Any negotiation can be tricky, but especially ones in which differently positioned, opposing sides are trying to decide what is fair. These situations can grow from a single spark into a raging firestorm before either side knows what really happened. In the situation of Detonation and the Software Engineers Guild (SEG), both sides sit anxiously to determine what issue the other side is willing to give on in order to strike a labor deal. The ball is currently in Detonation’s court, and they must decide how they want to progress with the contract negotiations.
Detonation has the option to attempt to work collaboratively with SEG and find a mutual agreement, or they can play hardball and stiff arm the union. This analysis will investigate the situation and issues of both parties, along with the best course of action for Detonation to take in the next phase of the contract negotiation. Situation Detonation is a gaming company which produces console and PC games as well as internet games. Just under half of Detonation’s 10,000 employee workforce are members of the SEG. The SEG’s contract with Detonation expired at the first of the year; it is currently July and an agreement has yet to be reached.
The members of the SEG have been working without a contract and therefore are being compensated at the default rate of the last contract’s terms. The SEG has rejected any previous agreements because Detonation wants to transition from revenue sharing, and the SEG wants to expand its jurisdiction into the internet gaming division. The members of the SEG are in a position where they seek to maximize their compensation in order to generate as much money as they can during their productive lifespan. Under the previous contract, the SEG members were able to supplement their base compensation with revenue sharing.
With the current state of the economy, revenue sharing is a much safer and more fruitful option than profit sharing. Giving up revenue sharing, without a substantial increase in base pay rates, would cause a significant reduction in the overall compensation of the programmers. On the other hand, Detonation is in a tough position as well. The company has just been presented a report showing revenue from internet games over the next three years would be inconsequential and retail sales are suffering. Wall Street is predicting that the company will not hit their quarterly or annual numbers.
Any major concessions on the negations would impact the bottom line of the company as well as how it is viewed from Wall Street. The company needs to get the SEG to agree to a fiscally sound compensation contract so the company can remain profitable through these trying times. Recommendations Detonation needs to take control of the situation quickly and reduce the bargaining power of the SEG. By gaining the upper hand, Detonation will be able to control the tempo of negotiation as well as make its offers look more enticing.
In order to do this, Detonation must be firm with its offers and yet empathetic to the situation of the SEG members. The first action that Detonation should take in order to resolve the labor dispute and settle on a contract would involve removing an integral bargaining point from the SEG. Detonation needs to eliminate Tetsui from the equation. In order to achieve this outcome, Detonation should offer Tetsui a technical management position in its newly formed internet gaming division, and give him the power to build his own team out of the best current employees.
However, the stipulation for joining Tetsui’s team would be that the individuals would have to leave the union, and would be working under individual contracts with Detonation. Since Tetsui’s team would be the best and brightest of the company, they would be offered generous compensation packages. By removing Tetsui and the best coders from the union, the union would lose a good portion of its power and bargaining position. Also, by securing Tetsui and his team, Tetsui would be satisfied that a strike would not impact his current and future gaming projects.
Once Detonation has successfully remove Tetsui from the negotiations, they need to make a firm last chance offer. This last offer needs to be appealing to the SEG since any denial of the offer would surely lead to a strike. The offer will be base on the two major issues that keep the SEG from accepting any previous deals. This offer will be a tiered increase in the pay and benefits with the first year resulting in a 2% increase that would be retroactive to the beginning of the year. Year two would be a 3% increase in pay and benefits with the final contractual year increasing by 5%.
In the final year, the SEG would get the greatest increase but would also have to transition from revenue sharing to a profit based sharing model. The second highlight of the offer would be to give the SEG a small foothold in the internet gaming division. SEG’s involvement in the internet gaming division would be a tiered approach as well with the final jurisdiction being based upon the profitability of the division. In year one and two, the SEG would be staffed on 20% of all projects over $150,000.
This would partially appease their request to have jurisdiction over internet gaming, while giving the SEG the opportunity to prove their value in the division. In order to drive success in the division, SEG’s involvement in the third year will be based on the amount of profits the division generates. The percentage of SEG involvement would directly correlate to the portion of profit the internet gaming division provided. This offer will be given an expiration date of seven calendar days from the date it was presented.
By stipulating a quick turn-a-round date, the SEG will not have enough time to gather the necessary support for a strike. It will reduce the risk that the hardliners will have time to persuade the remaining SEG members that the deal is not good enough. Conclusion In order to settle the labor dispute, Detonation must take a hard line with the SEG, especially after six months of non-agreement. However, it is in Detonation’s best interest to make an acceptable offer to the SEG. The company must make an offer that is enticing enough to keep the experienced workers and the knowledge they bring to the company.
Detonation will be able to retain its developed talent and leverage existing knowledge to make its internet division successful. Also, both Detonation and the SEG stand to benefit from reaching this agreement. When Detonation seals the deal with SEG at an acceptable accord, Wall Street will not punish the company and both sides will gain value from the outcome. In addition, the SEG will have a foot hold in the internet gaming division as well as a tiered increase in compensation. These requirements will satisfy the interests of the SEG and meet their needs for the negotiation.