Any negotiation can be difficult, particularly when opposing sides with differing positions try to reach a fair agreement. These circumstances can quickly escalate into a heated conflict without either side fully understanding the cause. In the case of Detonation and the Software Engineers Guild (SEG), both parties are eagerly awaiting to see which concessions the other side is willing to make in order to reach a labor agreement. The responsibility to determine the next steps in the contract negotiations currently lies with Detonation.
Detonation has the option to either collaborate with SEG and find a mutual agreement or adopt a confrontational approach and reject the union. This analysis will examine the situation and concerns of both sides, as well as propose the best course of action for Detonation in the upcoming contract negotiation phase.
Situation: Detonation is a gaming company that develops console and PC games, as well as internet games. Almost half of its 10,000-strong workforce are members of the SEG. The SEG’s contract with Detonation expired at the beginning of the year, and despite several months passing, no agreement has been reached yet.
The members of the SEG have been working without a contract and are currently receiving compensation based on the default rate set by the terms of the last contract. The SEG has declined previous agreements as Detonation aims to shift away from revenue sharing, while the SEG desires to extend its jurisdiction into the internet gaming division. The members of the SEG are seeking to maximize their compensation in order to generate as much income as possible during their productive years. In the past contract, SEG members were able to augment their base compensation through revenue sharing.
Given the current state of the economy, revenue sharing proves to be a safer and more profitable alternative to profit sharing. If revenue sharing is abandoned without a considerable increase in base pay rates, it would lead to a substantial decrease in overall compensation for programmers. Conversely, Detonation is also facing challenges. It has recently received a report indicating that revenue from internet games will have minimal impact over the next three years, and retail sales are struggling. Wall Street predicts that the company will fall short of its quarterly and annual targets.
The company’s financial performance and reputation could be affected by significant concessions in the negotiations. It is crucial for the company to reach an agreement with the SEG that ensures fiscal responsibility in compensation contracts, allowing it to maintain profitability during challenging times. To achieve this, Detonation must promptly take charge of the situation and diminish the SEG’s bargaining power. By gaining the upper hand, Detonation can dictate the negotiation pace and present more appealing offers.
To resolve the labor dispute and reach a contract agreement, Detonation should adopt a firm yet empathetic approach towards the SEG members. The first step would involve addressing a crucial bargaining point by removing Tetsui from the equation. To achieve this, Detonation could propose offering Tetsui a technical management position in its newly established internet gaming division. Additionally, granting him the authority to assemble a team comprised of the most qualified current employees would further facilitate this outcome.
However, in order to join Tetsui’s team, individuals would need to leave the union and work under individual contracts with Detonation. These individuals, who are the best and brightest in the company, would receive generous compensation packages. By taking away Tetsui and the top coders from the union, it would lose a significant amount of power and bargaining position. Additionally, by ensuring that Tetsui and his team are on board, Tetsui can be confident that any potential strike would not affect his current or future gaming projects.
Once Tetsui has been successfully removed by Detonation from the negotiations, they must present a definitive last opportunity proposal. This final offer must be attractive to the SEG, as rejecting it would undoubtedly lead to a strike. The offer will address the two main issues that have prevented the SEG from accepting previous agreements. It will consist of a graduated increment in payment and benefits, starting with a retroactive 2% increase in the first year. In the second year, there will be a 3% increase in pay and benefits, and in the final contractual year, there will be a 5% increase.
In the final year, the SEG would receive the highest increase but also switch from revenue sharing to a profit-based sharing model. Additionally, the offer includes providing a small position for the SEG in the internet gaming division. The SEG’s involvement in this division would be based on a tiered approach, depending on how profitable the division is. In the first and second years, the SEG would be assigned to 20% of all projects exceeding $150,000.
This proposition aims to address their desire for internet gaming jurisdiction and test the SEG’s capabilities in the division. To ensure success, SEG’s participation in the third year will depend on the division’s profitability. The level of SEG involvement will correspond directly to the internet gaming division’s profits. A time limit of seven days starting from the presentation date will be imposed on this offer.
By setting a tight deadline, the SEG won’t have sufficient time to gather support for a strike, minimizing the chances of hardliners convincing other SEG members that the deal is inadequate. In order to resolve the labor dispute, Detonation needs to take a firm stance with the SEG, especially after six months of failed negotiations. However, it is in Detonation’s best interest to make a satisfactory offer to the SEG, enticing experienced workers to remain with the company and retain their valuable knowledge.
Detonation will utilize its developed talent and existing knowledge to ensure the success of its internet division. This agreement will benefit both Detonation and the SEG. When Detonation finalizes the deal with SEG on mutually agreeable terms, there will be no negative impact on the company’s stock valuation, and both parties will derive value from the outcome. Furthermore, the SEG will establish a presence in the internet gaming sector and experience incremental compensation growth. These conditions will fulfill the SEG’s interests and address their negotiation requirements.
