear them away in quick order, and becomes impatient and frustrated if he cannot. Most of what the American wants to convey, of course, he puts into words—often many of them. His approach is highly verbal and quite visible—and thoroughly planned. He has outlined his alternative ahead of time and prepared his counterproposals, contingencies, backup positions, bluffs, guarantees, and tests of compliance, all carefully calculated, and including, of course, lots of numbers. Toward the end, he sees that some bailout provisions are included, but he usually doesn’t worry too much about them; making and meeting business commitments “on schedule” is what his life is all about—he is not too concerned about getting out. If he has to get out, then he has to, and he will find a way when the time comes. The American experiences real satisfaction when all the problems have been “worked out,” especially if he has been able to get provisions very favorable to his company—and to his own reputation as a “tough negotiator.” He rests securely when everything is “down in black and white” and the contract is initialed or signed. Afterward, the American enjoys himself; he relaxes “over some drinks” and carries on some “small talk” and “jokes around” with his team and their counterparts. Malay patterns of negotiation, as might be expected, differ considerably. When they are buying something, Malays bargain with the merchant, and when they are working, they socialize with their boss and coworkers. Their purpose is to develop some sense of relationship with the other person. The relationship then provides the basis, or context, for the exchange. Malays take the same patterns and preferences into their negotiating sessions. When all is said and done, it is not the piece of paper they trust, it is the person—and their relationship with the person. A Malay negotiator begins to develop the context for negotiations through the interaction routines appropriate to this and similar occasions. These routines are as complicated and subtle as customary American routines; they are cordial but quite formal. Like Americans and their own routines, Malays understand the Malay routines but are seldom consciously aware of them. Neither Malays nor Americans understand very clearly the routines of the other. As the preliminary context is formed, it is important to the Malay that the proper forms of address be known beforehand and used and that a variety of topics be talked about that are unrelated to the business to be transacted. This may continue for quite a while. A Malay negotiator wants his counterpart to participate comfortably, patiently, and with interest. As in other interaction, it is not the particular words spoken which are of most importance to the Malay; rather he listens primarily to the attitudes which the words convey—attitudes toward the Malay himself and toward the matter being negotiated. Attitudes are important to the relationship. At this point and throughout the negotiations, the Malay is as much concerned about the quality of the relationship as the quantity of the work accomplished. Motivation is more important to the Malay than momentum. The Malay negotiator, as in other situations, is also aware of feelings—his own and those of his counterpart, and the effects of the exchanges upon both. He is also aware of, and concerned about, how he looks in the eyes of his team, how his counterpart looks in the eyes of the other team, and how both he and his counterpart will look after the negotiations in the eyes of their respective superiors. The Malay is alert to style, both his own and that of his counterpart. Displaying manners is more important than scoring points. The way one negotiates is as important as what one negotiates. Grace and finesse show respect for the other and for the matter under consideration. Negotiating, like other interaction, is something of an art form. Balance and restraint are therefore essential. The agenda that the Malay works through in the course of the negotiation is usually quite flexible. His strategy is usually rather simple. His positions are expressed in more general terms than the American’s, but no less strongly held. His proposals are more offered than argued: they are offered to the other party rather than argued with him. Malays do not enjoy sparring. They deeply dislike combat. In response to a strong assertion, the Malay negotiator usually expresses his respect directly by replying indirectly. The stronger the assertion and the more direct the demands, the more indirect the reply—at least the verbal reply. The Malay and his team usually formulate their positions gradually and carefully. By the time they present their position, they usually have quite a lot of themselves invested in it. Direct rejection of the position, therefore, is sometimes felt to be a rejection of the person. Negotiating for the Malay is not quite the game that it is for some Americans. If the Malay and his team have arrived at a position from which they and those whom they represent cannot move, they will not move. If this requires a concession from the counterpart, the Malays will not try to force the concession. If the counterpart sees that a concession from him is necessary, and makes it, the Malays, as gentlemen, recognize the move and respect the man who made it. A concession, therefore, is not usually considered by the Malay team to be a sign that they can press harder and extract further concessions. Instead, a concession by either side is considered as evidence of strength and a basis for subsequent reconciliation and cooperation. What about getting out a contract? Making and meeting business commitments is not what a Malay’s life is all about. He has other, often prior, commitments. He therefore enters into contracts cautiously and prefers to have an exit provided. In addition, Malays are certain of their control over the future (even their control of their own country) than are Americans. Therefore, promising specific kinds of performance in the future by specific dates in a contract, especially in a long-term contract where the stakes are high, is often difficult for Malays. It is even more difficult, of course, if they are not certain whether they can trust the persons to whom they are making the commitment and from whom they are accepting commitments. Malays therefore give a great deal of thought to a contract and to the contracting party before signing it. And they are uneasy if provisions have not been made for a respectable withdrawal should future circumstances make their compliance impossible. Questions: What are the differences between an American and Malay approach to business relationships? How are the different approaches important to understanding negotiations and cultural differences? Source: G. Renwick, Malays and Americans: Definite Differences, Unique Opportunities (Yarmouth, Maine: Intercultural Press, 1985), pp. 51–54. Describe the stages of negotiations. Understand the strategies in bargaining. Understand the role that cultural differences have in the negotiation process. How do you recognize and respond to cultural differences in negotiation and bargaining strategies? A resistance point is the point beyond which an opponent will not go to reach a settlement. Planning for a negotiation session involves (1) understanding the basic nature of the conflict, (2) knowing what the group wants to achieve in the session, (3) selecting a chief negotiator, and (4) understanding one’s opponent. Cultural differences play a major role in the negotiation process and influence such factors as persuasion techniques, the key characteristics of the negotiators, and communication patterns. Chapter Review Questions Identify the types of conflict commonly found in organizations, and provide examples of each. How can conflict be good for an organization? Identify some reasons for the prevalence of intergroup conflict in organizations. How does intergroup conflict affect behavior within a work group? behavior between two or more groups? Review the basic conflict model discussed in this chapter. What lessons for management follow from this model? Of the various strategies for resolving and preventing conflicts that are presented in this chapter, which ones do you feel will generally be most effective? least effective? Why? What is the difference between distributive and integrative bargaining? When would each be most appropriate? How can cultural differences affect bargaining behavior? If you were negotiating with a Japanese firm, what might you do differently than if you were facing an American firm? Explain. Managerial Skill Application Exercise You might find it interesting to see how you approach conflict resolution. To do this, simply complete this self-assessment. When you are done, refer to Appendix B for scoring details. What Is Your Approach to Conflict Resolution? Instructions: Think of a typical situation in which you have a disagreement with someone. Then answer the following items concerning how you would respond to the conflict. Circle the number that you feel is most appropriate. Highly Unlikely Highly Likely I firmly push for my goals. 1 2 3 4 5 I always try to win an argument. 1 2 3 4 5 I try to show my opponent the logic of my position. 1 2 3 4 5 I like to discuss disagreements openly. 1 2 3 4 5 I try to work through our differences. 1 2 3 4 5 I try to get all concerns on the table for discussion. 1 2 3 4 5 I try to work for a mutually beneficial solution. 1 2 3 4 5 I try to compromise with the other person. 1 2 3 4 5 I seek a balance of gains and losses on each side. 1 2 3 4 5 I don’t like talking about disagreements. 1 2 3 4 5 I try to avoid unpleasantness for myself. 1 2 3 4 5 I avoid taking positions that may incite disagreement. 1 2 3 4 5 I try to think of the other person in any disagreement. 1 2 3 4 5 I try to preserve relationships in any conflict. 1 2 3 4 5 I try not to hurt the other person’s feelings. 1 2 3 4 5 Managerial Decision Exercise The president of your company has just told you that an Indian multinational company is interested in purchasing a large amount of the products that you and your group are responsible for. You have been charged with meeting with the team from India, hosting their visit, and negotiating the agreement, including pricing. How do you communicate during the meeting with your colleagues? What are some aspects of the social and business interactions that you will want you and your staff to avoid? What will you report back to the president regarding the meeting, and will you encourage her to take part in the meeting? Critical Thinking Case College Corp. Janice just graduated college, she’s ready to head out on her own and get that first job, and she’s through her first interviews. She receives an offer of a $28,000 salary, including benefits from COLLEGE CORP, from an entry-level marketing position that seems like a perfect fit. She is thrown off by the salary they are offering and knows that it is lower than what she was hoping for. Instead of panicking, she takes the advice of her mentor and does a little research to know what the market range for the salary is for her area. She feels better after doing this, knowing that she was correct and the offer is low compared to the market rate. After understanding more about the offer and the rates, she goes back to the HR representative and asks for her preferred rate of $32,500, knowing the minimum that she would accept is $30,000. Instead of going in for her lowest amount, she started higher to be open to negotiations with the company. She also sent a note regarding her expertise that warranted why she asked for that salary. To her happy surprise, the company counter offered at $31,000—and she accepted. Questions: What key points of Janice’s negotiation led to her success? What could have Janice done better to get a better outcome for her salary? Sources: “Good & Bad Salary Negotiations,” Salary.com , April 19, 2018, https://www.salary.com/articles/good-bad-examples-of-salary-negotiations/; M. Herner, “5 Things HR Wishes You Knew About Salary Negotiation,” Payscale.com , accessed October 21, 2018, https://www.payscale.com/salary-negotiation-guide/salary-negotiation-tips-from-hr. BATNA An acronym popularised by Roger Fisher and William Ury which stands for ‘Best Alternative to a Negotiated Agreement’. BATNA answers the question: ‘What would you do if you weren’t able to agree a deal with your negotiation counterparty?’ Your BATNA is the alternative action you’ll take should your proposed agreement fail to materialize. Distributive bargaining Where the goals of one party are in fundamental and direct conflict with those of the other party. Resources are fixed and limited, and each party wants to maximize its share of these resources. Integrative bargaining A negotiation strategy in which parties collaborate to find a "win-win" solution to their dispute. This strategy focuses on developing mutually beneficial agreements based on the interests of the disputants. Resistance price The point beyond which the opponent will not go to reach a settlement.

Business


Introduction (Credit: Free-Photos/ Pixabay/ (CC BY 0)), modified from an original image by Ivan Mlinaric) Learning Outcomes After reading this chapter, you should be able to understand these statements: Define the external environment of organizations. Identify contemporary external forces pressuring organizations. Identify different types of organizational structures and their strengths and weaknesses. Explain how organizations organize to meet external market threats and opportunities. Identify the fit between organizational cultures and the external environment. Identify environmental trends, demands, and opportunities facing organizations. Jeff Bezos of Amazon Amazon’s market value was estimated at $1 trillion USD dollars in 2018. The company was recognized as the most innovative company in Fast Company’s 2017 list, accounting for 44 percent of all U.S. e-commerce that year—approximately 4 percent of the U.S.’s total retail sales. Amazon market value is greater than the sum of the market capitalizations of Walmart, Target, Best Buy, Nordstrom, Kohl’s, JCPenney, Sears, and Macy’s. Jeff Bezos, founder and leader, has creatively accomplished what most large companies fail at: meshing size, scale, and external opportunities with agility. Sales figures reached $100 billion in 2015 while the stock price climbed over 300% in the past five years. The company plans on creating over 50,000 new jobs starting in 2018. Bezos has blended his strategy of virtually reaching unlimited numbers of online customers while maintaining land-based distribution centers using Prime’s $99-per-year—$119 in 2018—membership. Stephenie Landry, an Amazon vice president, stated that Prime has reached 49 cities in seven countries. Over 100 million people in 2018 subscribe to the Prime service. She noted that the business has only to answer two questions from customers: “Do you have what I want, and can you get it to me when I need it?” The answer seems to be yes, especially with Bezos’s strategy of having high-tech robots already working side by side with human employees—resembling a “factory of the future.” Bezos’s digital commerce strategy has led the firm to become the leader of retail commerce. Amazon’s digital strategy uses Prime memberships that are supplied and supported by land-based distribution centers; Prime takes in reaching about 60% of the total dollar value of all merchandise sold on the site. That accounts for 60 million customers in the United States who use Prime and who spend $2,500 on Amazon annually. A study of 3,000 independent businesses, half of whom were retailers, listed competition from Amazon as their primary concern. Industry after industry is being disrupted, some replaced, by Bezos’s strategy. He has said, “Everybody wants fast delivery. Low prices. I’m serious about this. Our job is to provide a great customer experience, and that is something that is universally desired all over the world”. Still, Amazon faces such challenges as high shipping cost (over $11 billion annually), pressures on employees (especially those working in warehouses that have been criticized for poor working conditions), shipping contractors who go on strike demanding higher wages and reduced workloads, and the possibilities of more governmental regulation (especially with regard to adding drones as a delivery method), as well as pressures to pay more taxes. Bezos has countered these arguments by adding more full-time jobs in different cities, promising to improve working conditions, supporting public spaces for the public, and most importantly, contributing to the U.S. economy. Sources: https://www.bloomberg.com/news/articles/2018-04-26/amazon-eyes-second-biggest-market-cap-surging-past-microsoft. Noah Robischon, (2017). Why Amazon Is The World’s Most Innovative Company Of 2017, https://www.fastcompany.com/3067455/why-amazon-is-the-worlds-most-innovative-company-of-2017; L. Thomas, (2018). Amazon grabbed 4 percent of all US retail sales in 2017, new study says, https://www.cnbc.com/2018/01/03/amazon-grabbed-4-percent-of-all-us-retail-sales-in-2017-new-study.html Organizations and industries are again at a crossroads when confronting new and challenging external environmental demands. Exceptional companies such as Amazon, in the opening case, Apple, Netflix, and Google/Alphabet Inc. exemplify evolving business models that combine strategic innovation, technological prowess, and organizational cultural agility that not only meet external environmental demands, but also shape them. Many businesses with traditional business models, however, have failed or are not succeeding strategically, operationally, and organizationally by not realizing and/or adapting to changing external environments. Such firms that were once successful but did not anticipate and then adapt to such changes include Blockbuster, Toys R Us, Borders, Sun Microsystems, Motorola, Digital Equipment Corporation, Polaroid, and Kodak, to name only a few. A sample of contemporary external environmental trends and forces that currently challenge organizations’ survival and effectiveness includes: Digital technologies and artificial intelligence (AI) : Extensions of AI help automate a firm’s value chain, thus speeding up and increasing efficient operations and service to customers—as Amazon exemplifies. A current survey showed that 59% of organizations are collecting information to develop AI strategies, while others are moving forward in piloting and/or adopting AI solutions to compete faster and at less cost. Panetta, Kasey, “Gartner Top 10 Strategic Technology Trends for 2018”, Gartner , October 3, 2017. https://www.gartner.com/smarterwithgartner/gartner-top-10-strategic-technology-trends-for-2018/ However, there are also risks that accompany firms that incorporate new digital and online technologies without adequate security measures. For example, some newer online technologies can expose operational systems to cyberattacks and large-scale manipulation. Hacking is now both an illegal and ongoing “profession” for those who are able to paralyze organizations from accessing their data unless they pay a ransom. While hacking is not new, it is more widespread and lethal, to the point of even threatening national security. Evidence from the U.S. presidential election between Donald Trump and Hillary Clinton indicates that international hackers affected online U.S. election processes. In 2020, a major cyberattack penetrated multiple portions of the U.S. federal government, including the Departments of Homeland Security, Justice, Treasury, Energy, and Defense. Still, the future of most businesses is using some type of digital and AI technologies. The advent of blockchain technologies that are interrupting new industry practices. Blockchain is not a single technology; it is “an architecture that allows disparate users to make transactions and then creates an unchangeable record of those transactions.” It is “a public electronic ledger—similar to a relational database—that can be openly shared among disparate users and that creates an unchangeable record of their transactions, each one time-stamped and linked to the previous one.” Mearian, Lucas, “What is blockchain? The most disruptive technology in decades”, Computerworld , May 31, 2018. https://www.computerworld.com/article/3191077/security/what-is-blockchain-the-most-disruptive-tech-in-decades.html; https://www.forbes.com/sites/theyec/2018/01/10/23-trends-that-will-shake-the-business-world-in-2018/#6b6c3524583f These technological inventions will continue to affect almost every business process from procurement to legal management. The banking industry is already using it. It increases speed, security, and accuracy of transactions. Sharing-economy cultural and economic value-added business models that use information technologies to gain competitive advantage. Companies such as Airbnb and Uber have ushered in new business models that have already disrupted real estate, hotel, taxi, and other industries. Taking out the middle layer of management in transactions to increase efficiencies and customer satisfaction while cutting costs through the use of information and social media technologies will continue. This trend has already had both positive and disruptive effects on companies. Many customers are likely benefitted; businesses with outdated and ineffective business models have either failed or struggle to adapt. Shifts in learning and learning credentials . Identifying, recruiting, and retaining talent is crucial to organizations. An evolving crisis for the current generation—future talent—is the continued rise in higher educational institutions’ tuitions, student debt, and the changing nature of jobs. With the advent of online resources, prospective students’ inability to pay creates both a crisis and opportunity for traditional higher educational institutions. While bachelor’s degrees remain a requirement for many companies hiring needed higher-level talent, online resources such as Khan Academy, Udacity, and Coursera are gaining recognition and legitimacy toward providing financially challenged students opportunities for entry-level jobs. While many higher-skilled students and professionals may not presently be included in this trend, companies seeking to pay lower wages while offering flexible working conditions are attracting students. Young Entrepreneurship Council, “23 Trends That Will Shake the Business World in 2018”, Forbes , January 10, 2018. https://www.forbes.com/sites/theyec/2018/01/10/23-trends-that-will-shake-the-business-world-in-2018/#6b6c3524583f Again, how higher educational private, not-for-profit, and even for-profit educational institutions adapt, innovate, and manage their external environments is yet to be seen. Ethics, corporate social responsibility (CSR), and sustainability. Corruption, lying, and fraud have been and continue to be part of the landscape of governments and public- and private-sector corporations. However, public awareness through social and online media has awakened consumers and corporations to the impending dangers and drawbacks of illegal and unethical activities of certain large corporations. And external environmental problems, created in part by humans, such as pollution and climate change pressure companies to be responsible for their share of the costs associated with these problems. This small sample of powerful external forces illustrates the continuing pressure companies encounter to innovate in their industries. Basic theories, concepts, and principles are presented in this chapter to help explain elements of external environments and how organizations and corporations can organize and are organizing to survive and thrive in the 21st century.

Business


The Organization's External Environment Define the external environment of organizations. To succeed and thrive, organizations must adapt, exploit, and fit with the forces in their external environments. Organizations are groups of people deliberately formed together to serve a purpose through structured and coordinated goals and plans. As such, organizations operate in different external environments and are organized and structured internally to meet both external and internal demands and opportunities. Different types of organizations include not-for-profit, for-profit, public, private, government, voluntary, family owned and operated, and publicly traded on stock exchanges. Organizations are commonly referred to as companies, firms, corporations, institutions, agencies, associations, groups, consortiums, and conglomerates. While the type, size, scope, location, purpose, and mission of an organization all help determine the external environment in which it operates, it still must meet the requirements and contingencies of that environment to survive and prosper. This chapter is primarily concerned with how organizations fit with their external environments and how organizations are structured to meet challenges and opportunities of these environments. Major takeaways for readers of this chapter include the following: 1) Be able to identify elements in any organization’s external—and internal—environment that may interest or affect you as an employee, shareholder, family member, or observer. 2) Gain insights into how to develop strategies and tactics that would help you (and your organization) navigate ways to cope with or try to dominate or appeal to elements (e.g., market segments, stakeholders, political/social/economic/technological issues) in the environment. The big picture of an organization’s external environment , also referred to as the general environment , is an inclusive concept that involves all outside factors and influences that impact the operation of a business that an organization must respond or react to in order to maintain its flow of operations. This is a broad definition which has been used in different forms. The source here is “What is an External Environment in Business” Chapter 5, study.com , Accessed October 15, 2018. https://study.com/academy/lesson/what-is-an-external-environment-in-business-definition-types-factors.html illustrates types of general macro environments and forces that are interrelated and affect organizations: sociocultural, technological, economic, government and political, natural disasters, and human-induced problems that affect industries and organizations. For example, economic environmental forces generally include such elements in the economy as exchange rates and wages, employment statistics, and related factors such as inflation, recessions, and other shocks—negative and positive. Hiring and unemployment, employee benefits, factors affecting organizational operating costs, revenues, and profits are affected by global, national, regional, and local economies. Other factors discussed here that interact with economic forces include politics and governmental policies, international wars, natural disasters, technological inventions, and sociocultural forces. It is important to keep these dimensions in mind when studying organizations since many if not most or all changes that affect organizations originate from one or more of these sources—many of which are interrelated. Macro Forces and Environments (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) Globalization is a combination of external forces shaping environments of organizations. Defined as the development of an integrated global economy and characterized by free trade, capital flows, communications, and cheaper foreign labor markets, the processes of globalization underlie the forces in the general international economic environment. This dimension continues to present opportunities and pressures to companies operating locally as well as globally. Globalization continues to affect industries and companies in ways that benefit some and not others. Amazon, for example, is thriving. The firm sells low-end products through its brand AmazonBasics. The company has individual retail websites for the United States, the United Kingdom and Ireland, France, Canada, Germany, Italy, Spain, the Netherlands, Australia, Brazil, Japan, China, India, and Mexico. Uber and Airbnb represent some of the larger sharing-economy companies that operate internationally and have to date prospered in the so-called new but fragmenting global economy. Bezos Jeff Bezos’ digital commerce strategy has led the firm to become the leader of retail commerce, and forced traditional retailers like Toys R Us to close their operations, and retailers like Walmart, Target, and Sears to reassess their business environment. Amazon’s digital strategy uses Prime memberships that are supplied and supported by land-based distribution centers; Prime takes in reaching about 60% of the total dollar value of all merchandise sold on the site. (Credit: Sam Churchill/flickr/ Attribution 2.0 Generic (CC BY 2.0)) In general, countries that have gained from globalization include Japan, South Korea, Taiwan, Malaysia, Singapore, Hong Kong, Thailand, and China. China’s markets and growing economic prowess have particularly been noticed. China’s GDP (gross domestic product) is estimated at $13.2 trillion in 2018, outpacing the $12.8 trillion combined total of the 19 countries that use the euro. Jamrisko, Michelle, “China’s Economy to Overtake Euro Zone This Year”, Bloomberg , March 6, 2018. https://www.bloomberg.com/news/articles/2018-03-06/china-s-economy-is-set-to-overtake-combined-euro-area-this-year Corporations worldwide, large and small, online and land-based, strive to gain access to sell in China’s vast markets. Moreover, China at the beginning of 2018 owns $1.168 trillion of the United States’ debt. China Owns US Debt, but How Much? | Investopedia , April 6, 2018. https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp#ixzz5DcHG4d7k Japan, in second place, owes $1.07 trillion of this debt. Any instability politically and economically with China could result in increasing inflation and interest rates in the U.S. economy that could, in turn, negatively affect U.S. businesses. Economic forces Economically, “The strategic challenge of the next decade is navigating a world that is simultaneously integrating and fragmenting. Stock markets have set new records and economic volatility has fallen to historic lows, while political shocks on a scale unseen for generations have taken place. Seemingly contradictory realities do co-exist.” Rawlinson, Paul, “A prediction for globalization in 2018”, World Economic Forum , January 22, 2018. https://www.weforum.org/agenda/2018/01/prediction-globalization-2018/ Overall, while economic data indicates that globalization has had a positive effect on the world economy, a dark side also shows that two-thirds of all households in 25 advanced-economy countries had incomes stagnate and/or decline between 2005 and 2014. Moreover, the U.K. and U.S. witnessed falling wages. Wealth distribution in these countries continues to decline. Income inequality globally is also rising. Other trends that also affect the global, regional, and local economies are discussed in this chapter as well as below. Technological forces Technological forces are another ubiquitous environmental influence on organizations. Speed, price, service, and quality of products and services are dimensions of organizations’ competitive advantage in this era. Information technologies and social media powered by the Internet and used by sharing-economy companies such as Airbnb and Uber have democratized and increased, if not leveled, competition across several industries, such as taxis, real estate rentals, and hospitality services. Companies across industry sectors cannot survive without using the Internet, social media, and sophisticated software in R&D (research and development), operations, marketing, finance, and sales. To manage and use big data in all these functional areas, organizations rely on technology. Government and political forces Government and political forces also affect industries and organizations. Recent events that have jarred the global economy—and are too early to predict the long-term outcomes of—are the United Kingdom’s exit from the European Union, wars in the Middle East, policies that question and disrupt free trade, health-care reform, and immigration—all of which increase uncertainty for businesses while creating opportunities for some industries and instability in others. Sociocultural forces Sociocultural environmental forces include different generations’ values, beliefs, attitudes, customs and traditions, habits, and lifestyles. More specifically, other aspects of societal cultures are education, language, religion, law, politics, and social organizations. The millennial (ages 20 to 35) workforce, for example, generally seeks work that engages and interests them. Members of this generation are also health conscious and eager to learn. Since this and the newer generation (Generation Z) are adept and accustomed to using technology—social media in particular—organizations must be ready and equipped to provide wellness, interesting, and a variety of learning and work experiences to attract and retain new talent. Millennials are also estimated to be the United States’ largest living adult generation in 2019. This generation numbered about 71 million compared with 74 million baby boomers (ages 52 to 70) in 2016. By 2019, an estimated 73 million millennials and 72 million boomers are projected. Because of immigration, millennials are estimated to increase until 2036. Cilluffo, Anthony and Cohen, D’Vera, “10 demographic trends shaping the U. S. and the World in 2017”, Pew Research Center , April 27, 2017. http://www.pewresearch.org/fact-tank/2017/04/27/10-demographic-trends-shaping-the-u-s-and-the-world-in-2017/ Other general sociocultural trends occurring in the United States and internationally that affect organizations include the following: (1) Sexual harassment at work in the era of #MeToo has pressured organizations to be more transparent about relationships between owners, bosses, and employees. Related to this trend, some surveys show new difficulties for men in workplace interactions and little effect on women’s career opportunities taking place in the short term. Graf, Nikki, Sexual Harassment at work in the Era of #MeToo”, Pew Research Center , April 4, 2018. http://www.pewsocialtrends.org/2018/04/04/sexual-harassment-at-work-in-the-era-of-metoo/ (2) While fewer immigrants have been entering the United States in recent years, diversity in the U.S. workplace continues. For example, 20 million Asian Americans trace their roots to over 20 countries in East and Southeast Asia and the Indian subcontinent—“each with unique histories, cultures, languages and other characteristics. The 19 largest origin groups together account for 94% of the total Asian population in the U.S.” The Global Risks Report 2018 13th Edition. (2018). The World Economic Forum , http://www3.weforum.org/docs/WEF_GRR18_Report.pdf, p. 6. Also see http://reports.weforum.org/global-risks-2018/global-risks-landscape-2018/ (3) Young adults in the United States are living at home longer. “In 2016, 15% of 25- to 35-year-old Millennials were living in their parents’ home. This is 5 percentage points higher than the share of Generation Xers who lived in their parents’ home in 2000 when they were the same age (10%), and nearly double the share of the Silent Generation who lived at home in 1964 (8%).” Fry, Richard, “It’s becoming more common for young adults to live at home for longer stretches”, Pew Research Center , May 5, 2017. http://www.pewresearch.org/fact-tank/2017/05/05/its-becoming-more-common-for-young-adults-to-live-at-home-and-for-longer-stretches/ (4) While women have made gains in the workplace, they still comprise a small share of top leadership jobs—across politics and government, academia, the nonprofit sector, and business. Women comprised only about 10% of CEOs (chief executive officers), CFOs (chief financial officers), and the next three highest-paid executives in U.S. companies in 2016–17. DeSilver, Drew, “Women scarce at the top of U.S. business- and in the job that lead there”, Pew Research Center , April 30, 2018. http://www.pewresearch.org/fact-tank/2018/04/30/women-scarce-at-top-of-u-s-business-and-in-the-jobs-that-lead-there/ A 2018 study by McKinsey & Company “reaffirms the global relevance of the link between diversity—defined as a greater proportion of women and a more mixed ethnic and cultural composition in the leadership of large companies—and company financial outperformance.” Hunt, Vivian et al, “Delivering Through Diversity”, McKinsey , January 2018. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Delivering%20through%20diversity/Delivering-through-diversity_full-report.ashx These and other related sociocultural trends impact organizational cultures and other dimensions involving human talent and diverse workforces. Natural disasters and human-related problems Natural disaster and human induced environmental problems are events such as high-impact hurricanes, extreme temperatures and the rise in CO2 emissions as well as ‘man-made’ environmental disasters such as water and food crises; biodiversity loss and ecosystem collapse; large-scale involuntary migration are a force that affects organizations. The 2018 Global Risks Report identified risks in the environmental category that also affect industries and companies—as well as continents and countries. These risks were ranked higher than average for both likelihood and impact over a 10-year horizon. The report showed that 2017 was characterized by high-impact hurricanes, extreme temperatures, and the first rise in carbon dioxide emissions in four years; “man-made” environmental disasters; water and food crises; biodiversity loss and ecosystem collapse; and large-scale involuntary migration to name a few. Authors of this study noted that “Biodiversity is being lost at mass-extinction rates, agricultural systems are under strain and pollution of the air and sea has become an increasingly pressing threat to human health.” The Global Economic Report, 13th Edition, World Economic Forum , 2018. http://www3.weforum.org/docs/WEF_GRR18_Report.pdf Most vulnerable to rising seas are low-lying islands in the Indian and Pacific Oceans. The Republic of the Marshall Islands has more over 1,100 low-lying islands on 29 atolls that include island nations with hundreds of thousands of people. Predictions indicate that rising sea levels could reach 3 feet worldwide by 2300 or sooner. One report stated that in your child’s lifetime, Miami, Florida, could be underwater. Rice, Doyle, “Thousands of low-lying islands may become 'uninhabitable' within decades as seas rise”, USA Today , April 25, 2018. https://www.usatoday.com/story/news/world/2018/04/25/thousands-low-lying-islands-may-become-uninhabitable-within-decades-seas-rise/550659002/ Large sections of Louisiana’s marshes separating the ocean from the coastline are submerging. Oil producers and other related corporations are being sued by that state, claiming that fossil fuel emissions have contributed to natural disasters such as climate change. Many new companies in the United States are already constructing buildings to withstand increasing flooding and predicted rising water levels. Define the components of the internal and the external business environments. What factors within the economic environment affect businesses? Why do demographic shifts and technological developments create both challenges and new opportunities for business? Define the external environment of organizations Organizations must react and adapt to many forces in their internal and external environments. The context of the firms such as size and geographic location impact how environmental forces affect each organization differently. An understanding of the forces and they currently affecting organizations and pressuring structural change is crucial. Socio-cultural environment forces Include different generations’ values, beliefs, attitudes and habits, customs and traditions, habits and lifestyles. Technological forces Environmental influence on organizations where speed, price, service, and quality of products and services are dimensions of organizations’ competitive advantage in this era. Government and political environment forces The global economy and changing political actions increase uncertainty for businesses, while creating opportunities for some industries and instability in others. Natural disaster and human induced environmental problems Events such as high-impact hurricanes, extreme temperatures and the rise in CO2 emissions as well as ‘man-made’ environmental disasters such as water and food crises; biodiversity loss and ecosystem collapse; large-scale involuntary migration are a force that affects organizations.

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