WAMBIYA: Best alternative to negotiated agreements

In the lingo of bargaining, the fallback numbers for labour unions and for government or management in protracted collective bargaining agreements like the one currently ongoing between medical practitioners and the Kenyan government are called BATNAs, a term coined by Roger Fisher and William Ury. It stands for best alternative to a negotiated agreement.

Others think that it stands for Best Alternative to No Agreement. It is the best you can get if you don’t reach an agreement with the other party in any labour dispute according to Avinash K. Dixit and Barry J. Nalebuff in their book, The Art of Strategy (2008).

Since everyone can get their BATNA without having to negotiate, the whole point of a negotiation is how much value can be created above and beyond the sum of their BATNAs. The best way to think about the pie is how much more value can be created beyond giving everyone his or her BATNA in Collective Bargaining Agreements.

Questions like why is it that agreements are not always reached before any damage is done—why are there even strikes in the first place usually come to mind around this time. As strategists, we are entitled to offer some thoughts.

Before an old contract expires, the union and the firm begin the negotiations for a new labour contract. But there is no sense of urgency during this period. Work goes on, no output is sacrificed, and there is no apparent advantage to achieving an agreement sooner rather than later. It would seem that each party should wait until the last moment and state its demand just as the old contract is about to expire and a strike looms. This is the problem.

Why can’t wage negotiations go on after the old contract has expired but without a strike, and work continues under the terms of the old contract? This might seem to be a better arrangement, because the machinery and the workers are not idle and output is not lost.

But one of the parties, usually the union, is seeking a revision of the terms of the contract in its favour, and for it the arrangement is singularly disadvantageous. Why should the government or management concede? Why should it not let the negotiations spin on forever while the old contract remains in force de facto?

In a regular strike, workers lose their wages or allowances or benefits relating to being on the job and an employer loses its profits while the consumers fail to get the required services. Its a zero-sum game. Nobody gains. This is why a virtual strike is a better alternative to a full-blown strike. So, during a virtual strike, the workers would work for nothing and the employer would give up all of its profits.

Profits might be too hard to measure and short-term profits might also understate the true cost to the government because it is never a profit-making entity but this can be viewed in terms of revenue lost. Instead, we have the Government give up all of its revenue.

As to where the money would go, the revenue could go to a charity. Or, the product, in this case health care, could be free so that the revenues would be given to citizens. During a virtual strike, there is no disruption to the rest of economy. The consumer is not left stranded without service. government and labour feel the pain and thus have an incentive to settle, but the government, charities, or the public get a windfall.

The virtual strike is not just a wild idea waiting to be tested. History reminds us that during World War II, the navy used a virtual strike to settle a labour dispute at the Jenkins Company valve plant in Bridgeport, Connecticut. A virtual strike arrangement was also used in a 1960 Miami bus strike. Here, the customers got a free ride, literally.

In 1999, Meridiana Airline’s pilots and flight attendants staged Italy’s first virtual strike. The employees worked as usual but without being paid, while Meridiana donated the receipts from its flights to charities. The virtual strike worked just as predicted. The flights that were virtually struck were not disrupted. Other Italian transport strikes have followed the Meridiana lead.

In 2000, Italy’s Transport Union forfeited 100 million lire from a virtual strike carried out by 300 of its pilots. The virtual pilots’ strike provided a public relations opportunity, as the strike payments were used to buy a fancy medical device for a children’s hospital.

Instead of destroying consumer demand, the virtual strike windfall provides an opportunity to increase the brand’s reputation. The medical practitioners would be held in high esteem by the public who could join them in putting pressure on the government to adhere to their demands in the current Kenyan scenario.

Somewhat perversely, the public relations benefit of virtual strikes may make them harder to implement. Indeed, a strike is often designed to inconvenience consumers so that they put pressure on management to settle. Thus, asking an employer to forfeit its profits may not replicate the true costs of a traditional strike. It is notable that in all four historical examples, management or government agreed to forfeit more than its profits —and instead forfeited its entire gross revenue on all sales during the duration of the strike.

Why would workers ever agree to work for nothing? For the same reason that workers are willing to strike now—to impose pain on government and to prove that they have a low cost of waiting. Indeed, during a virtual strike, we might expect to see labour work harder because every additional service represents additional pain to the government, who has to forfeit the entire revenue on the sale.

The point is to replicate the costs and benefits of the negotiation to the parties involved while at the same time leaving everyone else unharmed. So long as the two sides have the same BATNAs in the virtual strike as they do in the real one, they have no advantage in employing the real strike over a virtual one.

The right time to go virtual is when the two sides are still talking. Rather than wait until the strike is real, labour and management might agree in advance to employ a virtual strike in the event their next contract negotiations fail.

The potential gains from eliminating the entire inefficiency of traditional strikes and lockouts justify efforts to experiment with this new vision for managing labour conflict.

Consultant on strategy. He can be reached on [email protected]