Thursday, 24 October 2013

Procurement reflections on Grangemouth negotiations

I'm sure, like me, you felt for the workers of Grangemouth who heard yesterday they were going to loose their jobs. Seemingly uncontrollable cost of living increases, Scottish winter fuel costs and Christmas only add to the real issue of whether or not there is any hope of future employment.

But what we are seeing is also high stakes negotiation. At face value we have the following buyers and sellers:
  1. Shareholders, who are indirectly buying workers;
  2. The workers, who bought union membership;
  3. The union, who sell union membership;
  4. The union, sell (broker) on behalf of their members;
  5. The workers, who sell their skills to the employer;
  6. Buyers throughout the country, who purchase fuel and plastics, used, for example, in the manufacture of cars and packaging;
  7. The UK government, who will incur additional financial and political costs if the workforce are unemployed or there are industry security of supply impacts.
However, what happened?
The owners of Grangemouth concluded that they were losing £10m a month and needed to have a pay freeze, end the final salary pension scheme, etc. if the plant was to be viable. The union recommended non-acceptance of the proposed changes to their members. A fraction less than 50% of the workers rejected the proposed changes through the union. The company then announced closure of the petrochemical plant and the union said these aren't the rules we use in this game. If the plant closes, the union lose all their membership fees and the workers stare into the abyss of unemployment. At the heart of the mayhem is that the union seemed to have misread the owners position and thought it was only a threat. Then, having been told the plant would close, today the union have rethought their position and gone back, cap-in-hand, begging the owners to implement the originally proposed changes. As I write the owners are now deliberating.

Something appears to have gone drastically wrong with the union negotiating strategy in what isn't 'a game' at all. Nor did the union appear to have had the backing of the vast majority of the workforce, yet their negotiating stance impacts on all the workforce.

I just wonder how often buyer/seller negotiations go as drastically wrong? The buyer forgets they 'need to buy'. The buyer assumes the seller has to accept the terms, yet the seller just walks away. The buyer has to admit they got it wrong and then try to get the seller to return to the table cap-in-hand! It's all about power and dependency isn't it, yet how often do we misread the relative power and who is dependent on who. It's a classic lose/lose. Andrew Cox has written some really great stuff addressing these very issues.

Of course, negotiations rarely, if ever, take place in a vacuum. and the outcome of the recent events will also influence the future. Neither party is in the same position they started in. The stand taken by the Grangemouth changes the position of their negotiation the next time. The union has not just lost face on this occasion, they will return for future negotiations with significantly less power. I'd have thought the union can also expect to lose members, particularly amongst those who didn't support the initial stance taken by the union and who were marched to the very edge of the precipice of unemployment. Then you have the impact nationally - have the Grangemouth union also changed the status quo vis a vis other owners and given the confidence to other employers and weakened the confidence of other unions and their members?

Perhaps the next time you think about negotiating you should think about Grangemouth, and maybe even my previous blog on benevolence.  

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