Wednesday, January 13, 2010

Demand & Supply Game

It can be observed from the given case that, in individual-organizational relationship, bargain power rests on one who is needed by the other more.
In this case, ICC needs Darrel Hair's resignation more than Darrel Hair needs anything from ICC. This gives Darrel the bargain power and by virtue of which he is able to write such a mail to ICC.
It can also be observed that, when one has bargain power he tends to exploit the opportunity, which is being done by Darrel in this case.


In today's world the bargain power of employee and employer shifts from one end to the other. In today’s market economy everything is driven by the demand-supply game. If the demand of the employee is high and the supply of its substitutes is scarce, then the bargain power shifts towards the employee. If the employee is dispensable and plenty of substitutes are available in the market then the bargain power remains at the employer's end.
From Employee’s perspective:
It is possible to make such a non-negotiable offer to employers. But for that one needs to satisfy two fundamental prerequisites,
Demand: Employer must need you badly.
Supply: Supply of your substitute must be rare in the company as well as in the external job market.
The demand criterion would be satisfied when:
You have got special/unique skill sets required by your employer.
The employer's business is dependent on you and your style of working.
You possess some extraordinary ability, which the company considers to be valuable.
You are indispensable to the company.
The supply criterion would be satisfied when:
There is scarcity of the substitute for you in the company and in the job market.
Effect of the non-negotiable offer:
Short term: You get what you demand from the employer
Long term (If you stay with the same company): In long term nobody is indispensable. There would be a time when your substitute will be available in the market or can be trained in the company.
If you have shown your opportunistic tendency to the employer before then the life of your career in the company would be the life of your indispensability to the company.
What to do? : As we are a part of market economy, we must consciously follow the fundamentals of it (Demand - Supply) and as a true product of the market economy, we should capitalize on the market opportunities (capitalize the bargain power as long as we have it). In the same time, when we realize that we don't have much to exploit from the current employer, without any any-type of dilemma we should jump to the place where we can exploit more.
If somebody has question marks on ethical or moral ground, my answer is "market doesn't understand ethics and morality". If a company needs you it will kiss you else it would kick you out. So choice is yours.

From employer's point of view:
If we receive similar non-negotiable offer from an employee, first we would assess the dispensability of the employee and the availability of its substitutes. If we find that, the person is dispensable and the substitute is available, then we would laugh saying "what an insane fellow" and reject his offer.
If we find him indispensable and its substitute is scarce then we would go to the negotiation table. As nothing is unchangeable in a sane human mind, “non-negotiable” can be negotiated to “negotiable”. It depends how effectively you negotiate/convince or how quickly the employee's mindset de-crystallizes. If the employee turns out to be insanely adamant, then give him what he wants (as long as it satisfies the economical sanity). In the mean time look for a substitute and start preparing his replacement. In this case, the employer should ensure to keep the matter as confidential as possible. Because, this act of the employer if disclosed would give wrong signal to other employees and this might frustrate few for disparity and might encourage few to adopt the same non-negotiable bargain technique.
Effect of yielding to the non-negotiable offer from employee:
Short Term effect:
The employee is retained and the business continues as usual. But this act may create dissatisfaction in other employees and might encourage others to adopt the same technique.
Long term: When a similar situation occurs in future the company might again stoop to the employee’s demand. In long term this might become an expectation and general practice of the employees. This in turn might put the company in difficult situations in lot more times.
What to do? :
To avoid any such thing in future, the company should take adequate steps to make the organization process dependent rather than employee dependent. It should try to keep backups ready for critical positions. And come up with a process by which the replacement could be made ready very fast. This would make employees less indispensable and reduce their bargain power. It would be impractical to say that no employee can be indispensable in a company, but the company can try its best in right direction to reduce the employee’s indispensability hence the bargain power as much as possible.

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