salary freez case

BUSI 3331 PMU-Fall 2016-2017

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Case 1

Negotiation: Thawing the Salary Freeze

BUSI 3331 PMU-Fall 2016-2017

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Reference Concepts

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The Meeting

A: Hi Katherine.

K: Hi Alisa, how are you?

A: I’m good thanks.

K: It was OK coming over here, no problem?

A: Yeah, yeah, no problem. So I called this meeting, I know we are in the final stages of

negotiating the contract. Just recently I found out the executives got incredibly large

bonuses and I thought there was no more money. This is very frustrating. I didn’t

know anything about this. I didn’t understand why I wasn’t notified, basically on such

an important point. I’m ready to call the New York Times and scream bloody murder

because this is unacceptable for me not to know this important point. And I don’t

understand why you wouldn’t tell me the truth.

K: Well I think we should take a step back. I absolutely told you the truth with regard to

the wage increase. Across the board there are absolutely no increases to be offered.

The money that you’re mentioning is related to bonuses awarded to executives for

last year’s performance and came from last year’s budget.

A: I didn’t know about this.

K: Honestly, it’s not something that is part of this negotiation because I do not have the

ability to go into last year’s budget to try to help the employees for this year. I’m

given a pool of money, which is this year’s money. The fact that certain people have

been awarded at year end, a bonus and the fact that this payout may occur at some

time during this year is completely unrelated.

A: I should have known this information. If this is something that is a company thing, and

I have negotiated in good faith thinking the money is not there, finding out about this,

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you can imagine how frustrated I am. So I want to know, really I’m not calling you a

fibber, but I don’t believe that there is no money. I’m having a hard time wrapping

my brain around that.

K: I want to mention two points. First, you are new to this industry, and I don’t want to

mention that many times because I want the fact that we are going to be working

together or years, I have been doing this for 10 years, and there are things that you are

not familiar with and this is one of them.

A: Case in point is that this should have been explained.

K: Absolutely not. That’s my exact point in the opposite.

A: You don’t think I should have known about this important information? It’s money,

it’s money. It’s the budget.

K: Absolutely not. And the budget relates to last year’s revenue. Again, we can keep

going on this or we can work on the points that can actually help the employees.

A: I think that you are trying to avoid discussing this because you know that it would be

an integral part of this discussion.

K: It’s last years numbers, based on revenues from two years ago, when those numbers

come in, that bonuses are awarded. It’s completely different. And I must say that I am

personally offended that you are now saying that this is in some way, a fraudulent

nondisclosure and our company prides itself on full disclosure of its financials and

taking care of its employees. You’re going along a very thin line here saying that

you’re questioning my ethics.

A: I’m not personally attacking you.

K: Well you’re saying that I didn’t disclose something that relates to another year’s

budget and that somehow that is not full disclosure, I just don’t agree.

A: Well see that’s where we keep butting heads, you keep saying the money is last years,

but you see the money is still in this year’s budget.

K: It’s not. The payout is this year, out of last year’s budget. The cheques are being cut

this year but it’s completely unrelated.

A: I don’t understand that.

K: We’ve had several meetings now; I do understand that the number one point is salary

increases. It’s not a matter on negotiating and finding the number, there is no money

to be had on salary increases, neither in management or non management is awarded

a single dollar. My pay stayed the same, I’m more than happy to show you my pay

stub, as well as disclose the fact that it’s just not on the table for negotiation.

A: No thank you, I don’t want to see you pay stub.

K: We’re spending a lot of time on an issue that I have no leeway to change at all.

A: Well what about the bonus that’s going to next year? Why don’t you give that money

to the people, as opposed to once again, giving it to the upper management?

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K: Well what happens at the end of the year is going to determine if there’s a bonus. The

fact that there was a bonus last year does not mandate that there is going to be a bonus

this year. I don’t have funds.

A: But there is money waiting around obviously to be given to somebody as a bonus.

K: At year end, if there is money available, depending on how revenues go from now

until the end of the year, and depending on the managements’ performance at the end

of the year, that’s a determination that can happen. I can’t say right now.

A: Well the dollar amount you’re saying, but it’s clear to me according to the way things

have been working that someone is going to get a bonus.

K: And I think that is the wrong assumption. There are years when the company does not

do well that it does not award bonuses. We have had years where the company is

running negative and bonuses are not awarded. So you’re talking about money that

possibly, could be, if revenue turns around, could be awarded at year end. And you

and I are going to have a negotiation next year, and if the company does better, we

are going to have more money to award the employees.

A: Why can’t it be allocated differently? How can you help me get that money to my

workers? That’s the issue here.

K: I think what we need to do, and what we can address and work with, is that there is

nothing that can be done on the salary increase. But I can formulate bonus

distributions, providing bonuses to the employees based on this year’s revenue.

A: I definitely don’t understand why this wasn’t presented before.

K: Because we were discussing the salaries of the individuals, you came to me wanting a

7% salary increase; there is salary freeze across the board. But I am willing to come

to the table and say, the employees, I am very well aware, contribute to the revenues

of this company and if they can’t receive it in salary increase, we can take a look at

the revenues at year end and we can make an exception, we can work with them on

formulating a new type of structure, that has a bonus component.

A: OK, I would definitely like this in writing.

K: What I suggest is that I draft this; I will get this to your desk so that you can review it

and then we can meet on Tuesday and not lose much time. And I will get that to your

desk by tomorrow morning.

A: Ok that would be fabulous. I really appreciate that, and I hope that it’s a little more

smooth sailing.

K: And I do too. It’s really important that the employees feel really good about their jobs

and I think we are on the right track to get there.

A: OK, I’d like to think so. Alrighty Katherine.

K: Ok then I will see you on Tuesday and if you don’t get that document by morning, and

then just contact my office.

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Assignment

1) Read the conversation, then describe it in your own words, relating it to key negotiation terms.

2) Answer the questions inserted into the text. 3) Analyze situations in terms of mutual perceptions, goals, positions vs. interests,

possible alternatives, where each of Katherine and Alisa did well, and what could

each have done to improve her respective position.

4) Organize your above reflections into a 10-minute class presentation.

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