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Negotiations Case Study

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Updated: Jul 6th, 2020

Introduction

Pergy Fischer is the current chair of Mid-Western contemporary Art. Fischer took over the management of the museum at a time when it had a number of problems; most of them were financial. The museum was in need of premises and thus the management decided on building new premises. The new building was to ease congestion in the operation of the day-to-day activities at the museum.

Moreover, the new premise was to help the museum stock a variety of more artifacts from various parts of the world. Initially, the construction of the building was seen as a simple venture that would not raise any problems. To raise funds for the same, many people had pledged to donate towards the project. However, a challenge arose because the greatest pledge came from the former Chair of the museum, Mr. Peter Smith.

Alternative Approaches

Relying on pledges to fund the new project proved very unreliable. Overtime, it became apparent that most donors would not honor their pledges. Many donors and stakeholders had pledged enough money towards the project. However, the donor would end up paying only a part of the pledge citing economic hardships as the challenge.

Other donors would just change the priority of giving and therefore to some extent heavily vary the amount pledged. Since the introduction of the FASB accounting rule, it became mandatory that all the nonprofit organizations record all the pledges as income during the time of the pledge.

The new requirements and rules made the number of lawsuits in the US law courts, relating to donor pledges, to rise sharply. These lawsuits were made in order to seek the court redress in claiming the unfulfilled pledges.

A former chairperson had made a huge pledge towards the project but also failed to honor it. Consequently, Fischer sought the board’s advice on the case that involved the Smith’s unfulfilled pledge.

Due to not fulfilling the pledge, lack of funds was seriously affecting the museum and the construction project was seriously stalling. During the meeting, the board members argued about the idea and finally settled that the lawsuit was not the best idea then.

Since the court approach was not the best solution, Fischer was contemplating the next alternative approach to collect the unfulfilled pledge. According to Born (2009), if one does not wish to bring a lawsuit against another, arbitration is the best alternative remedial process. Arbitration serves the aggrieved party but it does not involve any court process.

Born (2009), further observes that arbitration helps parties to avoid costly and lengthy litigations. Noting Smith’s current situation as discussed in the meeting, arbitration will simply be the smartest idea. Instituting a lawsuit against smith would simply leave him weaker and in the process jeopardize his life.

It is, therefore, advisable that, considering his current situation, the museum institutes an arbitration process in order to encourage him to honor his pledge. Such a process will help both parties to easily reach a consensus. Moreover, consensus will be arrived at in a less costly way and save time as opposed to lengthy court cases.

Should Fischer involve the board or formulate a recommendation on her own for the board’s next meeting?

Following the first meeting with the board, Fischer received quite a number of ideas in terms of alternatives to lawsuits. The ideas gathered from board members aimed at ensuring the organization does not have to proceed with any legal suit against Smiths.

Most of the argument were based on the situation that smith is in, while others argued with the image of the organization in mind. In a way, it will be noble for Fischer to involve the board in further discussion leading to any action against Smith.

This will highly reflect the element of transparency and accountability in her leadership. Further, involvement of the board in determining next agenda enhances democracy and participation.

Nonetheless, basing on the first board meeting, it may seem like wasting time to involve the board in setting the next agenda. It would appear like waste of time because the board seems to have already agreed unanimously on the decision to follow. This means that involvement of the board will not change much on what is already agreed. Formulating a recommendation on her own for the board’s next meeting will have many implications.

Though Fischer is the Chair of Mid -West contemporary art, the position does not give her absolute powers to do as she wishes. By formulating a recommendation on her own for the board next meeting, it means that she has undermined the decision reached earlier by the board, and that she no longer values the output of the board as she can equally do better without the board.

Similarly, her decision means she has started dictating to the company on what to do, without necessarily consulting in order to get the perspectives of the rest.

Making the organizations’ decision on her own, it would mean that, she no longer upholds the virtue of practicing democracy and that she now prefer authoritarian things to the rest of the board members. According to Gasper (2005), leadership should be learned rather than being inherited.

Gasper (2005) simply means that a leader should develop his leadership skills through interaction with the rest rather than doing things depending on what he think is acceptable and favorable. Gasper further notes that the best style of leadership is the one that combines the elements of democracy and directive. With democracy, the author notes that the leader should practice the issue of giving power to be self-directing.

Should the museum sue Smith or not?

There are many factors, which should inform the decision on whether the museum should sue Smith or not. First, Smith has a moral responsibility to pay the pledge he made to the museum. Regardless of Mr. Smith’s current Situation of suffering from cancer, his written pledge still stands.

When the museum received the following pledges it had a lot in mind, and by all standards, the pledge came in to relieve them. Unfortunately, even after the museum had started implementing some of its plans with the pledge in mind, like coming up with a bigger and modern structure, the pledge was not fulfilled.

As of now, the Smith’s are elderly and sick. Consequently, the chances of recovering the pledge from them get slim with the passing days. The smith pledge issue is compounded by the fact that the board is almost unanimous that the museum is not supposed to sue the Smiths. The reason the board is adamant on not suing the Smiths’ is that the Smiths’ have been long members of the museum.

Particularly, Mr. Smith was a long serving chairman of the museum. There have equally been worries of the reputation of the organization and the Smiths’ if the lawsuit were to go through; considering that, particularly at this time, Mr. Smith is tremendously ill with cancer. The reputation of the museum has to be safeguarded if it is to viewed favorably by the public and other donors in general.

The board is avoiding a negative image; where it will be seen as greedy by engaging in a court battle whenever issues come up. Similarly, the board is afraid that suing Mr. Smith will anger him so much, such that he will never again try to lend or even give any part of his money to the museum. The board is also afraid that by suing, Mr. Smith and other donors will be forced to think twice before they offer the museum any money.

Largely, I think the museum should not have hesitated in suing Mr. Smith because legally Mr. Smith had committed a crime by pledging to offer an amount worth $5millions to the museum, a pledge he never satisfied.

According to Keown (2003), a financial pledge has lot of significance in any business or organization, because a part from being recorded as income in account receivable, the organization is also valued with the amount of money pledged in consideration.

This pledge made the museum to experience intense financial stress. Were it not for the pledge, the museum would not have commenced constructing the new structure that had actually cost the museum a lot of money.

Reference list

Born, G. (2009). International Commercial Arbitration. Kluwer law international: Amsterdam

Gasper, E. J. (2005). Introduction to Business. Cengage Learning: Boston.

Keown, J. (2003). Foundations of Finance: The Logic and Practice of Financial Management. Pearson Education Inc: London.

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IvyPanda. 2020. "Negotiations Case Study." July 6, 2020. https://ivypanda.com/essays/negotiations-case-study-critical-writing/.

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