Reference no: EM133443676

Questions:

1. Did the Head of School, faculty budget committee, and board of trustees agree on appropriate decision criteria and negotiating process before debating the merits of specific projects? Why or why not?

2. Would agreeing to decision criteria and negotiating processes before discussing the merits of specific projects have been helpful to coming to an "acceptable" agreement? Why or why not?

3. What is negotiable in this role play? Was the domain of the negotiation expanded during negotiations (i.e., were more items added to the bargaining mix)? Did or would such an expansion have helped come to an "acceptable" agreement?

4. What sources of power does each group have (i.e., Head of School, faculty budget committee, and board of trustees; see pp. 185-186 Lewicki, et al.)?

5. Which group (if any) has the greatest amount of power and what impact did that have on the outcome?

6. What techniques were used to make a more integrative (win-win) solution? Was an integrative solution achieved? Why or why not? Was an integrative solution preferable? Why or why not?

Case Study: The Connecticut Valley School lntroduction In this situation you must allocate a limited capital budget among seven competing projects. Three parties are involved in the negotiation: the Head of School, the faculty budget committee, and the board of trustees. While the issues in this exercise appear straightforward, the parties do not necessarily perceive the budget process in the same manner. Read the background information for the Connecticut Valley School; then read the role information that the instructor has provided for you. Participants who have been assigned to the same team (faculty budget committee, board of trustees, headmaster) will meet separately to decide how to manage the upcoming meeting. The different parties will meet together to negotiate an agreement about the capital projects that will be funded. The chairperson of the board of trustees will chair this meeting. Participants will leave this meeting with an agreement about the priority of the capital spending projects. If no agreement is reached, each team should have a record of their final rankings and where they are willing to make further concessions. Background I nformation The Connecticut Valley School (CVS) is a private boarding school in Massachusetts. The Head of School, J. C. Loring has just submitted annual recommendations for capital spending to the board of trustees. Capital spending will be funded from two sources: new debt and the accumulated interest on the school's endowment. Since the school is approaching its debt capacity and trustees are committed not to draw on the principal of the endowment, the school can afford to spend only $900,000 to $ 1,000,000 on capital improvements over the next year. The seven major projects under consideration are described briefly here: l. Swimming pool Cost: $640,000 Expected life: 15 years Currently the school rents a local facility for $60,000 per year. In addition, the school pays $10,000 per year to bus students to the facility. If the school owned a pool, it could rent out pool time to local organizatrons for $30,000 per year' Loring feels that more students would use the pool if it were located on campus. 2. Buses Cost: $270,000 (3 buses) Expected life: 6 years Salvage value: Nil CVS owns two campuses several miles apart. A private bus company transports students between campuses at a cost of $ 180,000 per year. If the school owns and operates its buses, it wifl incur $80,000 in operating expenses each year. 57 New roof for hockey rink Cost: $60,000 A new roof is essential to prevent further damage to the rink and to the arena's infra/ structure. The project could be delayed one year; but due to the additional damage thatCost: $800,000 Expected life: 15 years Cold New England winters and the high cost of fuel oil have been draining the school's operating funds. This new heating system could save the school between $140,000 and $160,000 per year over the next 15 years. 5. Renovation of fine arts building Cost: $300,000 The faculty and trustees agree that an improved fine arts program is critical to the school's liberal arts mission. The renovated fine arts building would include a photography lab, a pottery shop, and art studios, as well as a small gallery. The building would not generate any incremental revenues or cost savings. However, a wealthy benefactor (after whom the building would be named) has offered to contribute $150,000 to subsidize the project. In addition, the facility would provide some marketing benefits, as a strong arts program attracts quality students. 6. Renovations to women's locker room Cost: $40,000 The women's locker room has not been renovated since it was built 33 years ago for visiting men's teams. Many of the women have complained that the facility is dirty, depressing, and overcrowded. Some women refuse to use the facility. The Head of School insists that these complaints are unfounded. The renovations would generate no incremental revenues or cost savings. 7. Upgrading the computer lab Cost: $120,000 Over the past eight years computer equipment has been purchased on a piecemeal basis with surplus operating funds. To support curricular goals, the school needs stateof-the-art computers and more workstations. The director of computing has proposed that the equipment be upgraded over three years. The first stage of this plan would require spending $120,000 on personal computers in the comin g year. An additional $160,000 would be spent over the following two years. The school uses a 12 percent annual discount rate to evaluate all cost-saving investment projects. Since not all of these projects can be undertaken, they must be prioriti zed,.lnhis report to the trustees, the Head of School ranked the seven projects as follows: 1. Swimming pool $640,000 2. Hockey rink roof $60,000 3. Buses $270,000 580 Exercise 28 4. Heating system 5. Fine arts building 6. Women's locker room 7. Computer lab $800,000 $300,000 $40,000 $ 120,000 Loring recommended that this year's capital funds be spent on the construction of a swimming pool, repairs to the roof of the hockey rink, and the purchase of three buses. These projects would require a total expenditure of $970,000. Loring's rankings were based on a subjective evaluation of cost-benefit trade-offs' While the trustees must make the final decision, they have solicited advice from the faculty. The faculty is in touch with the day-to-day operations of the school and with the needs of the students. In addition, many faculty members feel that they were closed out of the decision process last year and that the ultimate allocation of funds was inconsistent with the school's objectives. In an attempt to improve the decision process, the trustees appointed a faculty budget committee to advise them on capital spending priorities. A meeting of the trustees, the budget committee, and the Head of School has been scheduled. The purpose of this meeting is to prioritize