Sunday, August 21, 2011

A Revelation From Fred Claire: How to
Negotiate With a Competitor  

In closed or limited organizational ecosystems, you have to be able to negotiate with competitors. Not all of us work in closed systems, but unless you're the rarer than rare person who has so much power he can force his will on everyone (say, Saparmurat Niyazov or  Lloyd Blankfein) sooner or later, you'll be negotiating with a competitor. It could be external...a company that's a direct competitor, or internal, a territorial manager of an adjacent department or a department you are competing with for resources.

Baseball is an almost-entirely closed system. Whenever you make a deal with another team, you are pushing hands with an antagonist who, in a zero-sum system, is seeking the exact same end goals you are: a World Series trophy. So any asset to your side of the equation is most likely a debit on her side. In a zero-sum system, it's pretty rare to get to a win-win outcome. (Bill Bavasi told me this, btw, is one of the reasons some GMs far prefer free agent signings -- it doesn't collide with the zero-sum nature of trading in a closed system.)

Well, if it can be done anywhere, it will happen in the most vibrant, flexible, advanced management arena in the world, Baseball. And the way you do it is to analyze the situation in agonizing depth, or at least to a level considered agonizing in the bush league management arenas that are the ones Beyond Baseball.

I'll give you a great example I read recently in Fred Claire's 2004 book My 30 Years in Dodger Blue. The situation is this: In 1998, the Bums' catcher and primo team star, Mike Piazza, and coming off arguably the best-ever offensive season a catcher had ever had, was to become a free agent. Claire and the Dodgers fiercely wanted him to stay, but new corporate ownership (Fox) was focused elsewhere, and enforcing the normal post-takeover budgetary tightness, while Team Piazza was indicating they were seeking the fattest contract in Baseball history. Pre-season negotiations had failed to close the deal, so Piazza entered the season unsigned, an indicator to other teams that he might be traded (since a team that holds on to a good player who leaves for free agency & signs w/another team is very unlikely to recover "full" value for the loss of services). Other General Managers, such as the Florida Marlins' Dave Dombrowski, a leading practitioner of negotiating arts, would float offers, in the hopes of adding immediate wins, or adding wins and signing the star, or alternatively, flipping him to another team looking for immediate wins in exchange for a handful of promising cheap youngsters.

So, this excerpt from Claire's book:

In that call, on April 10, our negotiations with Piazza on hold, Dombrowski had inquired about Mike. His approach was very direct -- "Fred, would you trade Mike Piazza and a young, low-salaried pitcher for Charles Johnson, Gary Sheffield and Jim Eisenreich?"

I knew Dombrowski was under orders from Florida owner Wayne Huizenga to unload payroll after the Marlins had won the World Series the previous season and yeat had lost money in the process. Sheffield was at the top of the Marlin salary list in that he had just signed a six-year deal that paid him $61 million from 1998 through 2003.

Dombrowski figured if he could trade Sheffield for Piazza, the Marlins would be free of the bulk of their future payroll obligations. Furthermore, Dombrowski would be in a position to acquire young players for Piazza in that Mike was in the last year of his contract.

I went to Graziano [Claire's boss] and told him {snip} I wanted to reply to Dombrowski that we weren't interested in discussing Piazza because we wanted to sign Mike, but we were interested in Sheffield.

My reasoning: I felt that as long as Sheffield remained the focus of trade discussions, Charles Johnson would remain a Marlin. The two made an attractive trade package, the high-priced slugger paired with the lower-priced but highly-valuable catcher. If Fox decided Piazza had to go, Johnson would be just the replacement we needed. {snip} 

A subtle, masterful playing of the chess board that can only happen because Claire's workgroup has come to a blisteringly thorough understanding of the other side of the negotiating table. The Dodgers still want to sign Piazza, but they may not be able to, for whatever financial or corporate-political or personal reasons. The Dodgers would like to keep the Marlins' younger, cheaper catcher (and not as fine a player, but already Johnson was an All-Star and had won a Gold Glove) in the trading pool so the Dodgers might snare him as a contingency if Piazza left. But Johnson was a most-attractive player beyond his on the field value; he was a logical pairing with Gary Sheffield, the personally difficult but extremely productive and extremely expensive slugger in a trade.

So to keep Johnson from leaving the Marlins, Claire hoped to pin the Marlins by expressing more interest in Sheffield than the Dodgers really had. Getting Sheffield's and Johnson's prowess and payroll obligations wouldn't necessarily be a tragedy, but why not try to get the sweeter benefit/cost pairing alone (in Johnson)?

To attempt this required nothing less than the striving for total data omniscience.

Claire and his group needed to:

  • examine the dollar and playing values,
  • learn and interpret the other side of the table's motivations and short- and long-term plans,
  • interpret the Marlins' valuation systems and measuring factors as well as their own, and
  • come up with either a win-win match-up, or, barring that,
  • a ploy that would freeze the Marlins pursuit of other deals as long as possible .

And, oh yeah, without totally burning the other side of a table, because (especially) in a closed system, you don't want to set off a neutron bomb (a deal so bitter that it guarantees one side will never again do business with the other).

In your own management, consider how complex the preparation for this negotiation was. Are you good enough for Baseball (that is, do you prepare this way)? You can in most cases, of course. It requires a level of research most managers Beyond Baseball are unwilling to take on.

Maybe you can't be as skilled as Fred Claire, but I promise you it's worth trying.

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