Wednesday, May 17, 2006

Employee-Employer Power Dynamics in Negotiations

Negotiation has been defined as "an interpersonal decision-making process by which two or more people agree how to allocate scarce resources"

Every year, companies have to perform a mandatory ritual called as "employee appraisal". Often employee appraisal is a two or three way negotiations between employees, managers and top management. It is very common for employees to negotiate a higher salary and/or a promotion during the appraisal process. And at the end of this negotiation process - both parties can walk away happy or both can end up very unhappy depending on the process and outcome of the negotiations. The outcome of the negotiation is greatly dependent on the power the negotiator yields during the negotiations.

Source of Employer power

If employer holds greater power, then the employee raises/promotions may be seen as unfair. Often employers/managers are eager to be seen as fair negotiators - and work on creating a win-win negotiations. However during difficult times, there may be pressure to reduce salaries/benefits and at those times employer can yield great power over the employee.

Source of employee power

If employees are not satisfied, they can opt to leave the company and work somewhere else. This represents a serious threat to the operations of the company - as key employees cannot be replaced immediately. Thus employees too can yield a greater power over the employer.

Power dynamics

I have seen a lot of these employee-employer negotiations and having worked in marketing, I know a few things about negotiations. So in this article, I am writing about the power dynamics in employee-employer negotiations.

One factor that is widely acknowledged to affect negotiator performance is power. A negotiator’s power may be critical for the quality of his or her success, because it can determine the allocation of rewards in an agreement. The greater one’s power relative to the power of others, the more resources one should be able to claim.

In 1959, French and Raven described the types of power bases. They classified power into 5 types:

  1. Reward power : A’s power over B is a function of how much B can be rewarded and the extent to which B believes that A controls these rewards.

  2. Coercive power: A’s power over B is a function of how much B can be punished by B and the extent to which B believes that this punishment can be avoided if B complies with A’s wishes.

  3. Expert power A’s power over B is a function of B’s perception that A possesses some special knowledge or expertise.

  4. Legitimate power A’s power over B is a function of how much B believes that A has the lawful authority to influence B.

  5. Referent power A’s power over B is a function of how attracted B is to A and, thus, how much A can influence B’s feelings of personal acceptance, approval, and self-esteem.Note: A & B can be either the employee or the employer.

Those who wish to improve their negotiation power should realize that power may be influenced by a wide range of negotiators, and they are likely to be overwhelmed by the varied and often inconsistent lists of characteristics, properties, strategies, and descriptions that have been offered during the negotiation process. This results in a dynamic power equation. The dynamic negotiating power has four components:

  1. Potential power: To obtain the desired benefits from the negotiations

  2. Perceived power: Negotiators’ assessments of each party’s potential power

  3. Power Tactics: Behaviors designed to "use" or "change" the power relationship

  4. Realized Power: The extent to which negotiators have claimed benefits from the interaction

To gain an upper hand in the negotiation, the negotiator may use several influence tactics during the negotiation process. These influence tactics are:

  • Pressure The negotiator uses demands, threats, or intimidation to increase the target’s compliance.

  • Legitimation The negotiator attempts to legitimize a request for compliance or claim the right to request it by referencing existing policy or tradition.

  • Exchange The negotiator uses implicit or explicit promises to reciprocate if the target complies.

  • Coalition The negotiator obtains the aid of others to help persuade or pressure the target to comply.

  • Ingratiation The negotiator attempts to make a favorable impression and improve the target’s mood before requesting compliance.

  • Rational persuasion The negotiator uses logical arguments and factual information to support the viability of complying with the request.

  • Inspirational appeal The negotiator makes an emotional appeal for compliance by appealing to the target’s values and ideals.

  • Consultation The negotiator seeks the target’s participation in the decision making process and the implementation of the request.

  • Personal appeal The negotiator appeals to the target’s sense of loyalty or friendship before requesting compliance.

Closing Thoughts

The negotiations have to end at some point. The result of the negotiated agreement is ideal when both the parties walk away happy. Successful conclusion of a negotiations occurs when both the parties know their BATNA, their negotiating power, and to means to alter their negotiating power. This article is written with the intention to help readers know their types of negotiating power and ways they can alter their negotiating power in order to come to a successful negotiated agreement.


Narayanan said...

Yes what you said and written is good to read but my actual experience shows that in many Indian cos still the owner calls the shot...The crux of the matter is that the boss should not only like your work he should like your apple polishing too..

redi said...


I read this post two times.

I like it so much, please try to keep posting.

Let me introduce other material that may be good for our community.

Source: Employee appraisal process

Best regards