Reference no: EM131366562

Chapter 4 in "Essentials" explains ten specific steps for effective planning. (see pp. 97-110)

Address the third step in detail as to the Twin Lakes Mining Company, Exercise 18, ("Readings, Exercises and Cases" pp.547-549.) This step calls for assembling the issues, ranking their importance, and defining the bargaining mix. You are describing how you would plan the negotiation if you were the lead negotiator for the Twin Lakes Mining Company.

3. Assembling the Issues, Ranking Their Importance,and Defining the Bargaining Mix

The next step in planning is to assemble all the issues that have been defined into a comprehensivelist. The combination of lists from each side in the negotiation determinesthe bargaining mix (see Chapter 2). In generating a list of issues, negotiators may feelthat they put too much on the table at once or raise too many issues. This may happen ifthe parties do not talk frequently or if they have lots of business to transact. As we notedin step 2, however, introducing a long list of issues into a negotiation can make successmore, rather than less, likely-provided that all the issues are real. Large bargainingmixes allow many possible components and arrangements for settlement, thus increasingthe likelihood that a particular "package" of components will meet both parties'needs and therefore lead to a successful settlement. At the same time, large bargainingmixes can lengthen negotiations because they present so many possible combinationsof issues to consider, and combining and evaluating all these mixes can make valuingthe deal very complex.
After assembling issues on an agenda, the negotiator next must prioritize them.

Prioritizationincludes two steps:

1. Determine which issues are most important and which are less important. Oncenegotiation begins, parties can easily be swept up in the rush of information, arguments,offers, counteroffers, trade-offs, and concessions. For those who are notclear in advance about what issues are more or less critical, it is easy to lose perspectiveand agree to suboptimal settlements or to get distracted by long debatesover points that are relatively unimportant. When negotiators do not have priorities,they may be more likely to yield on those points aggressively argued by the otherside rather than to yield based on their own priorities.

Priorities can be set in a number of ways. One simple way is for the negotiatorto rank-order the issues by asking, "What is most important?" "What is secondmost important?" and "What is least important?" An even simpler process is to groupissues into categories of high, medium, or low importance. When the negotiatorrepresents a constituency, it is important to involve that group in setting priorities.

Priorities can be set for both interests and more specific issues. A third, more precisemethod is to award a total of 100 points to the total package of issues and then todivide the points among the issues in proportion to each issue's relative importance.
If the negotiator has confidence in the relative weighting of points across the issues,then trading off and "packaging" possible settlements together becomes moresystematic.

It is also important to set priorities (and possibly assign points) for both tangibleand intangible issues. Intangible issues are often difficult to discuss and rank-order,yet if they remain subjective and not quantified, negotiators may overemphasizeor underemphasize them. It is easy to push such issues aside in favor of concrete,specific, numerical issues-and negotiators must be careful not to let the "hard bargaining"over numbers drive out more ephemeral discussion of intangible issues andinterests. More than one negotiator has received a rude shock when his or her constituencyhas rejected a settlement because it ignored the intangibles or dealt with themsub optimally in the final agreement.

Finally, negotiators may also wish to specify a bargaining range for each issue inthe mix. Thus, not only would a "best possible" and "minimally acceptable" packagebe specified, but also a target and minimally acceptable level would be specified foreach issue in the mix. Sometimes, assigning points to each issue, based on the issue'srelative importance to the others, can help a negotiator "keep score" as various elementsof the bargaining mix are assembled.

2. Determine whether the issues are linked together or separate. If the issues are separate,they can be easily added or subtracted (here is where points can help); if connected,then settlement on one will be linked to settlement on the others and makingconcessions on one issue will inevitably be tied to some other issue. The negotiatormust decide whether the issues are truly connected- for instance, whether the pricehe will pay for the house is dependent on what the bank will loan him-as opposedto simply being connected in his own mind for the sake of achieving a goodsettlement.

The above content is the method that we you need to use in next. Follow it to finish thisnegotiation.

CASE

Twin Lakes Mining Company

Introduction

In this role-play you will have the opportunity to negotiate a serious problem-a conflictbetween a mining company and the government of a small city regarding an environmentalcleanup. While the issues in this scenario have been simplified somewhat for thepurpose of this role-play, such conflicts between industry and governmental groups aretypical throughout the country. Try to introduce as much realism into this situation asyou can, based on your own personal experiences.

Background Information

The Twin Lakes Mining Company is located in Tamarack, Minnesota, in the northernpart of the state. It was established there in 1961. The city of Tamarack has a year-roundpopulation of approximately 18,000. Although there is a growing revenue that accruesto the city as a result of heavy summer tourism (summer homes, fishing, etc.) and severalcottage industries, Tamarack is basically a one-industry city. Twenty-five hundredpeople, 60 percent of whom live within city limits, work for the Twin Lakes MiningCompany; 33 percent of the city's real estate tax base of about $5 million consists ofTwin Lakes Mining Company property and operations. Both in terms of direct taxrevenue and indirect contribution to the economic stability of the local population,Tamarack is strongly dependent on the continued success of the Twin Lakes MiningCompany.

The Twin Lakes Mining Company is an open-pit, iron ore mine. Open-pit miningconsists of stripping the topsoil from the ore deposit with the use of power shovels. Trainrails are then laid, and most of the ore is loaded into railroad cars for transportation to acentral collecting point for rail or water shipment. As mining operations progress, railsare relaid or roads constructed to haul ore by truck. The ore is transported to a "beneficationplant" located on the outskirts of Tamarack. Benefication of ore involves crushing,washing, concentration, blending, and agglomerating the ore. In the early days of ore production,such treatment was unnecessary; however, benefication is necessary today forseveral reasons. First, transportation costs of rejected material (gangue) are minimized.

The crude ore may lose as much as one-third of its weight in grading, and, in addition,impurities are removed at a much lower cost than if removed during smelting. Second,ores of various physical and chemical properties can be purified and blended during thisprocess. Finally, fine ore materials, which previously may have been rejected as a resultof smelting problems, can now be briquetted and pelletized to increase their value. Afterthe ore proceeds through this process of cleaning and agglomerating into larger lumps orpellets, it is shipped by railroad car to steel mills throughout the Midwest. Rejectedmaterials are returned to "consumed" parts of the mine, and the land is restored.

Twin Lakes' benefication plant is located approximately five miles outside of
Tamarack. As a result of the expansion of the residential areas of the city, summerhome development, and various Twin Lakes operations, the plant has become a majorproblem for local citizens. For years, the Tamarack City Council has been pressing thecompany to clean up the most problematic operations.

While most of these discussions have been amicable, Twin Lakes has done little ornothing to remedy the major concerns. Now, as a result of more stringent environmentallaws and regulations, Twin Lakes has come under pressure from both the state of Minnesotaand the federal government for environmental cleanup. Both the state and the federal

Environmental Protection Agency have informed Twin Lakes that the company is inmajor violation of water and air pollution quality standards, and that immediate actionmust be taken. Twin Lakes' estimates indicate that total compliance with the cleanupregulations will cost the company over $36 million. Because Twin Lakes is now miningrelatively low-grade ore and because foreign competition in the steel market has significantlyeroded the demand for ore, environmental compliance may seriously influencethe profitability of the company. Many local citizens, as individuals and through thelocal chapter of the United Mineworkers Union, are putting significant pressure on theCity Council to help the Twin Lakes Company in its environmental cleanup operations.

The imposition of the environmental controls on Twin Lakes, and the resulting pressurefrom all segments of the community, have led to renewed discussions betweencompany officials and the City Council. As a result of these discussions, the followingenvironmental issues have emerged:

1. Water quality: The Twin Lakes plant requires large amounts of water to wash thecrushed ore. In addition, much of the highest-quality ore is reduced to an almostpowder like texture after washing and is being lost in the washing operation. As aresult, the company has built a series of settlement recovery ponds alongsideBeaver Brook near the plant. Water that has been used for washing ore is allowedto stand inthese ponds; they are periodically drained and the ore recovered.Nevertheless, granules of iron ore and other impurities continue to wash downstreamfrom the plant. The environmental agents have insisted that the effluentfrom the plant and the ponds be cleaned up. Estimates for the cost of a filtrationplant are $20 million. Twin Lakes claims that it cannot afford to build the plantwith its own revenue. Since Tamarack has periodically talked about Beaver Brookas a secondary water source for the city (and residential development makes this amore pressing concern in two to three years), the Twin Lakes officials hope thatthey might interest Tamarack in a joint venture.

2. Air quality: The entire process of mining, transporting, and crushing ore generateslarge amounts of dust. This has significantly increased the levels of particulatesin the air. In addition, during the dry summer months, the operation of many largetrucks along dirt roads intensifies the problem considerably. Twin Lakes believesthat it can control a great deal of the dust generated immediately around the plantat a cost of approximately $8 million. The most significant debate with the cityhas been over a series of roads around the city outskirts. Approximately half of the roads are city owned; the rest have been specially constructed for thetransportation of ore and material. Estimates for paving all the roads are $4.8 million,with a yearly maintenance cost of $600,000; periodic oil spraying of the roads, tokeep down the dust, would run approximately $800,000 annually, but an agreementto do this as a short-term measure may not satisfy the environmental agencies.

3. Taxation of company land: The land for the mine itself is outside city limits.

However, the plant lies within city boundaries, and current taxes on the city landare $800,000 annually. The company has always felt that this taxation rate isexcessive. In addition, several of the railroad spurs used to move ore into theplant, and out to the major railway line, cross city land. The city has continued tocharge a flat rate of $400,000 annually for right-of-way use. It has occasionallyoffered the land for sale to the company at rates varying from $2.2 million to$2.4 million. Again, the company has felt that this rate is excessive.

Both the company and the city believe that if some resolution could be obtained onthese three major issues, the remaining problems could be easily resolved, and Twin
Lakes would agree to keep the mine open.