Tuesday, January 06, 2004

The Genius of Vinny Castilla
Secret #3 of Great Negotiation  

Negotiation skill is one of the mandatory constituents of decent management. If you can't earn at least a "C" in negotiation, your group will suffer from at least the following:

  • Predatory behavior from adjacent departments,
  • Chronic inefficiency in staff assigments,
  • Unapplied-to-work slack time,
  • Disappointment by staffers in their compensation,
  • Disappointment about your accomplishments among the people you report to.

Negotiation is one of the few management skills that's easily taught. There are models that are awfully good. Write me for a couple of book citations if you want some.

Baseball is a wonderful arena from which to examine and analyze negotiation techniques. Last month, Ken Rosenthal of The Sporting News wrote a three-dot column that included three clarifying lessons about negotiation every manager should internalize. I'm going to do three entries on them, the first today.

LESSON: Always Have Things of Value (That You Don't Need) to Negotiate Away in Exchange For Things You Value (That the Other Side Doesn't Need)

According to Rosenthal, Vinny "The Oaxaca Whacker" Castilla signed a one-year $1.5 MM deal with the Rockies, but he'll "be paid $500,000 next season, then receive annual loans of $100,000 without interest from 2015 to 2030."

One of my negotiating techniques is to always have a sweetener, something of value my side doesn't need, to give away in exchange for something else, a concession perhaps by the other side. If the other side values it, I may be in a position where I give them something they want that doesn't cost mne anything significant, putting me in the position to close a deal that might have been more difficult otherwise, or to try to get soemthing from them we do value.

Castilla did this; he structured a deal that gets him the money he wants, and a good deal of it. But Castilla decided he didn't need all the money now. By structuring a million of it over a ten year period, he'll have an upper-middle class income for years after he's retired but before his pension kicks in. And in the Rockies scheme of things, a $100,000 a year debt (below a minimum major league salary) over ten years that doesn't start for another eleven years has little net-present value.

Castilla was a wonderfully consistent hitter for the Rockies at his peak, although much of his value was what he hit in Denver, and not so much on the road. After he left Colorado, his value declined, until last year when he racked up some sweet numbers as a contributor on the Atlanta Braves. He even had some solid hitting games in Denver. The way the Rockies look at it, they're taking a flyer that Castilla will keep his 2003 form for $500,000, a low price if he delivers. They aren't even accounting for the chump change they're yielding in the Futurama time period.

If Castilla has a good year in Colorado (if he can't do it there, he probably can't do it anywhere), he can negotiate a better deal for himself next year when the market may no longer be dampened by owner collusion of an explicit or tacit nature. If his season is more rocky than it is Rock'em-Sock'em, he's not out much.

The only risk I can see is more macro-economic. Because of some U.S. and world economic factors, it's possible that the dollar will suffer hyperinflation (feel free to disagree about the following, but please don't bother writing me about it; I won't use our time engaging in dialogue about the cult commonly known as "economics"): a combination of continuing high petroleum consumption, exploding deficits, tax cuts, non-productive macro-investments and continued balance of payments tilt towards imports gravitationally undermine the dollar, decreasing its value against the Euro enough that big global investors start hedging by trimming their dollar investments and re-investing in Non-U.S. currencies such as the Euro, further diminishing the dollar, further amplifying the devaluation. Ad nauseum.

IF that happened, Castilla's Futurama Pre-Pension bucks wouldn't have much value. That's about The Oaxaca Whacker's only risk.

All good negotations end as a win/win. In Castilla's deal, he gave away something of value to the other side that he didn't need (today dollars). In exchange, he gets a crack at putting up some numbers that could increase his apparent value, pad his lifetime stats, and he gets to play in an environment he succeeds in, while starting his pension ten years early (age 48) so he might be able to take early retirement. The Rockies get an inexpensive player who could end up batting 6th and contributing beyond his immediate cost.

Thanks to geniuses like Vinny Castilla, almost everything you need to know about negotiation you can learn from baseball

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