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Negotiations

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Submitted By rusty467
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Professional athletes face the recurring dilemma of negotiating or renegotiating their contracts and according to Alvin Grier, the director of the midwest operations for Elite Sports Agency, “don’t know anything about NFL negotiating strategies”. He strongly recommends that all pro athletes hire an agent or attorney to perform the tedious negotiations citing it is their money and their livelihood on the line. He compiled seven strategies to negotiating a contract that helps athletes maximize their salaries: (1) be careful of the incentive laden contract, (2) know exactly how much of the contract is deferred, (3) only the signing bonus is guaranteed, (4) attempt to get a large signing bonus, (5) front-load your salary, (6) get a roster bonus after the third contract year, and (7) put off guaranteed base-salary until the last years. His strategies seem to be common sense but the average professional athlete entering the professional ranks is only 20 years old and has had little to no college education. The foundation for many successful renegotiated contracts is the athlete’s past performance and the team’s “what have you done for me lately” attitude. A productive player currently on the team’s roster has a better chance of signing a lucrative deal than one who has yet to prove himself. Contradictory to this is the player(s) selected in the annual sporting draft. The players selected highest in the draft are in a better position to negotiate a great deal than those drafted in lower rounds. Given these circumstances, how does a player and his agent strategize their negotiation and what tactics are used? What will be the target, resistance point, and best alternative to a negotiated agreement (BATNA)? Since negotiation is a process, there are many steps to take, many concessions to make, and the player must be well prepared especially if he is not a high draft pick or has not performed at a level that has impressed the current or prospective team.
First things first—agents are a must have commodity. Highly visible sports agents such as Scott Boros, Mark Steinberg, and Drew Rosenhaus are in short supply and demand is high. These three have accounted for billions in salaries for professional athletes such as Terrell Owens, Lebron James, Chad Johnson (now Ochocinco), and many other high profile athletes. They use similar tactics in the media when negotiating deals with the athletes’ teams. Time is on their side since the respective sporting seasons start the same time every year and the owners understand the value of the athlete as an entertainer drawing millions of viewers thus generating billions in ticket sales, concessions, and memorabilia purchases. Television ratings are much higher when these athletes’ teams play on prime time and the weekends. Of the thirteen television programs that drew more than thirty million viewers over the past year, eleven (85%) were sports related (Gregory, 2011). The Super Bowl contest between the Indianapolis Colts and New Orleans Saints alone garnered over 106.5 million viewers. The NFL isn’t the only league enjoying such great success. The Kentucky Derby, National Hockey League (NHL), Major League Baseball (MLB) and the National Basketball Association (NBA) all enjoyed significant increases in viewer numbers and television ratings. The amount of money generated by this plethora of viewers is astounding and professional athletes want their slice of the pie. How does the agent help the athlete get what is deserved? In the high profile world of professional sports, several tactics are used such as knowing when and when not to negotiate, information gathering, managing the conflict, understanding the other side’s needs and objectives, finding and emphasizing commonalities, and finally getting to the right solution that meet the needs and objectives for both sides. Therefore an integrative approach must be taken to ensure compromise and a win-win scenario. In the media, the negotiations seem adversarial and distributive (win-lose) when in reality both sides are working toward a mutual conclusion. Emmit Smith, a former running back for the Dallas Cowboys held out for two games in the 1993 season citing his contract needed to be renegotiated because he performed brilliantly the previous year and was the central reason the Cowboys won the Super Bowl in the 1992 season. Although Troy Aikman and Michael Irvin, quarterback and wide receiver respectfully, had just as much to do with the team’s success (not to mention the other fifty players), Smith decided to play hardball and “hold out” until his demands were met. His statistics justified his desires. DatabaseFootball.com, an online statistics database shows that he rushed for over 1700 yards in 16 games and scored 18 rushing touchdowns. His absence had an immediate impact on the team as they lost their first two games of the regular season prompting Michael Irvin’s public outburst to get him back and pay him what he wanted. Smith was granted his wish and came back for the duration of the season in which the Cowboys won another championship. His tactics were effective because he and his agent understood the organization’s needs, had a clear objective, and followed through. He proved his worth by leading the team to the championship.
Another example of a professional football athlete gathering information and being successful in trade negations is Eli Manning, quarterback for the New York football Giants. El, son of Archie Manning and brother to fellow NFL quarterback Peyton Manning, was a star collegiate player at Mississippi University. Destined to be drafted in the first round, Eli got his wish in 2004 and became the first pick of the San Diego Chargers—a franchise that was on the brink of greatness. However, six years earlier they drafted the number one overall player who became infamous for being the biggest bust ever—Ryan Leaf. Manning did his homework and discovered that the Chargers’ organization did little for Ryan Leaf to help ease the transition into the NFL lifestyle and give him an opportunity to immerse himself into the team’s playbook. His brother Peyton, on the other hand told Eli of how the Indianapolis Colts’ organization took care of all the non-football stuff and allowed him to focus solely on football. Eli then changed his mind and told the Chargers that he would not play for them and demanded a trade to the New York Giants. As a side note, this would also ensure he would not have to compete with his brother in the same division for a berth in the Super Bowl. He too got his wish when the Giants drafted Phillip Rivers and immediately traded him to the Chargers for Manning. In this example, Manning identified and defined the problem, had a clear understanding of the problem and brought his needs to the surface, generated alternative solutions, and selected from those he wanted. Of course he couldn’t have done this without the other party having an interest in the other player being traded. The media made this to be a conflict-laden relationship probably to garner higher rating for their sports telecasts. In reality, this was not a win-lose situation and there was no competitive relationship. Because there was to be no real long term commitment by either team, there was no expectation of competitive defensiveness. Each side won in this arrangement since both teams have been successful. Manning’s Giants have won a championship and the Chargers have been in the AFC championship game with Phillip Rivers at the helm. Clearly, the distributive and integrative styles will require different approaches. To ignore this can be devastating for the result, but it all too often happens. Because in the distributive approach each negotiator is battling for the largest possible piece of the pie, it may be quite appropriate - within certain limits - to regard the other side more as an adversary than a partner and to take a somewhat harder line as it seemed in the Emmitt Smith scenario. This would however be less appropriate if the idea were to hammer out an arrangement that is in the best interest of both sides especially in the Manning case. If both win, it's only of secondary importance which one has the greater advantage. A good agreement is not one with maximum gain, but optimum gain. This does not by any means suggest that we should give up our own advantage for nothing. But a cooperative attitude will regularly pay dividends. What is gained is not at the expense of the other, but with him.
In these examples, both athletes had the power to negotiate to a positive settlement or at least the power was perceived. Most negotiators believe that power is important in negotiation because it gives one party an advantage over the other. Although the negotiations in these examples appeared to be integrative in nature, all sides wanted to secure a greater share of the outcomes or achieve the preferred solution. Power tactics might be most useful when the other party refuses to negotiate or when negotiations break down (Lytle et al, 1999). Threats are sometimes used and can make the other party appreciate the severity of the situation. Perceived power in the Emmitt Smith case was his contribution to the team, or lack of contribution which would negatively impact their chances for success if he was absent from the roster. The Smith team should have perceived the organization as having less power assuming the same outcome would be a disastrous season. It might appear to the average sports fan that Smith dominated the outcome because his tactics garnered him a rich contract at the expense of the organization when in reality, the organization used Smith to win a championship, increase ratings and fan participation and therefore increase revenue. In the end both sides won. In the Manning case, the perceived power was in the hands of the organization. To the public, Manning got what he wanted by holding out for a better offer but only time would tell the tale. In the short run, the Chargers held all the cards because they had a gold commodity in their hands and could ask almost any price. In the end, the Chargers got a number one quarterback and extra draft picks in subsequent years and the Giants won a championship. Not all negotiations end positively and some key points and concessions require interdiction by third parties such as our legislative branch of government.
Recently, the NFL season was close to suffering a tragedy worse than death—no football for the winter! When the NFL Players Association and the owners failed to compromise on changes to the bargaining agreement, the season was put on hold as the owners “locked out” the players refusing to let them practice and get ready for the upcoming season. Because of the lockout, the players were not legally allowed to enter their respective organizations’ training facilities. NFL Commissioner Roger Goodell and the players association chairman and president DeMaurice Smith began talks to out the pieces back together. The commissioner represented the league and the owners and Smith represented the players union. There were many key concessions made in the labor agreement such as salary cap, rookie salary, medical benefits, rules changes, and drug testing. The last point and most fought over concession was testing for human growth hormones (HGH) that enhance athletes performance. As part of the ten year labor agreement, HGH testing was to begin in September of 2011 but could not agree on testing procedures (Maske, 2011). The NFL supported blood testing but the NFLPA balked stating that taking blood was a violation of privacy. Both sides made public relations statements in the media to bolster their case in the court of public opinion and attempt to justify their actions or lack of action. Now, representatives from the House Committee on Energy and Commerce have asked Congress to intervene with committee hearings to decide the validity of HGH testing with expert testimony from top scientists (Maske, 2011). It now appears that the pressure is on both sides to get a deal done in the HGH issue to avoid having a third party influence the outcome. Both sides have made statement that they are ready to move forward but no action has been taken to date.
In the end, professional athletes who want to maximize their salaries and bonuses must use standard negotiation strategies. Agents and other third parties must assist and intervene at times to apply pressure to the other party to keep the talks moving to a positive ending. In the Emmitt Smith example, the player threatened to hold and then followed through on the threat by not playing when the season opened. The team suffered losing its first two games and finally a deal was struck. Smith’s ability to follow through with his threats came from his knowledge that his contribution to the organization was substantial and he proved it when the team won the Super Bowl that year even thought they lost their first two games without him. The Manning example is also an example of a threat in that he was not going to play for the San Diego team. However, the San Diego franchise had little to lose because they had a golden commodity to trade to other teams and in return, received substantial rewards. The NFL and NFLPA concessions worked out because the season in now underway. Left in the wake of the lockout is a drug testing dispute that now seems to be heading to the highest legislative arena in the land. I don’t think that either party wants a third person to decide what is best for their sport. The fans are happy now that the Sunday afternoon void is filled but what the future holds for the players and owners and their drug testing will not be known for a long time.

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