Negotiability of the offer is situation specific

Bargaining Power is one of the many factors which determine the salary of the employees. Though the terms of the employment are determined by the employer, however it can be influenced by the following factors:
Perceived value that the prospective employee will bring to the company based on his capabilities.
Supply and demand of the qualified people in the market.
Though the Employer has a major role to play in the making of the employment contract, employee always has the option to negotiate the terms of the contract and leave or join the job depending on the availability of another offer.
Therefore employer ability to effect the terms of the contract is influenced by availability of requisite personnel for the job while that of employee is influenced by the alternative earning option available to him.

I will be in a position to make a non-negotiable offer in the future. This is because it can be made in case I have better employment opportunities, which I believe I will have at some point in my career.

If I receive such a non negotiable offer from my employee I would accept or reject depending on the situation. If he/she is indispensable in the given situation, I would accept the offer. However I believe such situation cannot last for long. In case I have another employee to fill the position I would try to negotiate or else reject the offer.This is because such non negotiable offer would encourage similar behaviour in the company.

Who has the upper hand???

No it's not always that an individual who is at recieving end and the bargaining power always shifts in favour of an employer. In my opinion, whetrhe it is the employee or the meployer, has an upper hand wins the bargain. In the case of Darrel Hair, certainly Mr.Hair had an upper hand. His expertise in field ofumpiring, experience and his success enabled him to make such demnads. Basically, th current situation of both employee and employer along with many other factors palys a vital role to decid who will be at receiving end.
In all these situations, either party looks for his own interests, nobody wants to lose his opportunity. Both parties know whenener in future if any one of them has the upper hand, will take the maximum benefit out of it. Hence this makes the bargaining process unstable and unequal. Similarly, in Darrel Hair case, Mr. Hair is certainly looking for his own interest and dont want to lose the ooportunity while making his demands.
Taking myself intothat situation, I think if I have an upper hand, certainly I will make an offer. For example, in my college placement period, some guys had multiple offers. After bieng placed in the first company when they sat for interviews of other companies, these students had an option to demand on basis of their knowledge, skills etc.
But being an employer at these knid of situations, I may have to look into various factors. First of all I will look into the concerns put forwarded by the employee. The genuiness of his offer, alternatives, aftreeffect of both accepting and rejecting his offer will be taken into account. If I see his demnads are within limits of the company and is justifiable then I may accept the offer. On the other hand if his demands are not geuine or way away from the limits, then I will have no problem in rejecting his offer.
But in today's scenario I think the bargaining power mostly remains in favor of employer. This is due to the large pool of aspirant employees available for the employer and high competitive labour force, which makes the employer find the substitute of an employee very easy.

Regards,
Soumya

Non-negotiable offers: Striking the right balance?

As per my understanding, a non-negotiable offer being made by an employee to an employer would require either the employee to be in a very strong position, as to be able to command what he thinks he deserves. As mentioned in a previous post as well, such an offer would hold merit if the employee possessed a skill-set that the organization felt was irreplaceable. In such a scenario, the employee could be on an upper pedestal and have the capacity to demand. However, my question at this stage would be: can an employee ever actually be in an advantageous situation enough to be able to negotiate.

Even though Darrell Hair wrote a mail, suggesting a one-off non-negotiable offer (which he wanted to keep private), & his decision (of England winning by virtue of forfeiture of play by the Pakistani team) was in accordance with the rules of international cricket; the ICC did consider the contents of his mail inappropriate. The same was also communicated by the ICC chief executive, Malcolm Speed, to Darrell Hair. Speed even stressed that he was satisfied there was no 'malicious, underhand or dishonest intent' in the offer and that in his belief, Hair was under 'great stress when he wrote the letter'.

(Content ref: http://www.cr17.com/index.php?topic=699.45;wap2 )

Perhaps one mayn’t be faced with situations of such magnanimity & media exposure in the real world, but as an employee, and citing a personal example here, a person can bargain with his employer (organization) on the basis of a better offer that he may have in hand. One of my colleagues had done the same, in return for a better pay package. Owing to the fact that he was amongst one of the top performers in the business unit, the top management chose to retain him by offering him a salary hike. Of course, he was directed not to divulge the salary details to anyone.

However, the situation also has a flip side to it, because of the fact that nothing remains a secret for too long. When other employees, who had joined at the same time as him, became aware of the new settlement that was made for him, it did cause some friction amongst them. This eventually did lead to a negative sentiment amongst the employees, thus creating a situation for the HR department.

Having said that, as to where the employee-organizational relationship is concerned, in the case I shared, the non-negotiable offer made by the employee did work out in favor of the employee. Also, the organization too did not lose a star achiever, and in consequence, didn’t lose valuable business. Still, the question remains in my mind, who really benefits out of such a bargain? Or would you say that both the employee and the employer form a mutually beneficial compromise on the offer, by striking the right balance?

Markets and Bargaining power

In almost all cases unequal bargaining power exists. During boom time employees have the upper hand (or in the case of football players or cricketers bargaining between clubs) while during recession time, employers have. The loss of a single employee to a big employer can be said to be the anticipated cost of doing business. Hence cost of losing a job is more for an employee.

I would like to include another perspective looking at the larger picture of markets and bargaining power. Talking of bargaining power in a country like India which has high unemployment and disguised employment, the tilt of the bargaining power is on the employer’s side. Equal bargaining power works when there exists a free market (which is a myth of course).According to proponents of free market economics perfect competition makes sure that neither parties have power over the other and state is a neutral framework and interactions determine the norms of contract. However, since free markets never really exist, unequal bargaining comes to the picture.

The fact that Darrell Hair is taking advantage of the employment contract also points to the issue of the framing of the employment contract. Keeping a few terms in the contract negotiable while a few others non negotiable can be beneficial/ non beneficial to both parties. Thus it is not about how much bargaining power lies with one party but about how much bargaining power each party allows the other to have!

Bargaining Power-A Hairy Affair

Once Benjamin Franklin said "Bargaining has neither friends nor relations".

Bargaining is basically the ability of one party to exert influence over another.Whoever

has the upper hand, is in a better bargaining position.As simple as that.So, it's nothing like either the employee or the employer is "always" at the receiving end.Their current positions determine their Bargaining Power.It's just that most of the the times, the employer is so abundant with available pool that it has an upper hand and hence it gives an impression that employee is always at the receiving end.Clearly in the case Darrel Hair that was'nt the case.

The bargaining power of an employee is almost directly proportional to two things-profit and loss i.e. how much profit would he able to generate for the company if he stays with the company and how much loss would he cause to the company if he is asked to leave the company without his demands being satisfied.As in case of Darrel Hair,it was because of his value in terms of expertise in umpiring and drawing in crowds cause of the controversies along with the favourable position of his to win the lawsuit and his potential to tarnish the image of ICC that gave him the confidence to write such a non-negotiable letter .

Whether I would be able to make such a non-negotiable offer or not-only time will tell. If I am in a favourable position, I would perhaps definitely go for it but only after looking at it from all possible angles and only after being certain I indeed am at a position to bargain! Else it's definitely going to backfire at me.

Incase I receive such a non-negotiable letter from my employee, first step would be to do a thorough investigation into the relevance of the demands and find out if the employee is actually in a position to make such a demand.Next would be to do a trade off between loss to the company in terms of money and reputation if it doesn't agree to the demands and value the company would achieve by agreeing to the employee's demands.If even after that, I find employee is at an upper hand and is indeed an integral part of the company, there is no harm in agreeing to his demands.

In the present scenario of reduced job opportunites, the chance of the same looks bleak though.

Regards

Subhrajit

Contextual Bargaining Power

Hi Everyone,

The theme being discussed is a very relevant theme in wake of the recent recessionary phase of the world economy. The answer to the first question is invariably situational in many of the previous posts.

Do you think the individual is always at the receiving end and the "bargaining power" is always shifted in favor of employer?

Well I believe that in most cases it depends on the contractual clauses in the job offer letters, the amount of time you have spent in an organization and the kind of expertise you have in that field. Based on this if you look at the IT industry today, people in the lower level of jobs can be fired easily based on poor performance which is a rampant practice. Most people in India will not file a suit in such cases, also the employers have safeguarding measuers in their contracts to handle such situations. On the other hand, if you are a critical resource for the company and you posses a rare expertise then I believe yes, you can have a say in the bargaining process. In fact, your employer will be more than keen on retaining you. To cite a case with my previous employer, one person in my team was an architectural expert in setting up new technical designs for contact centers using certain softwares. He was being offered 80% hike in some other companies. The person used this to bargain with the employer and was successful in getting a turnkey project in UK with a promotion and long term onsite opportunity.

In the case of Darrell Hair, he was a member of the elite list of umpires for ICC and also was in a favourable position to win the lawsuit he filed against ICC. This made ICC's position precarious and which is why he was able to negoitate this one time payoff with them.

Based on the email, what are your observations on "bargaining power" in the context of individual - organizational relationship? Would you be able to make similar non-negotiable offer to your employer in any point of time in your career?

The bargaining power as I already mentioned can be twisted towards any one - the employee or the employer. Mr. Darrell Hair could use such a tool because he could successfully argue his case against ICC (when he sued them) and was touted to be successfully winning it. ICC on the other hand was under pressure from some countries to retain Mr. Hair while most of the Asian countries wanted him penalized. Besides he was an elite umpire and had a huge experience of umpiring in his kitty. He also said however, that he wanted to retire after that controversial test between Pakistan and England, but I believe to retire in such a manner did hurt him which is why he would probably have fought this case. Being on the field and umpiring in a high tension match requires a lot of experience and skills which Mr. Hair had and this was recognized by ICC. This shows that the bargaining power can also shift in the favour of the employee. However, today it is not difficult to find talent in the market and poaching is very rampant. Employees invariably look for jobs elsewhere (offering better pay) and it has almost become a norm. They then use these offers to negotiate better remunerations with present employers. In such circumstances, it becomes important for the management to decide the real value of such an employee to the firm and the loss which they would have to bear if he moves. In case of confidential projects they might as well make him sign a non disclosure agreement and force him to sign a bond to work till the project gets completed. Hence, it really depends on the economic conditions, employee's value to the organization and its processes, the nature of the job he was in and the available talent pool in the market which largely decided on the shift of power in a bargaining process.

In future if I acquire such kind of skills and think that my presence is imperative to the company (which is very unlikely) then yes, I might use it in the process of bargaining. Before joining XIMB when I broke the news to my manager he immediately offered my an onsite opportunity within a month and also laid out a detailed growth plan for next two years before me. I wondered where was he when I didn't had an offer from XIMB!!

If you were to receive a similar one time non-negotiable offer from your employee, how would you handle this issue?

This part is real tricky. When you recieve such kind of a letter from one of your employees then you have to objectively look at all the factors which would change if he leaves. Most importantly what would be the damange to the company's image if he is a high profile public figure and despite best efforts his ousting cannot be kept under wraps. If this is combined with his superior expertise and knowledge of the company affairs then it is in the best interest of the company to keep him and be willing to negotiate further. On the other hand, if he is an employee in the entry levels of the company or not so important figure, and your HR deptt can fix the void in no time, then you can let go of him. It also depends on the criticality and confidentiality of the project which the employee was a part of and whether or not any contractual elements are being breached by you. If not, you can happily let him go.

Controversy king

Hi all,

A detailed description of events involving the case of Darrell Hair in the Pakistan-England Test Match can be found here. I would try to keep my viewpoints in relation to the incident as much as possible. However do excuse me if I happen to bring in other relevant [of course according to me] observations.

Darrell Hair was a well established umpire elected by the ICC into its elite panel of umpires. He had been voted the Umpire of the Season in a poll carried out by The Wisden Cricketer (Link). If we consider the case of Darrell Hair, it has been indicated by him that he had been encouraged to make the offer. His bargaining power is mainly from the fact that he stood on the ICC elite panel and any reactions by the ICC on this case would attract a lot of media attention. He had not taken any decision in the incident at hand that was against the books. This had been confirmed by the ICC as well. Hence, I take the liberty of assuming that the ICC could not have terminated his contract prior to March 2008 without providing compensation as acceptable to him. Also, in this case, the consideration of Labor market does not have a very major influence. The reason for this being that the ICC is an unparalleled body and does not have major competitors in the cricketing circuit. Mr Hair could have well been contemplating a “lifestyle change” himself and he would have been reasonably satisfied even if his offer was rejected, sending a wave of negativity to the ICC and he was not selected to umpire in upcoming Test Matches during his term of employment [This is a very far-fetched possibility but I have let my imagination run wild].

Whether or not an individual would be able to make a similar non-negotiable offer to the employer would primarily depend on the terms of employment. However, such a move on the part of the employee may well have future repercussions not in favor of the employee (as had happened in the case of Darrell Hair). In the IT sector, there are occasions when employees try to negotiate for higher pay packages and increments by bargaining with the aid of better offers from other employers. Even if the employee is successful at that juncture to avail a hefty rise or increment and other perks, he may well be the first in the firing line when the organization is facing a crunch situation since he has the lost the trust and goodwill of the employer. Also, it may well happen that the employer may want to “teach a lesson” to such employees and may temporarily accept the terms and conditions of the employee but later show the door to the employee on basis of “performance issues”. A similar situation had occurred with Darrell Hair wherein he was removed from the ICC panel of umpires under the pretext of bad umpiring and poor decision making and was put onto a developmental programme for 6 months.

Majority of the organizations today have adequate lawyers staffed to deal with such situations. If an employee gives me a non-negotiable offer, I would consider the following:

• Consult the lawyers seeking possible legal actions that could be taken by both parties.
• Analyze the financial costs related to the possible alternatives of action. For instance, considering the role play that was taken up in the class, management would not like to create an imbalance in the internal equity of their organization.
• Consider the social aspect of the outcomes. I would not like to send any weak or negative signals to employees within the organization which would tempt them to approach the management with non-negotiable offers that are not in the interest of the organization

I hope I have been able to do some justice to the issue at hand with my limited understanding of the technicalities involved. Looking forward to your valuable comments and any sort of constructive feedback.

Regards,

Urv