Bring reluctant parties to the table

Negotiations on factory safety suggest strategies for convincing others to work with you.

By PON Staffon / Business Negotiations

On April 24, an eight-story building in Bangladesh known as Rana Plaza collapsed, killing an estimated 1,129 people, many of them low-wage garment workers who made goods for foreign companies. In the aftermath, Western retailers were widely criticized for failing to address hazardous conditions in the factories where their goods are manufactured. Bangladesh is a top clothing exporter, producing about $18 billion worth of clothing per year, with about 60% going to Europe and 25% to the United States.

The large Western apparel companies had always worked independently on the issue of factory safety in Bangladesh. But following the Rana Plaza disaster, it seemed clear that the retail industry’s safety concerns had been overshadowed by the motivation to churn out clothing as quickly and cheaply as possible.

A few months after Rana Plaza, a consortium of European retailers and another consortium of U.S. retailers unveiled separate agreements aimed at improving safety conditions in overseas factories. The story of how these deals unfolded offers lessons to anyone who is trying to convince a reluctant party—or hundreds of them—to come to the table.

A slow start on safety
In April, several months before the Rana Plaza collapse, IndustriALL Global Union, a federation of 50 million workers, had brought together representatives of the world’s largest retailers, including H&M, Gap, and Walmart, to push for a joint initiative to improve factory safety in Bangladesh, where workers recently had been killed in factory fires and other disasters. But only one of the companies, Inditex, committed to negotiating a shared solution.

The retailers gathered for another meeting on safety on April 29—coincidentally, just days after the Rana Plaza collapse. Yet even as the death count rose, they balked at working together on an agreement. “I was astonished to see how complacent they were,” one labor leader told the New York Times.

In the weeks after the disaster, the apparel outsourcers faced mounting public pressure to address the problem. Labor unions turned up the heat, circulating a letter urging the companies to sign on to a legally binding safety agreement by May 15. They then focused their efforts on persuading Swedish “cheap chic” giant H&M to take the lead on safety improvements. “Get H&M on board, the thinking went, and others would follow,” wrote Liz Alderman in the Times.

H&M turns a corner
According to union officials, H&M executives at first resisted the idea of signing a legally binding agreement. Then a public outcry erupted over a human-rights ad that paired a photo of H&M’s CEO, smiling, alongside a photo of an anguished woman at the rubble of Rana Plaza. The resulting negative publicity, coupled with a new commitment from the Bangladeshi government for factory reforms, marked a tipping point for H&M.

The company signed on to an agreement that would require Western retailers to invest in improving the safety of foreign workers. As the labor leaders had hoped, once H&M was on board, European retailers, including Marks & Spencer and Zara, began to follow suit.

As an agreement coalesced in Europe, American companies faced increasing pressure to act.

Most large American retailers— including Gap, Walmart, J.C. Penney, and Target—remained holdouts, insisting that they could not accept the legal liability inherent in the working agreement. Yet as the agreement coalesced in Europe, American companies faced increasing pressure to act, and Gap began developing an alternate plan.

Two deals in three days
On July 8, the European consortium, which had grown to include 70 brands, unveiled its final, legally binding agreement, the Accord on Fire and Building Safety in Bangladesh. The group committed to inspecting the garment factories of members’ Bangladeshi suppliers within nine months, developing a plan to correct any safety problems found within nine months, making the dangers public, and paying workers during factory closings. Renovations were to be funded by the retailers, Bangladeshi factory owners, several European governments, and the World Bank.

Just two days later, a group of 17 North American retailers (including Walmart, Gap, Target, J.C. Penney, Kohl’s, and Macy’s) announced its own plan for factory safety in Bangladesh. The deal had been negotiated with the help of the Bipartisan Policy Center and two former U.S. senators, George Mitchell and Olympia Snowe.

The American companies agreed to contribute to a fund that would raise $42 million over five years for safety improvements in Bangladeshi factories. Under the plan, the retailers would inspect their partner factories in the country and develop plans to fix significant safety problems. The group also said it would help Bangladeshi factory owners secure any financing that they might need for renovations, the Times writes. In contrast to the European plan, the North American signatories’ promises are not legally binding, and the burden falls on factory owners to improve safety—or lose the companies’ business.

Labor groups immediately panned the North American agreement, saying it lacks the accountability of the European version and allows companies to walk away in the face of a safety problem. In response, WalMart’s chief compliance officer said his company could not sign the European agreement because of legal differences between the United States and Europe that could expose WalMart to “potentially unlimited” liability and litigation.

Getting naysayers to the table
How can you convince reluctant parties to come to the table—and, once they’re there, persuade them to negotiate a strong agreement rather than one that lacks teeth? Let’s look at the tactics that labor union leaders and others used in the Bangladeshi factory safety agreements:

Capitalize on public sentiment. In the aftermath of the Rana Plaza disaster, labor and other groups kept the pressure on retailers to act quickly, understanding that their incentive to address factory safety would fall away when public outrage faded. The fact that both consortiums reached agreement in a matter of months highlights what a powerful motivator negative publicity can be.

Define your scope. When a more global agreement was being considered, the American retailers began balking at various deal terms. At this point, the lead negotiators could have decided to water down the agreement to keep the Americans in the fold. Instead, they chose to stand by their core principles, and the Americans splintered off. In your own talks, weigh the pros of an all-inclusive, more diffuse agreement against the benefits of a smaller, more targeted one.

Divide and conquer. Labor leaders correctly surmised that if they got an industry leader on board—H&M—then others would fall in line. This strategy, which Harvard Business School professor James Sebenius refers to as backward mapping, involves targeting an influential party as an early negotiating partner in the expectation that she will create a critical mass for your initiative.