The Practice Case
INSTRUCTIONS: The practice case enables you to sharpen the ideas and methods you have studied by applying them to a realistic business problem. The answers you provide to the questions are not submitted to Course Service for grading. Rather, as its name implies, the practice case gives you the chance to practice for the examination case by having you put your newly acquired knowledge to work through analyzing and solving problems in a realistic setting.
After reading the case, summarize and analyze the situation as it has been presented. Ask yourself, “What is really going on here?” Read and answer the review questions, and then prepare a written analysis and solution.
THE SMITHSON COMPANY: NEGOTIATION BY ANY OTHER NAME IS STILL NEGOTIATION
The Smithson Company manufactured a variety of plastic parts that were custom designed to customers’ specification. A unique feature of the plastic was that parts made from it were highly anti-corrosive, lightweight, and not subject to distortion because of sudden environmental changes.
The company’s personnel program was designed to recognize talented employees. This was done by combining promotion and financial rewards for creative ideas that would benefit the company in its competitive efforts. Employees who lacked creativity or dynamic leadership generally were passed over for promotion. Many who failed to generate feasible and innovative ideas were released altogether.
Each department scheduled monthly brainstorming sessions. These meetings, attended primarily by management trainees and middle-level managers, were seen as opportunities to demonstrate those dynamic thought processes that the company valued so highly. When an idea with promise was put forward, a team was formed to study it in depth. The team’s findings were reported to the department head who decided whether to use the proposal or discard it.
JIM HAS AN IDEA
Jim Brainard, a young marketing representative, had the idea of repackaging a plastic pipe the company had been selling for residential plumbing in order to market it for use in large community waste disposal systems. As he had no chemical, engineering, or packaging background, he knew the idea needed some research and much thought before it could be presented at a monthly meeting. He was particularly conscious of the fact that the plan, if feasible, could greatly expand company sales.
Review Questions
1. What steps should Jim take to convince himself that the idea is feasible?
2. How could he obtain the necessary scientific input without revealing his plan? Because of the emphasis on creativity, Smithson employees were likely to be cautious about sharing ideas in order to receive help from other workers.
JIM’S SURVEY AND THE RESULTS
Using his skills as a marketing representative, Jim decided to conduct a minitest of the market. He planned to contact those customers he normally serviced and make discreet inquiries about the value of such a pipe for disposing of highly corrosive chemical waste. If his survey indicated that a need for the product existed, he planned to approach one of Smithson’s chemical engineers to see if the existing residential pipe could be adapted, within a competitive price range, for the new use.
Jim immediately discovered that there was need for such an anti-corrosive pipe. The idea was not new. However, a problem had surfaced when previous attempts had been made to use it. A new type of binding agent had to be developed because Smithson’s competition had already found that plastic pipe could not handle the chemicals typically used to dissolve waste disposal products. In casual conversation, Jim made it a point to bring up the subject with one of the company’s chemists, Ralph Henderson, who had experience with chemical binding processes. Ralph mentioned some ideas that sounded very workable.
Next, Jim tried out the idea on his manager, Waldo Merces. Here he met a setback. Waldo had only a short time before retirement and was not at all interested in undertaking new challenges. The manager’s feeling was that since there was a demonstrated demand for household piping, why try for something else? Jim refused to be discouraged; he was convinced that his idea, if developed using Ralph’s expertise, was valuable.
Review Questions
1. Why did Jim foil to win his manager’s endorsement?
2. What should be done to secure the cooperation needed?
RE-EVALUATION AND NEW APPROACH
Jim was aware that, without Waldo’s backing, there was little chance that his idea would be accepted for presentation at the departmental level or that it would receive further study. He also knew that he had approached Waldo on an emotional, rather than a logical basis. Because he believed in the potential of the new product, Jim thought that certainly the boss who had trained him would be convinced of its merits. He had fallen into the all-too-common trap of developing undue affection for his project. He had not given enough thought to acquiring the data necessary to win support and generate similar enthusiasm in others.
With a clearer understanding of the reason for his setback, Jim proceeded in a methodical way to gather the data needed to form the basis of a sound negotiating position. He understood that he would have to approach Waldo in the same way he would approach a potential client. This involved developing a position that could be defended by thoroughly understanding the subject and buttressed by strong supporting data to overcome contrary arguments.
Jim decided to tell Ralph about the results of his mini survey of the market and to explain the need for a new binding process. He asked Ralph to come up with some specific suggestions regarding ways in which binding techniques already available to Smithson might be used to keep the price of the pipe competitive. After receiving Ralph’s ideas, he planned to obtain a set of requirements from some of his customers who had expressed interest in the new pipe. If, with Ralph’s help, he could meet those requirements, he would bring up the proposal, the problems, the solutions, and the customers’ requirements at the next brainstorming session.
In short order, Ralph completed his evaluation and indicated that the customers’ specifications could be met. He added that the new pipe could be produced for about five percent less per running foot than that of known competitors. Jim, by now more educated in the problems of chemical interactions with pipe material, the highly acidic solutions some pipes must carry, and the chemical properties of the soil in which pipes are buried, proceeded to prepare a brief paper on the subject to present at the next departmental meeting.
His second conversation with Waldo on the matter was much more successful. The manager suggested that Jim see if he could get at least two commitments from potential users of the new pipe. They would be conditional on Smithson’s decision to produce the pipe and an understanding that the product would at least meet competitive pricing and delivery requirements.
By the time of the meeting, Jim had conditional orders from six companies. In general, they required that the pipe be available within twelve months at a price per running foot that did not exceed figures for piping in comparable use. The product, if warranted by Smithson to perform the intended purpose, promised a yield of some $25 million.
DEPARTMENTAL MEETING
At the monthly meeting, Jim’s idea was selected for in-depth study and, predictably, Jim was designated by his department to head the team. The young marketing representative felt that he was on his way at Smithson and headed for an important promotion when his manager retired.
He was disturbed by one matter. Because the idea involved a new product line, it was decided that the team should include representatives from the company’s manufacturing, finance, and legal offices. Jim knew that, as team leader, he would have to get the cooperation of these people and their departments.
Most of the departments were headed by managers with years of experience at Smithson and much practical expertise in their fields. Jim gloomily confided to his friends that his youth, inexperience, and brief tenure with the company would make it difficult to head such a team and to enlist adequate support from its members to maintain control and direction.
Review Questions
1. What would be sound strategy to gain the support necessary at this point to develop Jim’s idea?
2. How should Jim go about establishing himself as an effective team leader?
JIM’S STRATEGY
In reviewing his assets, Jim realized that he had two allies, Waldo and Ralph. Each was persuaded that the idea had merit. Each had the technical skills that Jim lacked.
Wisely, he asked Waldo to contact the departments that were to be represented on the team. As an employee whose value to the company had been proved over many years, and as a manager who had demonstrated the ability to present marketing questions persuasively to other divisions, Waldo could be expected to command the attention of other team members.
In stepping back to allow full play of Waldo’s unique abilities, Jim acknowledged his own limitations, even though it meant relinquishing the spotlight he might have enjoyed. He acknowledged, and accepted comfortably, his limitations a second time when he asked Ralph to serve on the team as the representative of the new products office. Ralph was pleased by the invitation and the thought of the subsequent recognition he would receive. He agreed not only to serve as a team member, but also to spend extra time in an effort to explain the plan and its merits to Smithson’s manufacturing experts.
At this point, Jim found himself worrying about the possibility of closed minds on the part of the representatives from the finance and legal offices. At Smithson, these offices had a reputation of regarding product innovation as risky, and they often vetoed new proposals of this sort.
Both Waldo and Ralph were successful in getting the other departments to assign members to the team. Waldo also had managed to secure some degree of commitment from the finance and legal department heads that their subordinates would hear out the proposal and participate on the team.
Once Jim was able to identify the full roster of team members, he arranged to meet with each individually. He provided each team member with a brief outline of all the positive elements associated with the new line of piping. He also included negative elements, following each with an appropriate response. Drawing on their special skills and experience, Ralph and Waldo provided much of the material contained in the outline.
Jim’s individual meetings with team members went well, and he prepared an agenda for the first formal group session. He scheduled the meeting to give team members two days to read the outline and the agenda and to prepare themselves for the meeting.
TEAM MEETING
Optimistic about results, Jim convened the initial session. He discussed the proposed product line, mentioning both the pros and cons of its development. He emphasized particularly the availability of a market, the likely financial rewards for Smithson, and added that in line with company policy each of the team members had a good chance for favorable recognition from top management if the new line was endorsed. He then called for discussion.
No one spoke. He waited several minutes and asked if the absence of questions meant that all participants agreed that the proposal had value. The response he received was limited. Jim began to feel uncomfortable. He would have preferred some discussion, perhaps even a good argument on one point or another.
Review Questions
1. Should Jim accept the silence as endorsement of his idea? Or was the team offering silent resistance to his leadership? Or were its members overly concerned about the appearance of cooperation?
2. How could Jim get participants to commit themselves? How could he stimulate the discussion that was necessary to the acceptance of his proposal?
JIM’S REVISED STRATEGY
Jim called a recess for lunch and asked each member to return in two hours to take a vote on whether the idea should be presented to top management.
During the break, Jim met privately with Ralph and asked him to make an oral presentation. Ralph hesitated, suggesting unexpectedly that perhaps his calculations were wrong. After the two talked the matter over, Ralph conceded that his earlier calculations were accurate and agreed to speak—but only if Jim called on him directly.
Next, Jim located Phil Hughes, the representative from the finance department. Outside the meeting room, Phil was openly hostile. He indicated that he believed the company could lose close to a million dollars if the pipe did not sell and demanded some guarantee from Jim in exchange for his support.
Sensing a trap, Jim agreed that some risk existed but pointed to the fact that of the six companies showing definite interest in the new pipe, four produced chemicals that required a low-cost, flexible pipe to conduct waste products to cleaning basins. The remaining two were municipal sewage treatment plants that needed a pipe with a 20-year life expectancy.
Citing Ralph’s findings, Jim argued that the new product should meet the requirements of all six. Jim also pointed out the variety of the six firms and the likelihood that these customers would spread word of the new line throughout the industry. Jim’s negotiating talents persuaded cost-conscious Phil, who acknowledged the logic of Jim’s position and agreed to support the new line.
With two of the four team members now convinced, Jim located Gail Kitchin, who represented the office of legal counsel. She expressed concern that the pipe might fail and open the company to substantial product liability litigation. Gail pointed out that the pipe, if used by chemical plants, would carry highly toxic substances. If toxic fumes leaked into the air, ground, or surrounding streams, Smithson could be liable for millions of dollars in damages.
Jim explained that Ralph had dealt with this possibility by recommending an epoxy coating to prevent leakage under normal circumstances. The one possible danger was perforation of the pipe in some later drilling operation. Jim’s argument to that was, if the underground route of the pipe is clearly marked, then the company puncturing the pipe would be liable—not Smithson.
Gail responded that she was more comfortable about the proposal and agreed to think it over.
By now it was too late for Jim to have any meaningful discussion with Tim Woods, the representative from manufacturing. He suspected that Tim did not object to the ideas that had been presented. Rather, Tim lacked verbal skills and was often hesitant to speak out in group situations. Jim took a few minutes to reassure him, pointing out the team’s need for his expertise and his ability to comment on sophisticated aspects of plastic manufacturing processes. To Jim’s disappointment, there was little response from Tim.
Review Questions
1. How should Jim conduct the meeting now? Should he summarize the results of his individual conversations and call for a vote, or should he ask a member of the team who favors his idea to speak? If he chooses a speaker, who should it be?
2. Should Jim be prepared for a negative, positive, or neutral response from the finance representative? Why?
AFTER THE RECESS
When the meeting resumed, Jim called on Ralph to describe the chemical feasibility of the new pipe. Ralph’s remarks were delivered in highly technical terms that struck a responsive chord in Tim Woods. At the close of the presentation, the manufacturing representative indicated he was now willing to endorse the plan.
Gail Kitchin said that the liability issue, while not fully resolved, did not seem to present undue problems. She voted to go ahead.
Phil Hughes offered a memorandum of understanding to the effect that, if the team produced a majority “yes” vote—with himself abstaining—his office would accept no responsibility for any financial loss that might be suffered by Smithson. He demanded that the memorandum be signed by Jim as team chairman.
Jim countered by asking Phil to add to the memo a statement of intention to take no credit if the company gained financially as a result of approving the new line. Phil withdrew his memo and voted to move ahead.
Thus, Jim received unanimous approval to present the plan to top management.
After the meeting, Waldo called him into the office and told him that he had completed a fine piece of negotiation. Waldo added that, aware of it or not, Jim had employed all the elements of sound negotiation to which he could give credit for the success of his proposal.