Negotiation Case Studies March 4, 2009

No wonder the peanuts are $42....

I received an email:

Have you been following the Dodgers' negotiation with Manny Ramirez and his agent, the infamous Scott Boras? The Dodgers presented an offer of a 2 year contract, first year for $25M, second for $20M with a player option to opt out of the contract after the first year. Some of the money is deferred, so there is a "funny money" component here.

The deal was rejected by Boras and Ramirez, who then presented a counteroffer. Dodgers owner Frank McCourt would not respond to this counter, and then rescinded his own offer, saying "Now we start from scratch."

If I'm following correctly I sense at least three techniques from the Effective Negotiating seminar. Evidently McCourt's position was a "take it or leave it" (although I don't know if he expressed this in the negotiations, or just decided it after the fact). He then withdrew from the negotiating process entirely (forced deadlock), and for good measure added a kind of "Escalation" when he threatened to start over from scratch.

I've thought about doing this sort of grand gesture negotiating in some of my own deals, but usually decided I was just being emotional and not very business-like. However, in McCourt's favor, Boras and Ramirez have come back with two slightly more attractive counter-positions in the interim. My question is this: are there rules or guidelines for when it's smart and productive to withdraw an offer and step away from the negotiation?

Thank you,

Baffled and Intrigued

B and I,

Thanks for your query.

Clearly, you took the Karrass negotiating seminar seriously.

First let's catch everybody up with the players in this little drama. If you don't keep up with sports or sports negotiations, and you would like an entertaining and enlightening look at Mr. Boras, here it is.

In terms of negotiating, Mr. Boras seems to suffer from his own history. There are teams that historically won't even deal with him.

This relates to observations I've made recently about being too tough in negotiations. After a while, your reputation may not only intimidate your counterparts - they may just not show up. You may be the 800 pound gorilla in the room, but, given the choice, who wants to be in a room with an 800 pound gorilla?

To your question: I like to think that there are No hard-and-fast rules in Negotiation. Karrass would say, "No cookie-cutter approach."
Given that, when would one withdraw temporarily from a negotiation?
There may be several reasons, but among the biggest are:

1. When you learn new information and need time to regroup. In this case, maybe something more was revealed to Mr. McCourt by the Boras side that made them feel the landscape had changed significantly. This could be an advantageous or disadvantageous change.

2. To demonstrate the firmness of your limits.
This may be done for Mr. Boras' benefit or it may be done as a demonstration to the rest of Dodger's ownership, that McCourt is serious. Understanding the very public nature of the negotiations, Mr. McCourt may be sending a message to other players, current and future, regarding the limits within which the Dodger's will deal.

3. And, of course, there's always the good possibility of EGO being involved.

Remember, there is a substantial difference in a salaried worker doing a production deal for a company that needs to stay alive, and this deal wherein undoubtedly Mr. McCourt cares for the Dodgers and Mr. Boras has some level of allegiance to Mr. Ramirez, but each may see his own needs in great relief relative to the over-all picture....

More on agency in negotiation as we move forward.

Until next time...think about it.

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SENIOR ANALYST at BLUE CROSS/BLUE SHIELD OF MICHIGAN

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Kim C.
PROCUREMENT at AMERICAN EXPRESS

THIS PROGRAM HAS GREATLY INCREASED MY CONFIDENCE AND ABILITY TO NEGOTIATE FOR MYSELF AS WELL AS MY COMPANY.

LaDonna E.
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THE NEGOTIATING CLASS WAS VERY INFORMATIVE. THE INSTRUCTOR PROVIDED AN INSPIRATIONAL MESSAGE THAT CAN BE APPLIED TO EVERYDAY LIFE.

Mary S.
INTERNATIONAL SOURCING at FMC TECHNOLOGIES

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VICE PRESIDENT at GE

PRIOR TO THIS CLASS I FELT AS THOUGH I WAS GETTING EATEN ALIVE BY INTERNAL NEGOTIATIONS WITH SALES REPS. NOW I FEEL PREPARED TO CHALLENGE WHAT THEY ARE SAYING AND BET TO THEIR REAL NEEDS.

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PLANNER at HONEYWELL

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CONTRACTS MANAGER at HEWLETT-PACKARD
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