05 Disputes

BROOKSIDE COMMUNITY HOSPITAL
VS. BLACK COMPUTER SYSTEMS
Prof. Stephen W. Nason

Professor of Business Practice
© Prof Stephen W. Nason – All Rights Reserved
What is Different About Brookside vs. Black From
the Other Negotiations?
 Team:
 Power Difference:
 Dispute:
– A claim has been made by one party and rejected by the other
Brookside Community Hospital vs. Black Computer Systems
© Prof Stephen W. Nason – All Rights Reserved 2
Negotiation Outline: Where are We Going?
Negotiation
Fundamentals Processes Contexts Remedies
Nature of Perception Salary Negotiation

Negotiation & Biases Negotiations Envelope
Distributive Negotiating Style Disputes Video Analysis
Negotiations
International
Integrative Hard Ball Tactics Persuasion
Negotiations
Negotiations
Coalitions &
Strategy Best Practices
Groups Multiple Parties
& Tactics Difficult
Conclusion
Auctions Negotiations
Disputes vs. Negotiation
 Dispute: a claim has been made by one party and rejected by the other
 So what are the implications of a dispute?
– Initial negotiation starts off confrontational
– Harder to find integrative solutions
– Emotions: people “come to the table” angry
– BATNAs often linked
The Dispute
 Brookside claims
– Breach of contract and fraud for failing to provide custom data entry software
– ….. M in damages
 Black’s position
– Rejects the claim
– Contract doesn’t cover data entry software
– Threatens counter claim of ……M owed
Brookside’s Rights Arguments
 Breach of contract
– Black failed to deliver on it’s alleged promise to provide custom data entry
software
 Fraud
– Black had no intention of fulfilling its promise to provide custom data entry
software
Black’s Rights Arguments
 Breach of contract
– Contract does not mention custom data entry software
– Last paragraph of contract clearly states that the contract covers the entire
agreement
 Fraud
– Alleged “Promise” to provide custom data entry software inherently
unbelievable as both knew it would cost $1m and could not be licensed
elsewhere
Who is Right: Brookside or Black?
 Does being right really Matter?
– Other side will rarely agree that you are right
– Human biases tend to convince us that we are right (self serving bias,
egocentrism, confirmation trap)
– Matters some if you can convince the other side, otherwise does not matter
much
 What does Matter?
POWER!
What is the main source of Power in any
negotiation?
BATNA
Black’s Power
The main source of Power in any negotiation is your BATNA!
How strong is Blacks BATNA?
 Very strong? Why?
 Will win in court
 Deep financial pockets
Brookside’s Power
Brookside’s BATNA
 Very weak
 Will loose in court
– Fined …..m
 Will go bankrupt (probably shut down)
 Any other BATNAs?
What do you do when you have little power?
 Bluff, aggressive, hardball tactics?
 Little Dog Story
Brookside’s “Weak” BATNA: Black’s Advantage?
If Brookside goes bankrupt (probably shut down)
 Black fights with rest of Brookside’s creditors for $4.2 m owed
– Probably never get it
 Forcing a hospital into bankruptcy hurts Blacks ability to get clients in the
future
Conclusion:
Brookside’s very weakness is its source of power!
Brookside’s Weakness is its Source of Power!
Is this true in most negotiations?
 NO!
Why is it true here
 BATNAs are linked
– One side can force the other by choosing it’s BATNA
– One’s behavior affects the other’s BATNA
– BATNA’s the same (go to court)
Does Power Matter in Negotiations!
YES!!!!
 How do you get power?
 Find many alternatives and develop your Best Alternative
Side with more power gets …
 Better distributive outcomes, but …
 Often passes up possible integrative value
Conclusion: power both helps and hurts you
Does Power Matter with Brookside and Black?
 Not so much
– Linked BATNAs mean that if one looses both loose
 Power impacts people’s perceptions and behavior
– Results in poor agreements for both, even the most powerful
Three Approaches to Solving Disputes
1. Interests: needs, desires, concerns
– Approach: try to find a way to satisfy everyone’s interests
2. Rights: independent standards with perceived legitimacy or fairness,
such as legality, contract, accepted norms
– Approach: determine who is legally or ethically right
3. Power: ability to force someone to do something they would not
otherwise do, use of coercion or threats
– Approach: determine who is more powerful, create power, use power
What are Black’s Interests?
 Money: collect what it is owed from Brookside
 Become a leader in healthcare info systems business
 Sell wireless devices to healthcare industry
 Reputation in health care industry
– Loss of reputation if force Brookside into bankruptcy
 Have data entry software that can be used at many sites (Generic)
What are Brookside’s Interests?
 Stay out of Bankruptcy
 Generate profits
 Time: have a CIMS that works as soon as possible
 Have a CIMS that works technically
– Identifies core competencies
– Local community’s needs
– Areas of high profit
 Have a CIMS that is user friendly
Integrative Solutions?
 Generic Data entry software: Brookside as a beta site
– Makes Brookside profitable
– Lets Black enter clinical info systems industry
– If Black first with data entry software will dominate industry
– Allows completion on time
 Future marketing of data entry software
 Financial Relationship: price of
– Software
– Training
– Hardware
 Delayed Payment Scheme
Integrative Solutions?
Is some sort of delayed payment scheme an integrative solution?
 Time is money
 More time for one side means less money for another (time value of
money)
 Big, BIG risk when allow delayed payments from a firm near bankruptcy
 Still, if everything works Brookside should have more money in the future
so can afford to pay more
How much is time worth to Brookside?
How Much is the Time Worth?
 Brookside Loosing money
– Can’t even pay $...software costs to save company
 Expects to earn $... profits each year after implementing CIMS
– …K per month
– 1 year delay = $...m loss
– 9 month delay = $...m loss
– 5 month delay = $...m loss
What are Brookside’s Options?
1. Find another Vendor to produce the data entry software
– 9 more months minimum,
– 5 months delay over planed start date (‐$...M)
2. Hire Black to produce the data entry software
– 9 more months minimum,
– 5 months delay over planed start date
• (‐$...lost profits) or (‐…M direct loss)
3. Use Blacks Generic Software
– No delay (no loss, but training = +…M)
Brookside and Black Options
Option Price Delay Lost Extra Total

Profits Training Cost
Other
Vendor $...M 5 mo $...M $...M
Custom $...M 5 mo $...M $...M

Black
Generic
$...M none none $...M $...M
Black
To Make an Integrative Solution Work
1. Brookside must realize the weakness of its own position
– Give up any hope of winning $...M
2. Brookside must make Black realize that its financial situation is so weak
that even if Black wins Black will still loose
3. Black needs to avoid the “hurt you more” syndrome
4. Black must disclose existence of generic software
How do you get info that you do not know exists?
Is Brookside a Good Partner for Black?
 Brookside needs Blacks system so badly they have a strong incentive to
make it work
 Brookside’s weakness means that Black can set up a favorable relationship
for the Beta site
– Black setting up a JV with another hospital would likely result having to share
the profits from the generic data entry software
What are the “Best” results
 For Brookside
 For Black
Approaches to Negotiating
(Text pp. 122‐134)
Interests Rights Power

• Self‐interest • Fairness • Winning
Goal
• Dispute resolution • Justice • Respect
• Understanding others’ concerns
Time focus • Present (what needs and • Past (what has been dictated • Future (what steps can I

interests do we have right now?) by the past?) take in the future to
• Future: maintain relationship overpower others?)
Distributive • Compromise • Often produces a “winner” and • Often produces a “winner”

a “loser”; thus, unequal and a “loser”; thus, unequal
strategies distribution distribution
Integrative • Most likely to expand the pie via • Difficult to expand the pie • Difficult to expand the pie

addressing parties’ underlying unless focus is on interests unless focus is on interests
strategies needs
• Greater understanding • Possible court action • Resentment

Implications for
• Satisfaction • Possible retaliation
future • Stability of agreement • Revenge
How to Move a Rights or Power Based Negotiator
Back to Interests?
 Don’t reciprocate contentious communication
– Ask questions, offer info, refocus, apologize
 Do NOT reward obstinate behavior with concessions
 Don’t get personal
 Use Mixed message: if reciprocate combine it with a cooperative interests
based proposal
 Label and discuss the process
– Merely identifying the process can lead to it’s removal
– Discussing the process can lead to greater creativity
When Should You Use Rights or Power?
 The other side will not negotiate
 Negotiations are stalled
 All attempts to focus on interests have failed (interests are opposed)
 Negotiation is close to an agreement and you are positioning yourself in
the bargaining zone
 To let the other side know that you will not be taken advantage of:
– To force them to consider your interests
 When you can win (when you are the Big Dog) but only if
– Don’t need a future relationship!
– Cant do better with integration
Conclusion: Key learning Points
 Disputes pose additional difficulties in negotiations
– Negative emotions
– Focus on rights and power negotiating
– Generally more distributive outcomes that give up on integrative potential.
 A very weak BATNA can actually be a strength if the BATNA’s are linked
 Legal and financial strength does not always mean bargaining strength
 Can use interests, rights and power approaches to come to an agreement
 Can turn rights and power based negotiator back to interests

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BROOKSIDE COMMUNITY HOSPITAL

VS. BLACK COMPUTER SYSTEMS

Prof. Stephen W. Nason

Fundamentals Processes Contexts Remedies

Nature of Perception Salary Negotiation

Option Price Delay Lost Extra Total

Custom $...M 5 mo $...M $...M

Interests Rights Power

Time focus • Present (what needs and • Past (what has been dictated • Future (what steps can I

Distributive • Compromise • Often produces a “winner” and • Often produces a “winner”

Integrative • Most likely to expand the pie via • Difficult to expand the pie • Difficult to expand the pie

• Greater understanding • Possible court action • Resentment

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