The crux of our discussion will explore:
• WHAT IS win-win negotiation and applying it to a case study on salary negotiation in a banking industry
Setting the stage and set the tone and manner right - Provide clarity on the objective of the negotiation and establish a common goal
From the onset of the negotiation, the facilitator should set the tone right, and not only that, he should set the direction clear. In order to have a win-win negotiation to be arrived at the end of the discussion, employer should set the stage that “we are in this together”. Negotiation should have an objective clarified from the onset. In this case, the employer should spell out clearly what the employee may seem to misunderstand about the system. It is hence the employer’s responsibility to educate and provide guidance to assist the employee’s understanding on company perspective and to address his biasness to the merit increase system. The education should include the various aspects. Firstly, to erase the misconception the employee has towards to the system of appraisal and merit increase, employer needs to reinforce that the company based its decisions on a fair system. It is important to reiterate that there is absolutely neither partiality nor favoritism in the system. It works on judgment of performance, length of service and considerably the salary benchmark at entry point to the company. The employee must believe and advocate the reliability of the system in order to carry on the conversation. The system will rate the performance based on individual and company KPIs (Key performance Indicators) related to the role, function and the team. There will be shared and individual KPIs which will generate the ratio for increment. In addition to the KPIs, we have the part of the consideration on length of service and the grading of the position which is tied to the compa-ratio of the position. This compa-ratio will also restrict the percentage of increase applied to each position per se. This information is tied to a reliable source from Mercer and Hays, both of which are global market compensation and benchmark experts. Compa-ratio is taking the salary of the individual and divided to the mid-range of that position in order to derive the percentage. If the compa-ratio to the position is already 100%, this means the individual is paid up to market and which may result in less adjustment to his merit increase, and counter to that, if employee’s compa-ratio is below 80%, the adjustment will algorithmically be higher. The compa–ratio will be higher if the entry point when employee joined the company is paid to market. Hence, his annual adjustment will take on a lower percentage or ratio. They also need to educate that merit increase is applied within approved budget and within a pool of shared resources. There is the part of distribution metrics within the organization of rating 1 to 5 (5 being top performers) (refer to exhibit 1). In addition, the employer needs to assert that adjustment of salary has been completed and tied to company financial budget and employer could only exercise their salary adjustment within the approved budget. To further increase the merit increase of the individual will require further approval from the board of directors for extra budget dollars. Moreover, a discussion and resolution like such needs to be contained and carefully treated to prevent backlash. The employee needs to promise that such discussion must be contained and kept confidential.
Exhibit 1
The following sections will present an array of explanation to the elements which help us achieve a win-win negotiation;
Outline: Seven Elements to Win-Win Outcome in Salary Negotiation
Element 1: Be positive. Attitude Counts!
“Many negotiators underestimate themselves because they don’t perceive the power they have inside of themselves accurately. In most negotiating situations, you have more power than you think.” (Gibson, 2011) It is critical to believe the other party needs your involvement to reach a win-win outcome and make the negotiation a success. The employer have to realize this and recognize it and when an employee who asked for a salary increase in view of their contribution, the employer need to tactfully handle in order not to upset the staff and stand the chance of losing a valued talent. In addition, at the point of negotiation, the employer has to maintain a positive attitude and composure in order to provide an atmosphere comfortable for open and honest negotiation. When an employer approach the negotiation session in a positive way, where the tone and manner, including the body language, can be translated to signs known as ‘micro-inequity’ which can either reinforce or impair the relationship or the performance of the impacted employee. A ‘micro-inequity’ generally takes the form of a gesture, different kind of language, treatment, or even tone of voice. It is suggested that the perceptions that cause the manifestation of micro-inequities are deeply rooted and unconscious.” (Wikipedia). Micro-inequities, which are the signs of your body movements or your gestures, may reveal what you really have in mind. If the counter party feels you are uneasy or unconfident at the negotiation, they will have the upper-hand at the negotiation. On the other hand, if the employer does not willingly desire a win-win outcome, the employee would easily sense that. It is important that the dialogue is managed in most natural and honest manner to resolve for everyone’s benefit and not to be lop-sided. The dialogue behavior is something worth discussing in detail, which we have included in the dialogue section.
Element 2: Be assertive, state your viewpoint clearly
“Assertiveness enables you to communicate precisely what you want and can therefore have a significant effect on your earning potential. Assertive individuals can get things done in a calm, composed manner without out being over emotional; they are definite and attentive and in a working environment this generates high levels of respect, which improves motivation among team members” (Halliday 2007).There are always things that you may not be able to compromise but is at top of your priority list. It would work well if you would let the other party know upfront your needs and wants from the onset – “Provide Information About Your Interests and Priorities”. (Thompson, 2009)This will help to facilitate the negotiation and help the employee to understand the bottom line – what and why.
Element 3: Allow a Dialogue, not a one-sided communication
“Dialogue is based upon the premise that there are many ways of approaching any issue, and that no single one is correct. The aim of Dialogue is to create a forum in which ideas can be explored, expanded, deepened and illuminated until new meaning and understanding emerges. Instead of trying to create support for their own positions, people engaged in dialogue -listening to and questioning each other, attempting to deepen their understanding of all of the information being presented.” (Weiss, 2007) People express their opinions and feelings openly. During the salary negotiation, it is important for employer to facilitate the dialogue with the employee, allowing the employee to share his view of the issue. 
After understanding the importance of dialogue and the objective of dialogue, it is time to bring up another critical factor: A safe environment. None of these would be achieved if people are not feeling safe and thus stop to share the difference at the first place. And it is actually the employer’s role to facilitate such a safe environment for open dialogue. Partially this might be due to the power position the employer is in and partially this might be the experience or skill sets the employer occupy relative to the employee. 
The benefit of creating a dialogue goes beyond the understanding of each party’s interest and priorities. It helps to reach decisions quickly and easily as people avoid or bypass the common trap of negotiation - debating different positions and defending selves. Also after everyone “had the opportunity to be heard and acknowledged and has made a contribution to the outcome. Commitments to such decisions are high.” (Weiss, 2007)Element 4: Understanding employee’s perspective, show empathy
Most employees know their contribution and status in the company, and even within the industry, particularly the professional level and above employees. They often would like to emphasize to the employers their achievements. Their past achievements help to gain a stronger bargaining power at salary negotiation. Some of the medium size companies would like to retain valuable employees in order to expand their market share in the industry. Hence, employees knowing their individual value and impact to the company and the company facing risk if they resigned, often make use of this as a leverage to get better bargains at negotiation. This approach is common.
Comparison to peer group is still hot topic among employees. Employees often perceived themselves to have more workloads than others. Their role perception is often not well guided. Hence, comparison leads to feelings of injustice and unfairness due to unrealistic perceptions. The comparison and wrong perception hence resulted to unrealistic salary expectation. This problem is often experienced by younger employees where they did not consider the following factors 1) length of service in the role which also equates to years of experience in the role. 2) the quality of delivery to the role and function which can be influenced by experience and expertise of the individual 3) the depth of knowledge and complexity of the role which can be better fulfilled by a more seasoned person in the same role. These factors will make up the Key Performance Indicators (KPI) which directly influences the performance ratings and affecting the merit increase entitlement tied to each individual. At this point, the employer should also pause to ask if the employee thinks he is a top performer and what he thinks it is based on. Obviously also, the employer will need to be ready to walk through the performance evaluation to mention the employee’s attributes and point out his strengths and weaknesses in the role. This helps employee to ‘face up’ to his own performance and can erode his self confidence to stand firm on his bargain. This is a good tactic to negotiation – to tell why there is a discount to bargain; Once the employee realize they fall short of the required performance due to their weaknesses, they may get upset, but when done tactfully, they can accept and agree to the adjustment. And will realize that to ask for more and if the end result the employer oblige to give little more after the negotiation is a ‘grace’ gift from the employer to reward his efforts. This will make his mindset to become grateful rather than grudging.
Element 5: Make package deals of Equivalent, multiple offers to provide alternatives to solution
Option #1 – Overseas Exposure, training and development package. Equivalent to salary adjustment
The employer can offer attractive incentives as a bait for their commitment in the company by discussing on overseas training and development opportunities to bring next steps career development for the employee, and within the same incentive discussed, to explain that it would also include extra benefits such as study leave, extra travel allowances and holiday allowances for him and his spouse. Employee will always be attracted to development program which can help them escalate their career path and since it is at the expense of the company, the cost eventually can easily exceed the salary increase he can experience within the same year. Such development costs at the expense of the company is not only beneficial to the employee, it is also a tax benefit to the company. For the company to book as salary, the tax is higher than expenditures such as these. This presents a win-win situation where the employee can plan long-term and employer can have savings on tax and also achieve retention and development of an employee. This strategy can attract the ambitious and aggressive employee who enjoys overseas exposure and have no time for development at the work place. The luxury of having time off for such development and still getting paid and enjoy holiday simultaneously is very attractive. Employer can definitely dress this up a little more by providing the next steps to completion of this overseas trip, to send them to a rotation interim exposure at their overseas company for 3 months, for instance, and to return to share the experiences and exposure to the team. This can even be positioned as a caption “Train the trainer” program for the employee.
Option #2 – Increasing Benefit, equivalent to salary adjustment
The employer can present the alternative of equivalent monetary value in the form of increasing travel, medical or dental benefits or all together. In addition, there could be the proposal of increasing annual leave entitlements. This is beneficial to the employee especially if they have family commitments and have health considerations within the family, this could be attractive to them. This benefit presented by the employer not only does not have direct huge cost impact upfront on the company, it also poses an attractive reward to the employee who wants to extend the benefit to cover his spouse and family.
Option 3: Tax Incentive, equivalent to salary adjustment
Employer can present a tax incentive as bait for discussion. The way tax incentive work can be different approach; 1) by providing housing tax incentive 2) by providing expenses tax incentives 3) by providing study tax incentive. How does it work? For housing tax incentive, the employee who may be renting out an apartment in Hong Kong can enjoy annual tax reductions at no cost of the company. The tax reporting is simple and instead of employee being taxed fully on income statement, they could experience an incentive when the employer could include a housing incentive in the contract to offset from total income. This way he could save at least (depending on his annual rental cost) up to 10% of his annual income tax. For the tax incentive on expenses and study expenses, it could be applied to individual tax filing as expenditures which can have tax incentive from taxable income. When all of the three areas are taken into consideration for tax benefit, it becomes a good amount of savings to the employee. All of which are at no cost to the employer. This is again a win-win.
Option 4: Providing Stock Options
This will be the last weapon and the most long-term and attractive option if the company is doing well financially and have great prospects. Stock options provision is a way the company uses to attract and retain key talents who are critical to the business. The employer needs to draw the employee to think long-term and to plan long-term and this would be the most attractive option which vest with length of service. Employer could apply the multiple options separately or all in the package when the negotiation toughens and climax. Once the multiple offers are being exercised, it is evidently clear to the employee that he is definitely getting more out of the negotiation.
Element 6: Strategy approach, BATNA, in win-win negotiation, avoiding head on collision
Finally, both parties should conclude and congratulate each other on the outcome for what had been negotiated and established. Both parties should also apply lessons learnt from the process in order to reinforce “We are in this together”, and to celebrate the benefits received from the process. The final agreement should be signed off by both parties to prevent further considerations and disputes.
Conclusion
This case study on win-win negotiation can be applied in every day situation, demonstrating practical and easy to achieve steps with the power to achieve desired outcomes. Negotiations become pleasant and smoother and can draw employer and employee closer because of the nature of the conversation, “we are in this together” resolution. Employer who offer a listening ear, and empathizing attitude often produce better results than hard and tough employer who only want quick fix and quick wins. Providing a place for discussion, by setting the direction and tone right, facilitates the discussion down the path of successful and pleasant closure. In addition, when the employer or employee come prepared for the negotiation with their case clarified and bottom lines decided - the negotiation can arrive at end point much faster and smoother. Entering into negotiation with a positive attitude, willingness to understand each other’s viewpoint, creating a dialogue nature though asserting core values within the conversation are all critical to starting a good discussion. Laying out request and helping the employee to prioritize their needs to match company resources in order to find a resolution to the request can help the employee sense the sincerity of the employer towards wanting to make this work and demonstrating to him how much the company value him as a contributing individual. Adding alternative solution to the discussion helps both sides to see things out the box and expands employee horizons to think long-term solution rather than focusing on current satisfaction. This can benefit both employee and employer and plan for future anticipated successes ahead. At any point of the discussion, the rule of the thumb is never to have head on clashes which may escalate the problem, rather, both parties should mellow the issue and contain it and to ensure confidentiality is honored. Last but not least, upon securing an agreement, the celebration of better relationships and better agreement should be carried out so as to reinforce the objective of “we are in this together”. This way, win-win negotiation is achieved which leaves both parties satisfied and happy as they both benefit and received a lot from the process.
Reference
1. Simon Halliday. 2007. Reach The Right Deal, IET Engineering Management, February/March 2007, 38-39.
2. Bob Gibson. December 20, 2011. Six Successful Strategies for Negotiation. Retrieved from http://blog.vistage.com/business-strategy-and-management/six-successful-strategies-for-negotiation/
3. Laurie Weiss. March 14, 2007. Creating Dialogue Instead Of Conflict. Retrieved from http://daretosayit.com/blog/2007/03/creating-dialogue-instead-of-conflict-2/
4. Gunia, Brian; Brett, Jeanne; Nandkeolyar, Amit. Dec2012. In Global Negotiations, It's All About Trust. : Harvard Business Review. Vol. 90 Issue 12, p26-26. 2/3p.
5. Compensation Negotiation: Making it a win/win situation by Marc Mencher (August 12, 2005) Game industry rule of (sore) thumb: Everything is negotiable.
6. Tips for a Successful Salary Negotiation- You can negotiate win win compensation by Susan M. Healthfield, About.com Guide
7. ECHO Job Seekers-Job Search Tips- Salary Negotiation
8. Skills-Guide.com- Here is a Salary Negotiation Example
9. Win-Win Negotiation: Expanding the Pie by Leigh L. Thompson The Mind and Heart of the Negotiatior (2009)
