London Business School
Negotiation and Bargaining
Gillian Ku
ABC/Local 190 Round 3
It is July 18, 1985, exactly one month prior to the expiration of the contract established in the 1978
labor agreement. In the negotiation that occurred in 1981 (of which you were not a part), wages were
frozen. However, in the 1983 negotiations, due to the crisis in the food-processing industry, wages
were re-negotiated and were set at $______ (use your Round 2 agreed-upon wage here).1 Since this
last negotiation, relations between labor and management have been acrimonious and unsettled. In
fact, industrial relations throughout the United States have been experiencing real difficulties, some
claiming that it is the end of organized labor.
You will be negotiating to develop a new contract to replace the existing one. The following events
have occurred in past negotiations.
After the 1978 negotiations, ABC issued lay-off notices to a number of employees from the
Deloitte facility arguing that the increased productivity per worker in the new plant made it
unnecessary to keep the same size workforce in place.
In response to changing customer demand, ABC decided to expand into microwaveable food
products. This entailed a new production line, which, in turn, required additional employees
to work the new line. ABC filled these positions with applicants from the community, rather
than rehiring the employees who had been laid off.
ABC has not called back the majority of workers laid off in 1978.
The number of injury reports filed annually by Deloitte employees rose significantly with the
opening of the new facility.
To facilitate your upcoming negotiations, you and the other team sat down to outline the issues that
needed to be discussed. You have jointly decided to negotiate on the following issues, but have agreed
that other issues can be added, contingent on the agreement of both parties. For some of the issues,
you also discussed some ways of measuring/quantifying the issue (noted in parentheses), but these are
not set in stone and do not mean that either side is necessarily willing to concede anything.
Incentive program
o Incentives (possibly agree to whether some sort of incentive program should be in
place with details to be determined at a later date)
o Production quota (possibly measured as a percentage of current levels)
Work rules/autonomy
Layoff and hiring procedures
o Layoff notice period (possibly measured as number of weeks)
o Seniority protection (possibly measured as percentage laid-off by seniority)
o Hiring from layoff lists (possibly measured as a percentage from the layoff list)
Wages
As usual, you will want to prepare ahead of time with your team; a scoring system will likely be
useful to capture your relative preferences as well as the above information. We will spend about 1½
hours negotiating Round 3, after which you will jump into working on your post-negotiation analysis
assignment (see Canvas for more details) within your ABC or Local team to (i.e., there will be no
time for preparation in class). As in previous rounds, your outcomes are due to me at the end of the
negotiations.
1
If you did not come to an agreement, use the arbitrator’s decision: the arbitrator agreed with management that
the “me-too” clause was applicable to falling wages as well as to rising wages. Thus, the arbitrator ruled that the
base-rate wage be set at $8.67/hour, calculated by taking the three highest of the competitors’ wages and
averaging them.
