PROGRAM ON NEGOTIATION AT HARVARD LAW SCHOOL AN INTERUNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION General Information J. Amold is one of three vice presidents for Human Resource Development (HRD) at Multimode, Ine., an internationally known, American-based, manufacturer and distributor of specialized communications equipment. Arnold has been with Multimode for seven years — moving through the ranks in HRD. Before coming to Multimode, Amold spent 10 years with one of Multimode’s competitors. Multimode, Ine. has three separate divisions. ‘The original and largest division is Multimode Manufacturing, with 8,000 employees — in plants in seven cities. Multimode Communication Services, the smallest division, with 4,000 employees, is located in four cities. The third division arose when Multimode acquired the subsidary, Tonepitch Dialers of Canada. Tonepitch has 5,000 employees and operates as a completely separate unit of Multimode with its own management, T. Boyd is one of two Vice Presidents for Budget and Finance at Multimode, Ine. Boyd has primary responsibility for overseeing the annual budget process. Boyd has been with Multimode for 10 years, holding a variety of posts before becoming Vice President for Budget and Finance last year. Boyd has a reputation throughout the company for being a tough, unyielding manager with unlimited ambition, Boyd has just finished a detailed review of each department's preliminary budget request for the upcoming fiscal year. Boyd is meeting with the leaders in each department to tell them what the recommendations to J. James, the Chief Executive Officer, regarding next year's budget will be. Multimode, Inc. has done reasonably well over the past five years, with gross revenues increasing an average of 11% a year throughout the period. Costs, however, have continued to rise at an almost equivalent level. Were it not for the spectacular profits camed by Tonepitch, Multimode would not look nearly as profitable as it does. James has indicated to Boyd that next year’s budget expenditures will increase no more than 5%, James also wants overall productivity enhanced, Amnold and Boyd are about to meet to discuss Boyd’s reaction to Amold’s HRD budget request. Despite the guidelines circulated by Boyd (indicating that each department should stay within the 5% cap), Amold asked for an 8% inerease in HRD's budget. Amold marshalled an incredible amount of information in support of HRD’s request, including figures showing that the current fiscal year’s HRD budget at Multimode was ‘TSE wa WaT Taree SARI COPS we HTDTE aa TeSORADTE SOA TREAT NT POTS OAT THROES TETRT 258-4406, Fax: (617) 495-7818. This case may nl be reprdced, revised or ansfaed im whole ce in pat by any means without he ‘yriten permission ofthe Dnetrof the Curculur Development Program on Negotiation, Harvard Law School, S18 Pound Hall Cambridge. MA 02138, Please help to peseve the usefulness his eae By heepine cone Copyright () 1986, 1993, 1994, 1995, 1996, 1999, 2008 by he President and Fellows of Harvard College. All gh feserved, (Rov 9/08)‘MuLTIMODE: GENERAL INEORM far lower than comparable allocations in other firms of roughly the same size. Amold also demonstrated precisely how the inerement in funding in HRD would help to increase productivity throughout the company. HRD has proposed a re-organization based largely on the human resources management model adopted two years ago by Tonepitch. Amold explained that the 8% inerement in funding for HRD was essential to the success of the reorganization. ‘Most of Boyd's meetings with the Departments have run for less than half an hour. From. the rumors Arnold has heard, no one has gotten more than the 5% cap. Copy TES HBG TE, TIPE TOHE, TVG, TODD, DOS By The PaSTBE and Teas oT Farvard COEGS ATTN SEED (REV 9105)‘MULTIMODE: GENERAL INFORMATION Mubiibos RESULTS SHEET NAME OR TABLE # ResuLts: 1. AGREEMENT: Yes No 2..% INCREAS! 5% 6% Ma 8% 3.Boyo: Ger: Give: ARNOLD: — GET: “ORT CT THRE, THIS, TOWT THIS TOG TH TOUS By The PST ad Faw of Maar Cogs AT HEH eso. TRPROGRAM ON NEGOTIATION AT HARVARD LAW SCHOOL, [AN INTERUNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION MuLti¥obe, INC. Confidential Instructions for T. Boyd You are looking forward to the meeting with J. Amold. You were surprised with HD's request. Arnold showed some courage in asking for an 8% increase when you had specifieally indicated that every department should stay under the 5% cap. Amold did a good job of substantiating HRD’s request for the 8% increase. According to your calculations, a 5% increase would amount to $325,000, while an 8% increase would amount to $520,000, a difference of $195,000. Since HD's budget is less than 5% of the total Multimode budget, the $195,000 difference would not “break the bank”. On the other hand, you have a problem with fairness across the departments. In addition, you said there Was a 5% cap and you don’t want to set a bad precedent and encourage other (larger) departments to ignore what you say when the budget cycle begins anew. Maybe if you start out suggesting that some departments have had to take cuts, Arold will accept the 5% increase. If Arnold accepts, so be it. On the other hand, you admire the quality of work that Amold has done in putting the proposal together. Moreover, you can always justify the 8% increase by putting it off on the Executive Committee approval of the HRD reorganization plan So, you are willing to go with the $520,000 (8%) if you really must to keep HRD happy You don’t want to be accused of undermining the Executive Committee’s approval of the reorganization plan, You are only going to agree to an increase that is absolutely necessary, See how low you can get Arnold to go. TS car WS REN by La Sunn Coie WATTS aa Tasman lin A pO, ora Telephone (BOOT 258-4406, Fax (617) 495-7818. This ese may nol be reproduced revised or Uaslated in whole orm part by any means without the Syren psxisson ofthe Dtetor ofthe Curiulum Development, Program on Nego Cambidec: MA C2138, Please hep to pesceve the wefuness of this case by Keeping it sontiental. Copyright) 1986, 1993, 1904, 105, 1996, 199, 2005 by the President and Fellows of Harvard College. All rights reserved (Rev. 9105)