21st Century and Negotiation

Healthcare Management Shirley Carpenter is the President and CEO of Westmount Nursing Homes, and she has a meeting with the board. She has been implementing TQM at the company for several months. In her tenure, the revenue and net income have increased significantly at Westmount but the margins have decreased. There is presently an impasse in a negotiation with the union, which appears to be the subject of the meeting. Prior negotiations with the union have not gone well either.

Shirley needs two strategies at this point -- one to deal with the board and one to deal with the union. It is recommended that Shirley resolve ongoing acrimony between the board and the union by focusing on strategic HRM and productivity -- fewer workers of higher quality making more money, but delivering greater productivity. Essential Elements There are a few main actors in the case. Shirley was brought in from the outside, and she has generally enjoyed nothing but success in her career thus far.

She is accustomed to getting her way, and this is the first time that is not happening. She appears to be struggling with that, and for all her intelligence appears to be having trouble dealing well with this bit of adversity. As an example, she turned to her mentor to help deal with a labor negotiation, even though it should have been fairly obvious that wasn't something he'd be good at. The Board represents another major stakeholder.

Westmount had been performing poorly, so the Board brought in Shirley to address that. However, the Board had been lukewarm to TQM, which was her big idea. In essence, the Board hired a President and CEO but is unwilling to let that person have full control over the direction of the company. The Board, therefore, is a bit of a problem for Shirley -- the Board may also have been one of the reasons that the company was underperforming.

If they are unwilling to cede to the CEO enough control to do what needs to be done, that is an issue. The Board's explanations for its positions are not rooted in logical analysis, which is another red flag. The union is the other major stakeholder. The union seems to be taking an opportunistic tone with the new management team. Basically, the union saw a thawing of relations as an opportunity to do some horse-trading and maybe get a couple of the things from its must-have list.

So the union and its demands are the other key stakeholder. Where Westmount is a four-division company with a limited geography. The where is not that important to the case, as evidenced by the fact that the case write-up says next to nothing about geography ("a northeast state"). When Apparently this is taking place in the early 21st century. That's pretty much all that matters for this particular case. Why Now we will ask a meaningful question.

The key for Shirley is that she is basically the intermediary in what is a long-running dispute between the board and the union. CEOs come and go, but the board and the union will always be there. The fact that the union wants a seat on the board and that this is a non-starter for the current board highlights this deep-rooted antagonism that exists between the board and the union.

Shirley's arrival heralded a shift in the power dynamic between the two sides, and the union in particular has sought to leverage this. The union knew that the board was not 100% behind Shirley's TQM plan, so it made sure that it was. This provided the union with some leverage to gain concessions from Shirley -- or at least to have Shirley advocate to the board for positions that the union favors.

Consider that the union is basically seeking two major objections -- the seat on the board and the wage restructuring. It knows that Shirley will not accept the wage restructuring, so feels that Shirley will fight for the union to have a seat on the board. For its part, the board sees that margins are declining and that labor is 80% of their cost base. The why for the union is to get a seat on the board. They are playing the long game.

The union wants the seat on the board in the long run, and feel that if they make their other big offer so unpalatable to both the board and the Shirley, that they will get the seat. The board, seeking to cut wages, wants to give up nothing to the union. They might only be willing to surrender Shirley's incentive plan. Shirley, of course, has her own "why." She may be an intermediary here, but that is not her motivation.

She took the job because it was a bigger job than what she had done, and Westmont was an opportunity to be a CEO, and turn around a struggling company. Her reputation -- and ego -- are at stake. So her motivation is to continue her run of success lest her career get sidetracked.

She wants success, but perhaps fails to see the true dynamic here, which is that the board and union are locked into a long-run power struggle that has been going on long before she arrived and will be going on long after she has left.

She has surprisingly little power, but the union has to realize that her reputation as a star matters a lot to her, so ultimately she will have to side with the people who have the power to fire her, especially because their support for her key initiative -- TQM -- was always been lukewarm. Problems The case misses the opportunity to provide back context, but that is because Shirley probably doesn't know the back context between the union and the board.

She has inherited this animosity, and while she rightly wants to change the culture she is having some trouble with both the union and the board. She thought she was coming to run some nursing homes, but that is incorrect -- her job is to resolve the power struggle. So that is a major problem that Shirley faces. She has to realize what her role in this conflict is. Another major problem for Shirley is the fact that the board is reluctant to her TQM plan.

She ideally would have had utmost support for the plan, but the support was actually rather tepid. This means that the board may or may not have the patience to see it through. So that tepid support is definitely an issue for Shirley, because the board is probably willing to sacrifice TQM in order to meet its objectives in the labor negotiation. This would, of course, leave Shirley without her major calling card as a manager; not to derail her career but it would stagnate it.

The root of the union-board dispute is not given, but clearly there are members of the board who are part of the problem. They have extremely negative attitudes towards the union, the result of which is that they are not open to union ideas, or to improving their working relationship with the union. Shirley has to understand that these issues aren't personal -- they clearly predate her if all the other negotiations in the recent past were bitter and contentious.

If the board was willing to work with the union more, the union wouldn't want a seat at the board. As problems go, the fact that many workers are slow on the uptake on TQM is pretty low. Morale is improving, and ultimately that indicates that what Shirley is doing is resonating with the staff. They will be willing to commit to TQM in the absence of other factors.

Plus, Shirley's main focus her has to be on figuring out a way to get to around the impasse that exists between the union and the board, before that impasse does further harm to the company and undoes all of her work. Prioritizing the Issues The biggest issue is the short-run issue is the present impasse. Shirley might be tempted to think that this will not be resolved until the bigger issues are dealt with, but that is actually not the case.

Those bigger issues will be very challenging to tackle, and thus their successful resolution should not be a precondition of settling this negotiation. Indeed, they were not a precondition of settling the other ones as well. However, addressing the long run issues between the union and the board is going to be essential to Shirley doing her job effectively past this negotiation. She has to find out what lies at the root, and whether or not that problem is intractable.

From the case, it is fairly clear that certain board members have terrible, closed attitudes towards the union. There is nothing in particular that indicates that there is a personal issue on the union side. This puts Shirley in an unenviable position -- she must try to get the two sides to deal on the basis of the issues when one side (at least) clearly cannot do this. Dr. Howard's remarks do not cast him as someone using logic and reason to make his case.

And for Shirley, who can be fired by the board but not by the union, this is an issue. The sense, then, is that the board might have hired Shirley as a turnaround agent, but more for her no-nonsense demeanor than for her ideas -- she may have been brought in more to brutalize the union than anything else. The board certainly had no particular enthusiasm for TQM, her flagship idea.

So therein lies a massive problem for Shirley, because she is going to need to change the attitudes of the board, or conversely choose to find some cudgel with which to bludgeon the union into submission. Either way, it's not what Shirley signed up for. Out of this, there is the question of what ends up being the most significant issue. Shirley's union problem appears to be more of a board problem when the underlying attitudes and conflict are examined.

So first and foremost, Shirley needs to understand the root nature of the conflict, and mainly from the board side of things. The union is not asking for anything unreasonable or that cannot be negotiated, where the board does seem to lack the capacity to negotiate honestly. So Shirley's problem is really to get the board on board. She needs to sell her vision to the board, and to understand their vision of her role better.

It may be possible that her ambition and the board's blindness led them to work together in what was actually a pretty poor fit. Alternative Solutions, and the Consequences Thereof The first problem has been identified as lying with the board, in particular their attitudes, and their motivation behind both their hiring of Shirley and their approach to the union negotiation. Shirley may have walked into this job with less clarity about their expectations than she realized.

If the board is upset with her performance, she is about to find out. She will need to leave this meeting with greater clarity about why the board hired her and what they expect her to do now. In essence, this is good news for Shirley because she has an opportunity, immediately, to at least get more information about this problem. That insight is going to lead to a few different alternatives.

The basic choice for Shirley, though, in the short run, is whether she is going to work with this board towards its objectives or not. If it is true that she is going to have less freedom than she thought, then she can leave her position, and the other choice is to stay, accept the reality of the situation, and get on with brutalizing the union.

Neither is a particularly attractive option, but she is a President and CEO, and part of that job is finding solutions to precisely these kinds of problems. She would certainly not be the first CEO to have board problems. The second problem in terms of priority is to start to deal with the long-run issues between the union and the board.

Once Shirley has a better stance of where she stands, and where the board stands in particular, she can move on with the task of bringing this negotiation to a conclusion. She does have some alternatives on the table, and whichever one she opts for will have to be sold to both board and union. Whichever option she chooses, she has to sell the board on long-term reconciliation with the union, such that there is less hostility going forward.

It should not be the case that every single negotiation is so hostile and destructive. If she can leave one positive mark on this organization is won't be TQM, but ending the conflict between board and union. So she has a few alternatives on the table. The first is to be able to present a case to the board for better relations with the union. If the board is starting to take things personally because of the nature of some of the past conflicts, that is a problem.

But Shirley does have a way to do this -- TQM. She has shown thus far that the TQM system can be used in health care. There is some resistance, which is expected, but the organization has also experienced significant revenue and net income growth, which the board surely enjoys. Morale is higher, as is productivity.

The board might be operating from a 20th century mindset, but Shirley has done pretty good work to this point with the union, getting the workforce to embrace a more modern approach to running a healthcare organization. This is a strong positive for Shirley.

She is the first CEO to get the union to work with management on something, and she needs to show this to the board to get them on board, to build trust with the board members that giving the union some of its demands is a big part of moving Westmount forward. Shirley can also point to the macroenvironment to help make her case. In the 21st century, health care organizations face acute worker shortages and high turnover.

For the most part, the easiest way to solve those sorts of problems is to pay more, and even then there are high costs associated with high turnover. A logical case can be presented with hard numbers to show that making Westmount a place where people want to work will bring in better people, improve retention, and therefore insulate the organization from this massive problem of worker shortage. Shirley's efficiency solution is also a strategic human resource management solution.

If the board right now is arguing from an emotional standpoint rather than a logical one, Shirley can bring them back to the land of reason using a solid economic case that her plan will improve the long-run viability of the organization. The other alternatives are entirely unpalatable. If Shirley leaves Westmount, not only does the problem there remain, but Shirley's reputation will suffer.

Even if she rushed into the job out of eagerness to make her mark somewhere, and it was a bad fit, as CEO part of her job is to make the fit work. If she quits, that will reflect poorly on her. She is not being paid to sleep well at night, and every healthcare board in the country knows that -- so this alternative is career suicide for Shirley, and probably for no good purpose.

The final alternative, which is to go along with the board, is the wrong approach. Crushing the union may bring about a settlement more quickly, but it will leave Westmount back in the same place it was before she started, with high levels of antagonism and a 20th century mindset. Worse, the union will never trust another CEO again, so ultimately Shirley will lose the trust of the union, others after her will, too, and the organization's progress will not just be set back, but stopped dead.

This will leave Westmount ill-prepared for the realities of 21st century healthcare. Recommendation It is recommended, then, that Shirley first get clarity from the board about their expectations and underlying motivations. Then, she has to present a hard economic case for her plan. Her plan will take Westmount to the modern era -- apparently dragging the board kicking and screaming -- but it is the right plan. She needs a numbers-based case rooted in efficiency, strategic HRM principles and the.