Wednesday, January 13, 2010
Demand & Supply Game
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.
Tuesday, January 12, 2010
Non Negotiable Offer: The Aftermath
This cricketing controversy brings to the fore the theme: contracted or connected very well. The trouble with Darrell Hair was that he thought like a lawyer (now a cliché I fear but still apt) and not an umpire serving the greater interests of cricket. While Darrell Hair was no doubt a “high performer”, he failed to keep himself away from controversies, be it the chucking controversy with Muralitharan or the ball tampering controversy. Perhaps he failed to realise that these controversies are not isolated incidents but was damaging his credibility as an ICC umpire as well. He can be forgiven for been straightforward, he can be forgiven for speaking his mind, but can he be forgiven for the non negotiable offer which offended the sanctity of the ever decreasing halo of umpiring profession which many felt brought the game to disrepute. Of course he took back his mail saying it was under immense pressure but the damage had been done. Cricket didn’t change after this incident but the incident showed it is not “just a game” after all. The whole incident spilled over as a high performing but replaceable employee demanding his legitimate (?) chunk of pie from the organisation. Now what did the organisation do? First it ensured that the request for secrecy be an open secret. Now what it did was it brought the issue from a “legal platform” to a “moral platform” open to subjective criticisms and judgements from those who don’t just see the job as a “job to be done” but as a “virtuous duty” and there is no dearth of these people , least in sports. This dramatically weakens the demand calculated in numbers to a non numeric entity- Greed, Avarice. The non negotiable offer now looks like an offer which holds no ground and Hair was quick to realise this. The legal mode was abandoned. Now what lessons are there for us here? If I was in his position (position means a performer in an organisation thinking of a non negotiable offer....I am least interested in umpiring-not because it is a thankless job but because you have just one mate with whom you can hang out with i.e. the second umpire for the whole day), I would first judge the environment well and of course do some homework. Is it the opportune time to ask for such an offer? Am I in a position to do so? What will the possible reaction of the organisation? Will the organisation put on its legal spectacle or will it see it as a part of the relationship? Will it change the equation forever? How will my colleagues react? Do I need to take their feedback? At least I am sure it will not be an easy job managing the aftermath of the offer.
Who rules the roost??????
All of us are quite familiar with this rather famous (infamous) incident that rocked the International cricket world. Lets us do a small synopsis of the case and analyze what you and me and the companies/organizations that employed us or would be employing us would do in a scenario.
It all started with Darrel Hair accusing the Pakistani team of ball tampering. The team protested and didn’t field itself and the match was subsequently forfeited to England. Soon the mighty players- ICC, country cricket boards like BCCI, CAB and the media world jumped to aggravate the fiasco. Then came the special letter from Hair to ICC.
Having worked with a MNC for more than 24 months and been through the initial phase of boom till the Lehman brothers collapse and then the following meltdown, I have seen a bit of the two sides of the coin.
Pre Lehman brothers collapse-The economy was on a roll. As growth forecasts and demand equations were outplaying each other, companies were expanding at an astronomical rate and then were recruiting more and more people every day. The demand for employees and resources was more than the available supply and so the sword of power was with the employees. Many of them had more than 1 offer. Hence they were making hay while the sun shone- demanding salary hikes, better profiles, onsite opportunities and other benefits. Clearly the employee was the king.
Aftermath of the meltdown-The growth juggernaut applied sudden brakes. Organization and companies started getting less and less orders and business started to suffer. They had no choice but to resort to cost cutting measures- freeze or almost no hike in pay, pay cuts including abolishment of variable pay, forced leave, sabbaticals, deferred salaries payment and even job cuts. Now the employees had absolutely nothing to say and they had to meekly accept the treatment mooted. The balance of power shifted to the employer or organization hands and so the bargaining power and they were the new kings.
Hair being a well known umpire and respected in the cricketing circles did enjoy some clout. Moreover he was in the elite panel of umpires. And hence he used the power of his position to come out with the letter.
Let’s analyze the following points with respect to real life scenario-
Would you be able to make similar non-negotiable offer to your employer in any point of time in your career?
It all depends on my position and relative worth. It depends on the experience level, my capabilities and competencies. If I am a so called critical resource or in other words my team and my organization would find it difficult to find a substitute for me, then the sword of the bargaining power rests with me. I can define the rules of the game to certain extent. Also if I have other assured avenues or opportunities like offers from other organizations, I can dictate terms to certain extent. I am stressing on certain extent because I believe most of the times, a single employee cannot make the elephant (organization) dance to his/her tune for long. Organizations because of their size and clout will find a replacement and curtail the individual’s flight. Let me remind you that even Steve Jobs, the founder of Apple was driven out by his own company.
Employer or organizational perspective
Again it all depends upon the relative value of the concerned individual to my organization. I would never want to lose a qualified, competent and valuable resource. As the employer , I would like to analyze the terms put forth and based on the criticality of the resource and the substitutability and then take the call. It also depends on what kind of organization I have, what’s its value and the economic scenario prevailing.
Thank you
Power Tactics - Bargain your Way !!
Bargaining Power and Individual-Organization Relationship
Based on my experience with an IT company for over 3.5 years I sincerely believe that "bargaining power" is never limited to just one party and keeps on shifting between Employer and the Employee. The reason for this tilt of power balance can be multiple like:
1) The situation of the job market - In recessionary times employer has the "power (driven by need)" to go for salary cuts. deferring joining dates, deferring promotions, layoffs etc. In boom time it is the employee who is able to exercise higher demands from its employer based on his/her market standing and other offers employee may hold.
2) Skillset and Dependency level of the individual in his/her current job - Higher the task dependency on an individual or less availability of skills he/she possess for the job inside and outside the organization, more is the ability of employee to demand better incentives and offers in exchange of work. On the other hand, Organizations always prefer to have more than one person to know about the job and through Knowledge transfer, Shadowing and Training sessions they attempt to create sufficient backup for a key resource.
However another important area is that of "External Support and Pressures".
3) A good rapport with the client that an employee serves can also serve as a significant source of "power" that an employee has over his/her employer. Further, media and government pressures can also limit the power of employer in taking measures like ending employment agreement with the employees.
In an individual-organizational relationship the "bargaining power" comes from how the above-mentioned factors work out in favor of either of the parties. It is not wrong for employee to be opportunistic and demand higher incentives or better offers when conditions favor him and that's exactly what happens in the organizations. This corresponds perfectly with a saying that "Make Hay while the Sun Shines"
In my viewpoint, although an employee may be able to make a non-negotiating offer in short run based on favorable conditions for him/her, in the long run it is the organization or the employer who would always be able to neutralize and also command the situation through use of multiple tools like performance management systems, creating backups etc. Not to forget, character certificate and background checks are also a source of power that employer possesses in his power game against the employee. A new employer is very likely to refer to old employer of the candidate for inputs on his performance. In such cases, if the employee leaves the organization by offering a non-negotiating offer which gets rejected by employer, there are chances that employer notes down such activities in employee records maintained at their end and which reflect poorly on his/her attitude.
As from all professional experience that I have and rightly pointed out by Sudip Ghosh in his post, I believe that every offer is negotiable in some way.
Coming to the case of Darrel Hair and ICC (August 22 2006 - Pakistani Vs England - Ball Tampering Issue), Darrel Hair accused Pakistani team of ball tampering. Pakistani team protested against it by not taking to the field post Tea Session in which case the match point was awarded to England. This became a source of constant media debate and pressure on ICC.In the past, there was pressure from other cricketing nations like India as well for not allowing Darrell Hair to officiate in their matches because of his proven umpiring errors against the team. Public comments made by Darrel Hair on Sri Lankan player (Muralitharan) also compounded the matters for Darrel Hair. Now Let's look at three critical factors of the case:
1) Darrel Hair made his on-field decision in ball tampering case as per defined laws of cricket
2) He was recognized as Elite panel umpire by ICC.
3) He had a valid contract with ICC till March 31, 2008.
With his back against the wall due to constant media and ICC pressure, Darrel Hair taking the support of aforementioned factors issued a non-negotiable offer to Doug Cowie of ICC demanding $5,00,000 in case ICC decides to terminate his employment contract with him. In case ICC doesn't agree to paying this amount and other conditions mentioned in non-negotiable offer, Darrel Hair would be available for services to ICC till end of his contract.
Interestingly, the case is about an employee negotiating terms for his exit which is in some way forced upon him through ICC itself. Further, it is not that his skills are not replaceable by other umpires. So in a sense, unless the contract prohibits ICC from terminating the services of Darrel Hair for any reason (which I presume wouldn't be the case) it is Darrel Hair who is in the weak position with this matter. And as the fact stands out, ICC didn't accept non-negotiable offer from Darrel Hair and banned him from officiating in international matches. Hair was reinstated him into Elite Umpiring Panel on 12 March 2008 and resigned in August 2008 to pursue his career in coaching.
Source : http://en.wikipedia.org/wiki/Darrell_Hair
Would you be able to make similar non-negotiable offer to your employer in any point of time in your career?
There are two conditions that should be met before I make a non-negotiable offer to my employer at any point of time in my career:
1) I am a key resource for the organization (perhaps irreplaceable). This means that it's in company's best interest to retain me.
2) I possess backing of an alternative lucrative opportunity / offer (to safeguard myself in case non-negotiable offer is rejected)
Unless these two exist, there will not be any weight in my non-negotiable offer.
Employer's Viewpoint
If I get a similar "non-negotiating" offer from an employee then I would first analyze the following:
1) Resource criticality and substitutability.
2) Job Agreement with the resource
3) Conditions leading to non-negotiating offer from employee.
Based on above mentioned conditions I would be in a better position to take a stand on offer from the resource. A good resource leaving the organization is never desired by the organization and so it's imperative to negotiate with that resource to come to an agreement that is beneficial for both parties.
NOTE: I am deliberately using the term resource instead of employee in the Employer's perspective to indicate what in reality a person is to an organization in eyes of the manager. There is definitely no place for emotions in such negotiations.
Thanks a lot for reading,
Kindly provide me your valuable feedback / highlight any shortcomings in the text above.
How Powerful is my Bargaining Power?
Bargaining power of an individual often depends on his status, power and influence. In context of individual-organizational relationship, the bargaining power would depend largely on the “Need” i.e. who needs whom the most. Is it the employer who fears to lose business with the employee or the employee who needs a job desperately?
Based on the email, what are your observations on "bargaining power" in the context of individual - organizational relationship?
When the pool of suitable applicants is large, the employee has less bargaining power. If the business depends on the employee to large extent, then the bargaining power of the employee increases.
Inequality of bargaining power occurs as the employer often is in a stronger position to dictate the terms and conditions and also decides how much bargaining power to give the employee.
In this case, Darrell Hair realized his importance and the difference he could make to ICC, so he wrote such an email to ICC. He made the best use of his power to fulfill his interests.
Would you be able to make similar non-negotiable offer to your employer in any point of time in your career?
It is possible to make such a Non-Negotiable to my employer in case I realise that my “Market Value” is more than what I am getting. In order to make sure that I get (and if possible more) than what I deserve, it would be important to make such an offer to my employer.
But there are certain issues which I would like to take care of before making Non-Negotiable Offer:
• Am I in a position to make this offer? Am I easily replaceable in the organization?
• How important is my relationship with my employer to me and how this would be affected after making the offer?
• In case the offer is not accepted by my employer, what would be my course of action? Would I resign or negotiate the terms and stay with my current employer. In case I still plan to continue, would I be treated same as before.
Also, if you were to receive a similar one time non-negotiable offer from your employee, how would you handle this issue?
In case I receive such an offer from my employee, the decision would depend on the same conditions:
• Is the offer justified?
• Is he replaceable?
• Is the cost of accepting the offer more than expected profitability from the employee?
• To extent will the business be affected if his position is unfilled?
Monday, January 11, 2010
Power lies with the Influential..
This bargaining power has always resided with individuals and organisations that have an edge over the other party in the sense that one of the parties dreadfully needs what the other party is offering. It is not always necessary that one of the parties needs something desperately, it could also be that the product is not available with anyone else or the quality of the product is the best with that particular party or as in the case of individuals the skills and experience of that person cannot be replicated.
This often leads to a onetime non-negotiable offer. It is always given by that party which is in a more advantageous position as compared to the other party. In this offer, the terms and conditions of the contract are stipulated by that party and have to be accepted by the other party if the contract has to be made good.
Some examples could be as follows:
1. Generally when corporate executives switch their jobs, they are in the receiving end and they define the terms of the contract as the company requires the services of the executive.
2. People with specialized skill and knowledge are mostly in the receiving end as they are scarce in number and their services are of utmost importance like deep-sea divers, exploration experts, drillers, etc. Suceesion Planning is generally carried out in firms for these individuals.
3. When the economy is not booming or is in a recession, then the organisations are in the receiving end as the employees are at their mercy and hiring is also stopped.
4. The transfer of Christiano Ronaldo from Manchester United to Real Madrid for a staggering sum of 80 million Sterling Pounds could be termed as a non-negotiable offer in which the individual as well as the previous team both were in the receiving end.
In the above stated case, Darrell Hair could make such a onetime non-negotiable offer because he was one of the elite umpires in the ICC panel and was also one of the most experienced ones of the lot. Being one of the oldest umpires he had the capacity and audacity to make such an offer because of the following reasons:
1. ICC could not terminate his services only because of one faulty decision as the decisions take on the field are totally subject to one’s perception at that point of time.
2. The ICC could not assign him many matches further on because of the ball tampering controversy.
3. He also knew that if he retired now he could be able to save his face while ICC could also put an end to the controversy.
I would be able to make such a non-negotiable offer to my employer if I become a top executive in the corporate world or I possess some specialized skill and knowledge which are very difficult to acquire and find.
If I were to receive such a onetime non-negotiable offer from my employer I would first take into account the economic conditions of the business world. If the situation is good and the economy is not in a recession, I would look in further else I would take the offer. Then I would look into the prospects of the job being offered by the employer. If the job prospects are very good and the career path is well-defined, I would take the offer else I would look for more offers from other organisations and take up the best one.
The Way Behind--Non Negotiable Offer
Initial Views:
Getting straight to the point of discussion I would like to say that it is very evident to anyone like me who has worked in the IT industry for two years that there is an unequal bargaining power between employer and employee. From whatever professional environment I have worked in I can say that the reason for this is simply that the employer has thousands of employee working for him .The loss of a single employee is of little annoyance to the employer and is, in fact, we can say as an anticipated cost of doing business in today’s world.But if you take the case of the employee I belief that he or she is at the receiving end. His job is usually the only source of income .Losing his job means losing 100% of his livelihood. Furthermore, because of the typical Indian way of living it not only puts financial pressure on him but also psychological where his peers and families have a great role to play. Moving on it is again very difficult to find a new employer than vice-versa. Normally when a person loses a job he is put of work for weeks before he ends up with a new job and furthermore being fired from a job tends to be a black mark upon the resume of the employee, but the fact that an employer has mistreated its employees in the past never seems to prevent it from finding new workers.
The labor market is not a true free market:
· A great deal of effort is required for the employee to find a new job. Even the employer incurs significant costs in hiring a new employee.
· The employer has insufficient knowledge of an employee’s true worth.
· There is the unequal bargaining power problem.
OBSERVATIONS:
Background:
The Australian cricket umpire Darrel Hair, resident in the United Kingdom is a person who seems to love controversy. He began by no-balling Sri Lanka's ace spinner Muttiah Muralitharan seven times for 'throwing' in the Melbourne Test in 1995. Umpire Darrel Hair described the spinner's action as diabolical, prompting the Sri Lankans to complain to the ICC that he had brought the game into disrepute. The Spinner Murali was later cleared by the ICC using sophisticated technology. Umpire Darrel Hair also said in his autobiography that he would not hesitate to 'no-ball' Murali at any future matches. ICC said it was unprecedented that a serving umpire would make public comments on current players.
As if this was not enough, in the fourth Test England verses Pakistan, Hair accused the Pakistani's to have tampered with the ball and penalized them by awarding five runs to England. Pakistanis did not agree and refused to take the field after Tea resulting in the forfeiture of the Match. This is another first in the long history of Test Cricket.
While the issue was raging Umpire Darrel Hair sent an e mail on Tuesday 22nd August 2006, to Doug Cowie under the heading "The way forward" making a "non-negotiable" offer demanding five hundred thousand dollars to retire from International Umpiring. An email was leaked to the press and the motives of Umpire Hair's decisions on the field were questioned.
ICC's Chief Match Referee Ranjan Madugalle did not back Umpire Darrel Hair's ruling on the ball tempering allegation and exonerated the Pakistanis from such wrong doing.
Pakistan have stated officially that they do not want Umpire Hair to officiate in any of their matches, India have asked for him not to be considered for the Champions Trophy and Sri Lanka have long held grievances against him.
The ICC restored Hair to the Elite Umpiring Panel on 12 March 2008 while Hair resigned on August 2008 in pursuance of a coaching career.
Sources: http://articles.smashits.com/articles/sports/150430/sports-team-darrel-hair.html
Views:
Now my views on individual organizational relationship after going through the email was that the employee relationship game does not take place in vaccum.It generally takes place in an organizational setting, which operates under constraints imposed by factors which are external to the organization. This internal and external scenario clubs together a force that influences the relative balance of bargaining power between employers and employees. Whether the outcome of this employee relations game is biased towards employer or employee is based on the relative balance in the bargaining power.
Now the seeing Darell Hair directly demanding a non negotiable offer from the ICC brings to our mind two key level factors that influence this:
Macroeconomic Scenario:
The factors external to the environment which influences the relative balance of bargaining power between individual and organization are the economic, legal and technological factors.
Economic policies which are directed towards creating full employment and maximizing growth
Can shift the balance in the favor of the employees.
Microeconomic Scenario:
Now since I have worked in the IT industry, I could like to state some points which can lead to a scenario as it happened in case of Darrell Hair.
§ Whether employees have become key resources and can inflict cost on the organization.
§ Whether there’s alternate resource available to the employer.
§ Whether employee is aware of his/her potential capabilities.
§ Whether the employee has previously exercised his/her potential capabilities to initiate a non negotiable offer and whether it has been successful or not.
Now going through his terms of negotiation it is very clear to him what he wants from the ICC.
Now he was in a position to make this statement because of the status he had in the cricketing world as being one of the best in his field and also because of the contract that he had with
ICC till March 2008.
Frankly to me what transpired during the series was nothing more than a power game. Earlier it was Pakistan vs. Hair for the most part. Then it was also Hair vs. ICC, Hair vs. media, ECB vs. Pakistan (as they are looking for teams to replace Pakistan), Asian media vs. Australian media, white vs. brown, Elite vs. Asian and what not. Racism was brought in to context then Hair responded that he of all people was being racially discriminated so on and so forth.
Not only this after this letter was made public Darrell Hair exact comments where “This correspondence was composed at a very difficult time and was REVOKED by myself two days after a period of serious consideration”.
Now this happened after the letter was made public and comments by Malcolm speed.So I smell big time politics here where he may have been influenced by the ICC itself to draft a letter so that everyone comes out clean but unfortunately the letter got leaked and the entire plan boomeranged on them.
Would you be able to make similar non-negotiable offer to your employer in any point of time in your career?
Now making a non negotiable offer depends on the place the position and the situation where I will be in my career at the time of making this offer. Now if I have become a critical resource in my organization and I think that my leaving the organization would definitely have cost implications on the company then I would certainly go ahead and make a non-negotiable offer. Apart from that if I see any new opportunity knocking on my door with better benefits than the current job then I would again make a similar offer. If I am not able to build myself as a competent resource and do not have the talent to get new and better job offers than the idea of making a non-negotiable offer to the employer goes out of the window.
Handle the issue from an employer’s perspective:
o Now if I get a similar offer from the employee then I would first check the dependencies on the concerned employee, whether he in any way affect my production flow or services that will affect my bottom line.
o Then the next viable thing to do would be to check the terms and conditions of the concerned employee’s contract and see whether he is on firm grounds for determining a non negotiable contract.
Now there is a view point that in an IT organization creating a back up resource would make the concerned the employee lose some ground on his demands for a non-negotiable offer .Now generally when people become critical resources in an IT organization it is through years of hard work and experience in his concerned domain. Now from what I have seen in my organization is that resources leave the company within a notice of 15 days plus additional money that he has to give back to the organization for not serving a notice period of 2 months (which was in my organization). Now this situation gets interesting when the concerned competitor organization agrees to pay for the amount of money due by him to his current organization. Now most people in an IT organization seldom serve a notice period because immediately when an employee submits his resignation paper, then he is looked skepticism and disloyalty even though he is trustworthy, competent and dependant. The fear of being side-lined or alienated also comes into the picture. Similarly, there is a tendency to ignore suggestions and inputs of employees who resign from the organization. Now generally most of the employees feel that serving a shorter notice period is much better which in turn leads to the fact that building back up resources takes time and reaching to the level of competency is much for difficult for the backup resource. Even if a back up resource is engaged for the past two months with the concerned person to learn the skill set the he possesses, the backup is more often than not gets engaged in other project related activities and when the time finally comes to take up the vacant position he is not fully prepared to do it. This is how events normally pan out. Hence building back-up is one way to tackle the situation but it doesn’t always pay full dividends.
Now I would like to leave you all with the idea that no offer is non-negotiable. Every offer is negotiable in one way or the other
Kindly provide comments and feedback on my viewpoints and do correct me if I have gone wrong somewhere.
Thanks a lot for reading..