Owens

Win-Win or Hardball?

The case study, Win-Win or Hardball?, deals with the topics or Distributive and Integrative Negotiations as discussed in chapters 3 & 4 of your textbook. It is taken from articles published by the Program on Negotiation at Harvard University. Read each article and provide your analysis and opinion to answer the questions.

Assignment MUST include:

· Cover Page with Student’s Name, Course Number and Title, Class Time and Date

· Number and write out each question; answer in detail using complete paragraphs and sentences

· Word Processed – 12 Point Font, Double-spaced

· Free of grammatical and spelling errors

· Answer each questions asked

Article #1: Get Your Head in the Game

Analyze the article and critique the distributive negotiations style used by Matt Harrington. Discuss your opinion of his strategy and the outcome of his negotiations. Describe what you would do differently and the tactics you would use.

Article #2: Manage Team Dynamics

Explain in your own words how multiple parties complicated this negotiation. What role did external influences play to the process? Discuss how you would approach this negotiation and the tactics you would use to be successful in keeping the Big 12 together.

Article #3: Gain a Competitive Advantage

Critique the article from the position of integrative negotiations. Explain the key elements described and how you can apply them in the future negotiations. How important is a ZOPA in any negotiation?

Reflection:

Critique the three articles for their overall value. Identify “three key points” that you feel were the most valuable to you and explain why? How can you apply these three key points to future negotiations?

S P E C I A L R E P O R T

Learn Top Strategies from
Sports Contract Negotiations

Win-Win or Hardball?

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Negotiation Special Report #1

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About Negotiation
The articles in this Special Report were previously published in Negotiation,
a monthly newsletter for leaders and business professionals in every field.
Negotiation is published by the Program on Negotiation at Harvard Law School, an
interdisciplinary consortium that works to connect rigorous research and scholarship
on negotiation and dispute resolution with a deep understanding of practice. For more
information about the Program on Negotiation, our Executive Training programs, and
the Negotiation newsletter, please visit www.pon.harvard.edu.

To order additional copies of this Special Report for group distribution, or to order
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+1 301-528-2676, or write to negotiation@law.harvard.edu.

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To order the full text of these articles, call +1 800-391-8629 or +1 301-528-2676,
or write to negotiation@law.harvard.edu. Visit www.pon.harvard.edu to download other
free Negotiation Special Reports.

Negotiation Editorial Board
Board members are leading negotiation
faculty, researchers, and consultants
affiliated with the Program on
Negotiation at Harvard Law School.

Max H. Bazerman
Harvard Business School

Iris Bohnet
Kennedy School of Government,
Harvard University

Robert C. Bordone
Harvard Law School

John S. Hammond
John S. Hammond & Associates

Deborah M. Kolb
Simmons School of Management

David Lax
Lax Sebenius, LLC

Robert Mnookin
Harvard Law School

Bruce Patton
Vantage Partners, LLC

Jeswald Salacuse
The Fletcher School of Law and Diplomacy,
Tufts University

James Sebenius
Harvard Business School

Guhan Subramanian
Harvard Law School and
Harvard Business School

Lawrence Susskind
Massachusetts Institute of Technology

Michael Wheeler
Harvard Business School

Negotiation Editorial Staff
Academic

Editor

Guhan Subramanian
Joseph Flom Professor of Law and
Business, Harvard Law School

Douglas Weaver Professor of
Business Law, Harvard Business
School

Editor

Katherine Shonk

Art Director

Heather Derocher

Published by
Program on Negotiation
Harvard Law School

Managing Director
Susan Hackley

Assistant Director

James Kerwin

Copyright © 2012 by Harvard University.
This publication may not be reproduced in
part or whole without the express written per-
mission of the Program on Negotiation. You
may not forward this document electronically.

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1. Get your head in the game.
Like top athletes, smart negotiators confront the cognitive and psychological errors
that could keep them from performing at their best.

In 2000, 18-year-old Matt Harrington was widely considered the most promising pitcher in the Major League Baseball (MLB) draft. The
Colorado Rockies chose him as their seventh pick and then sweetened the pot
after Harrington, his parents, and his agent, Tommy Tanzer, rejected the team’s
first offer. On behalf of his client, Tanzer turned down the Rockies’ final offer of
$4 million over two years, though it was a typical offer for a seventh-pick player.

After a disappointing season in the independent leagues, Harrington
entered the 2001 MLB draft, where the San Diego Padres made him the 58th
overall selection. On the advice of his new agent, Scott Boras, Harrington
rejected an offer of $1.25 mil lion over four years and a $300,000 signing bonus.

In 2002, following another lackluster season in the independent leagues,
Harrington did poorly in the MLB draft and turned down less than $100,000
from the Tampa Bay Devil Rays.

In 2003, the Cincinnati Reds drafted Harrington in the 24th round and
offered him little more than the opportunity to play; again talks fell through.
In 2004, the New York Yankees drafted Harrington in the 36th round but
passed on making him an offer.

After failing to receive any offer in the 2005 draft, Harrington became a
free agent. In 2006, he received a minor-league contract from the Chicago Cubs,
but he was released before the 2007 season began. He continues to play for
independent-league teams, earning about $1,000 per month, and works other
jobs during the off-season.

Matt Harrington holds the dubious distinction of being the longest holdout
in the history of the MLB draft. His string of botched negotiations ensured that
his career ended before it could even begin.

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The mistakes Harrington and his negotiating team made are spectacular
as a whole, but considered one by one, they are not unique. In their book,
Judgment in Managerial Decision Making (Wiley, 7th ed., 2008), professors
Max H. Bazerman of Harvard Business School and Don A. Moore of Carnegie
Mellon University present Harrington’s thwarted baseball career as
a cautionary tale to illustrate the decision-making errors that affect virtually
all negotiators.

In negotiation, we unwittingly operate under a number of systematic and
predictable cognitive biases on a regular basis. Many of these errors in thinking
result from our tendency to put too much trust in our intuition. Here we present
three of the most common mistakes that Bazerman and Moore have identified
and suggest a number of ways to keep this faulty thinking from ruining your most
important talks.

Mistake No. 1: Viewing negotiation as a fixed pie. Negotiators often falsely
assume that their interests are directly opposed to those of their counterparts.
The prevalence of competition in our society, ranging from sports to university
admissions to corporate promotion systems, can lead us to view many other
situations as win-lose. For example, too many negotiators assume that the pie of
resources is fixed in size when, in fact, opportunities exist to expand the pie by
creating value.

What’s more, researchers have found that the belief in a fixed pie causes
negotiators to devalue any concession their “adversary” makes. Unfortunately,
Matt Harrington and his agents succumbed to the tendency to view the other
side’s alleged best offer with too much suspicion. They also neglected to explore
the possibility of a value-creating trade, such as accepting the salary offered and
negotiating performance-based bonuses if Harrington played as well as
he expected.

Solution: Share information. The simplest way to break through the fixed-
pie mindset in a negotiation is to disclose information to your counterpart.
In particular, try to provide information that could lead to wise tradeoffs. If a
customer complains about your prices, break down your costs for her and ask
whether she is willing to make concessions on delivery time or other issues

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3

in return for lower prices. Typically, the discoveries you reach jointly will
outweigh the risk that the other side will take advantage of the information
you disclose.

Mistake No. 2: Anchoring on the first offer. Harrington and his family fell
victim to another common cognitive bias: they were overly affected by the first
number that entered the negotiation. Harrington’s first agent, Tommy Tanzer,
told MLB teams with high draft choices that Harrington would require at least
a $4.95 million first-year signing bonus—an unrealistic amount that scared off
seven teams in the draft. This high anchor created expectations in the minds of
Harrington and his family that could not be supported.

Initially, the Harringtons stood by Tanzer’s hard bargaining. Only later did
they come to understand that they had hired an inexperienced agent—and file a
lawsuit against him for botching the deal.

Solution: Reject anchors. Unprepared negotiators are far more likely to fall
into traps, such as inappropriate anchors, than their prepared counterparts.
When you come to the table unprepared, you put yourself at a distinct dis-
advantage. Set concrete goals for the negotiation in advance so you won’t be
swayed by others’ influence tactics and vivid stories.

In addition, keep in mind that your thinking will tend to be more intuitive
and less rational when you’re pressed to make snap decisions. Don’t allow other
negotiators to force you to give an answer right away. Instead, schedule breaks
between negotiating sessions that give you time to think and evaluate.

Mistake No. 3: Escalating commitment. After wising up about Tanzer, why
did the Harringtons make the same mistake year after year—rejecting decent
offers in favor of much worse alternatives?

When Tanzer urged his 18-year-old client to turn down the Rockies’
multimillion-dollar deal, he unwittingly set up his client for a string of failed
negotiations. According to Bazerman and Moore, negotiators have a tendency
toward irrational escalation of commitment—a strong psychological need to
justify their prior decisions and behaviors, both to themselves and to others.
After you’ve invested a great deal of time and energy in a course of action, it’s
difficult to know when to quit.

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Many of us would rather remain committed to a losing strategy than admit
we’re throwing good money after bad. As for Harrington, by turning down one
disappointing draft offer after another, he committed himself more deeply to
doing better the next year, even as the odds of that happening dropped out
of sight.

Solution: Don’t dwell on the past. Thoughts about the “sunk costs” you’ve
invested can keep you plodding forward long after you should quit a negotiation or
settle for a disappointing deal. Yet economists tell us that past investments should
rarely affect our decisions about the future. At each decision point during your
talks, make sure you have a sound basis for escalating your commitment to a deal.

Adapted from “When Your Thoughts Work Against You,” first published in the
Negotiation newsletter (October 2008).

2. Manage team dynamics.
When you are trying to pull your team together, you’ll need to carefully navigate
group negotiations.

How do you get the attention of negotiating partners who seem intent on running off to greener fields? That’s the question Dan Beebe, the
commissioner of the Big 12 college athletics conference, faced as his league
threatened to splinter apart.

A rush on the field. Beebe’s troubles began on June 10, 2010, when the
University of Colorado abandoned the Big 12, lured away by the Pacific-10.
Larry Scott, the Pac-10’s new commissioner, was on a mission to launch a league
TV network by acquiring member schools in new geographic regions, according
to the New York Times.

A day later, the University of Nebraska also decamped from the Big 12,
joining yet another league, the Big Ten. The Big 12 was down to 10 members—
a number that immediately threatened to go down by half. Lining up behind
the University of Texas, the Big 12’s moneymaking powerhouse, were Texas

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Tech University, the University of Oklahoma, and Oklahoma State University,
attracted by the Pac-10’s promises of sky-high television revenues. Meanwhile,
Texas A&M University, another Big 12 member, was said to be flirting with
the Southeastern Conference as well as the Pac-10. The other five members of
the Big 12 faced the prospect of scrambling to find new homes in other leagues.

Hit hard by the economic crisis, universities have put pressure on their
athletic divisions to ramp up revenues. In this climate, the long-predicted
prospect of college athletics conferences merging into four 16-team “super-
conferences,” structured around lucrative TV deals rather than traditional
rivalries and geography, suddenly seemed imminent.

The playbook changes. On June 14, though, the game of musical chairs
came to an abrupt end. The University of Texas announced it would stay in the
Big 12, as did its four followers.

There were a number of reasons for the schools’ change of heart. First,
and most notably, Commissioner Beebe promised them between $14 million
and $25 million each in TV revenue per season (with the highest sum going
to Texas), about double their 2009 TV earnings. Texas also gained the right to
launch a potentially lucrative Longhorns TV network. Beebe had negotiated
with the Big 12’s TV networks, ABC/ESPN and Fox, for promises of generous
renegotiation terms in the years ahead. These future TV deals were viewed as
critical to winning over University of Texas President Bill Powers and keeping
the conference intact.

Second, the five schools that would have been left in a tattered Big 12
offered to give Texas, Texas A&M, and the University of Oklahoma their share
of the reported $32 million in departure penalties that Nebraska and Colorado
owed for abandoning the conference.

Third, a number of influential individuals “without a dog in the hunt”—
including business executives, athletic directors, and network executives—
quietly lobbied Texas and the other schools being pursued to stay put, a National
Collegiate Athletic Association (NCAA) source told ESPN.com. These concerned
outsiders reportedly warned the universities that the Pac-10’s expansion deal was
against their best interests. The group also was said to have helped Beebe with his
TV negotiations.

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Finally, Texas made 11th-hour demands that turned out to be a deal
breaker for the Pac-10. Given its plan to build its own TV network, the Pac-10
refused to let Texas keep its local network rights. Nor would the Pac-10 give the
school the “extra sweetener” it desired in revenue sharing, a source told the Times.

Having gone down to 10 teams, the Big 12 is expected to have to forfeit
its traditional championship game, in accordance with NCAA rules. But under
Beebe’s leadership, the league succeeded in keeping storied rivalries intact while
also appeasing its members financially—at least for the time being.

“The Near-Collapse of the Big 12: Holding a Winning Team Together,”
first published in the Negotiation newsletter (September 2010).

3. Gain a competitive edge.
To triumph in cutthroat situations, such as negotiations where agents are present,
you’ll need to tap new sources of strength.

Show me the money!” That refrain from the 1996 movie Jerry Maguire, shouted by a football player to his agent, continues to echo through U.S.
professional sports negotiations today. A public arena, enormous piles of cash,
and even bigger egos combine to make sports negotiations a unique context. Yet

Do a side deal or two. Commissioner Beebe understood the power of
money to influence the mutinous universities. Through side deals with
ABC/ESPN and Fox, he secured promises of TV contracts that rivaled
the Pac-10’s offer.

Exploit patterns of deference. The University of Texas was the clear
leader of the Big 12 schools that were threatening to defect. Aware of
this fact, Beebe concentrated his efforts on winning over Texas in the
expectation that the others would line up behind its decision.

Ask for a sacrifice. The five universities that risked being abandoned in
the Big 12 stepped up financially to help keep the league united. Such
sacrifices demonstrate goodwill and team spirit.

Enlist new players. The shadowy group that worked to try to hold the
Big 12 together may have strongly influenced the final outcome. If your
counterparts won’t listen to you, recruit outsiders they respect to argue
your case.

How to inspire team loyalty
1

2

3

4

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anyone who has negotiated through agents, faced a competitive atmosphere, or
lacked strong deal alternatives can learn a lot from team athletics.

Why are sports talks so tough? In his chapter “First, Let’s Kill All the
Agents!” in Negotiating on Behalf of Others (Sage, 1999), Harvard Business
School professor Michael Wheeler analyzes the key features that can make sports
negotiations so contentious. Here are three of them:

1. The presence of agents. In recent decades, the rise of players’ unions,
collective bargaining, and growing revenue streams from advertising and broadcast
fees gave players more leverage than ever before—and created a greater need for
experts to negotiate athletes’ increasingly lucrative and complex contracts. Agents
can add value by matching players with the right teams and insulating them from
subpar offers and hard-bargaining tactics, according to Wheeler.

But because sports agents typically have relationships with many different
teams and players, and earn a portion of their clients’ salaries (typically 4%
to 10%), they face significant conflicts of interest. Sports agents are routinely
accused of keeping players in the dark during contract talks and focusing on
player salary to the exclusion of other deal features that might please their
clients, such as a great location or options for contract extensions.

For reasons such as these, a small number of athletes choose to negotiate
on their own behalf. Former Major League Baseball (MLB) pitcher Curt
Schilling successfully negotiated an $8 million incentive-laden one-year contract
extension with the Boston Red Sox for himself, only to sit out the entire 2008
season with a shoulder injury. On his blog, Schilling wrote in 2007 that “at some
point in your career, an agent becomes baggage.”

2. Lack of alternatives. Consider the saga of baseball player Matt Harrington,
described in the first article in this report. As we noted, for four years straight, the
pitcher entered the MLB draft. Year after year, negotiating through different agents,
Harrington turned down offers from MLB teams. As Harrington got older, the
offers got worse, falling from a promise of $4 million over two years to little more
than the chance to play in the majors.

The story illustrates a prime feature of most professional sports deals: a lack
of strong outside alternatives. In most negotiations, if talks with one counterpart
don’t go well, we can walk away and deal with someone else. But in the major

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U.S. team-sports leagues, including MLB, the National Football League, and the
National Basketball Association, players enter the system through a draft that
requires them to negotiate with one particular team. For most junior players,
holding out for a better deal means sitting out the season—not an appealing
career option. Only when athletes have served their team for a set number of
years are they eligible to become free agents and negotiate with other teams.

3. No zone of agreement. In negotiations outside the realm of sports, parties
typically see value in negotiating with each other only if a zone of possible
agreement, or ZOPA, exists. If you’ve decided to pay no more than $15,000 for a
new car, you won’t bother visiting your local Porsche dealership.

Yet agents and sports teams often begin their negotiations miles apart.
Instead of dealing in the ZOPA, according to Wheeler, they deal in the
“NOPA”—the realm of no possible agreement. In a 1995 study, Wheeler and his
colleagues David Lax and James Sebenius tested this theory by observing how
actual National Hockey League (NHL) general managers behaved in a simulated
NHL salary negotiation. Almost all the pairs, playing the role of player’s agent
and general manager, started the negotiation with a large gap in their bargaining
range. That is, those acting as agents demanded much higher salaries for their
players than those playing managers were willing to offer.

In NOPA negotiations where the only alternative is to walk away (or, for
senior players in some sports, to let an arbitrator decide your fate), parties on
both sides of the table concentrate on getting the other party to budge, notes
Wheeler. Under these conditions, negotiation becomes nothing more than a
matter of hoping the other guy blinks first.

From competition to collaboration. If you’ve faced some of the same
challenges that plague sports negotiations, these four tips can help you strive for
greater collaboration and trust:

1. Manage your agent. In a chapter in Negotiating on Behalf of Others, Brian
S. Mandell argues that athletes who negotiate through agents need to take a
number of steps to guard against agent incompetence and conflicts of interest.
This advice applies to all negotiators who allow others to speak for them. First,
give your agent clear instructions regarding your long-term goals and your

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range of interests. Second, limit your agent’s authority to make commitments
on your behalf. Third, make sure that your agent consults with you throughout
the negotiation process. Fourth, try to align your agent’s compensation with
your interests by structuring a payment scheme that rewards him for creating
value at the table. Finally, verify your agent’s statements by reaching out to your
negotiating counterpart. Even if you’re not sitting at the table, you still have a
right to speak with the other side. Here’s one more tip: if your agent won’t follow
these instructions, find a new agent or consider representing yourself.

2. Insist on expanding the pie. Whether you’re negotiating on your own or
through an agent, you are likely to periodically encounter negotiators who persist
in haggling over a single issue—typically price. How can you convince someone
to discuss ways to create more value for both parties? First, reduce some of the
external pressures on your negotiation. If you’re facing a tight deadline, try to
extend it. If you’re being closely monitored by an audience, such as members
of your organizations or the media, work on making your negotiations more
private. At the table, discuss the benefits of viewing each other as collaborators
rather than as rivals.

3. Analyze the market. Examining each other’s constraints and broader market
forces can help negotiators move from a NOPA to a ZOPA. In 2005, the NHL
enacted a collective-bargaining agreement that placed an overall salary cap tied to
league revenues. As a consequence, players and their agents have had to lower their
expectations of what some NHL teams can afford to pay. Similarly, business negotiators
need to consider the larger economic forces in which they are working. In the midst of
a recession, it might be unrealistic for you to expect customers to accept a significant
price increase as part of your contract renegotiations, even if they did last year.

4. Create better alternatives. Occasionally, it may seem as if everything is
riding on the outcome of a particular deal. But that kind of pressure can sabotage
even the best negotiators. When preparing for a negotiation that seems like a
once-in-a-lifetime opportunity, make a list of all the other options you might
explore if you don’t succeed. By improving your sense of psychological power,
you set yourself up to perform at your best.

“Becoming a Team Player: Lessons from Professional Athletics,”
first published in the Negotiation newsletter (October 2009).

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