The Smyth Deal: The Anatomy of a Positional Negotiation Gone Wrong

A classic negotiation challenge is when parties lock into positions. Both sides articulate a demand – usually followed a threat such as “take it or leave it” – and then hopes the other side blinks first.

In the case of Ryan Smyth and the Edmonton Oilers’ I can almost imagine each parties’ statement. Smyth’s agent probably declared “my player is worth $6M dollars not a penny less – take it or leave it.” While the Oiler representative said “we can afford $5M and not a penny more – otherwise, we’ll go to the trading block.” Then, with both sides locked into a price, two things probably happened. First, the negotiation was restricted to a discussion about money to the detriment of the parties numerous other interests. Second, any change in either parties’ position would cause them to lose credibility and/or face. Consequently, any progress in the negotiation would have paradoxically increased the level distrust by confirming each party’s suspicion that the other could and would bend more.

And of course, this is what happened. Smyth was willing to accept less, and the Oiler’s were willing to pay more. A fact made evident as they managed to haggle their way to a difference of $5.4M and $5.5M per year. But getting closer probably had the perverse effect of making the negotiation harder. Each concession made the subsequent ‘demands’ appear less credible and firm. So, to prove that this was indeed ‘their final offer’ each side had to appear more and more inflexible. The result? A negotiation that collapses over a disagreement of $100,000 a year or $500,000 over the life of the contract – about 1.8% of the deals’ monetary value. Oiler’s GM Ken Lowe’s statement this was “a hockey decision and not a financial decision’ is laughable. This was neither a hockey or a financial decision – it was en ego decision.

Indeed, a tearful Smyth was more honest. While getting on a plane at Edmonton International Airport he summed up the process by virtually pulling the definition of positional negotiation out of a textbook: “We were stuck in our concrete, they were stuck in theirs.” (Edmonton Journal) Interestingly, the very fact that Smyth was crying indicates that, while both parties were arguing over money, financial concerns probably only made up a small fraction of each party’s numerous and complex interests.

To contrast against their positions I’ve quickly brainstormed the following list of each party’s core interests:

 

Ryan Smyth’s Interests

 

Oiler’s Interests

  • Maximize (or receive fair?) compensation
  • Set precedent for future negotiations
  • Stay close to/not have to relocate, family
  • Maintain links to community
  • Play on winning team
  • Play on Stanley Cup contender
  • Profitable franchise
  • Increase franchise’s marketability
  • Increase personal marketability
  • Increase interest in hockey
  • Play in a market where hockey is a major sport
  • Minimize (or pay fair?) compensation
  • Set precedent for future negotiations
  • Profitable franchise
  • Field a winning team under the salary cap
  • Field a Stanley Cup contender
  • Increase franchise’s marketability
  • Increase Smyth’s personal marketability
  • Increase interest in hockey
  • Maintain/improve morale of team and fans
  • Strong positive presence in the community

As you can see, money makes up only one (albeit important) piece of the puzzle. But in both cases numerous other issues whose value cannot be easily quantified also factor importantly.

For example, one wonders if $100,000 a year (our of $5.4M!) was worth forgoing if it allowed Smyth’s to keep his family in Alberta and stay close to them (especially given the after tax value of the $100K). Smyth probably also had an interest in maintaining/continuing his community work in Edmonton, a place he likely genuinely considers home (unlike Long Island). Smyth probably also had an interest in ensuring that the Oilers have enough money under the cap to acquire other key players that would have given him the chance to hold up a Stanley Cup.

Meanwhile, the Oiler management likely have an interest in players that are marketable and increase the profile of the team in the community (which Smyth is uniquely positioned to do). One wonders how much the lost revenue from merchandising will cost the Oilers. In a small market a local town hero can be worth their weigh in gold (and then some).

The point is that Smyth and the Oiler’s had relatively few conflicting interests compared to those that were either common or simply different (but not conflicting). Had both parties looked at their full range of interests, and not focused almost exclusively on money, it’s hard to imagine that some creative value-increasing options were not possible. For example: the difference of $100,000 could have been donated to a charity of Smyth choice every year – thus helping Smyth’s marketability, improving both his and the Oiler’s standing in the community all while not contributing to the salary cap. Or the $100,000 could have been converted into bonus pay contingent on Smyth’s performance. Ultimately, two negotiators thinking creatively about this negotiation as a collective challenge, and not locked into an ego-driven game of chicken, could have found a deal. But then Smyth’s agent is probably rewarded based on the money he pulls down and the Oiler’s manager on how much money he saves, so in the end money drove the negotiations… right over the cliff.

[tags]NHL, negotitation, negotiating, Ryan Smyth, Oilers, Edmonton, mozilla, sports, hockey [/tags]

9 thoughts on “The Smyth Deal: The Anatomy of a Positional Negotiation Gone Wrong

  1. Tania

    Hi Dave,

    I’m not sure if you’re the same Eaves I met at the convention through Ginger.

    At any rate, this trade, as a lifelong Oiler fan, pisses me off to no end.

    It was more than financial reasons why it wasn’t made. Smyth wanted a NMC put in, which is different than a no trade clause. No move meant he couldn’t be sent down for conditioning in case of injury thereby opening himself up to be waived.

    The EIG group has to do a lot to get me back as a fan, and I’ve been a fan since I figured out I loved hockey.

    Kevin Lowe’s made some conflicting statements that don’t jive with a fan that isn’t drinking the company kool-aid.

    Comments he’s made:
    – they weren’t going to pay for emotion but for statistics. This doesn’t make sense because they paid for emotion with the signings of Roloson, Pisani, Moreau, and Staios.
    – they said that they had the contracts listed according to priority on whose contract was up for negotiation. This doesn’t make sense as Staios and Moreau were both signed past this year. In fact, in both Staios and Moreau’s case they would have been in a better position to hardball given their bad years this year, with Moreau missing most of it due to a stupid punch he threw and Staios being out with various injuries. Instead of negotiating with Smyth they extended contracts for those two players.

    Also, in saying they paid for statistics, they didn’t need to sign Roloson to a long-term 3 year deal 3 million + given his age.

    Pisani had one good playoff run.

    Smyth, on the other hand had his contract ending at the end of this year. During the summer the Oilers told him they would negotiate with him after the hockey season, probably hoping he’d have a bad year.

    He’s currently on pace to score 40+ goals in one of his best years, factoring in he’s missed 10+ games due to a broken thumb.

    With the salary cap and the trading of Pronger, they could have signed him.

    They had other players who are having sub-par years whose contracts end this year instead of Smyth: Sykora, for example.

    Bad mistake by the Oilers and you look at how badly they’ve done the last two games you’ll see why.

    They can’t compare this to the previous trades pre-cap because they were one of the teams pushing for the cap to remain a viable contender.

    And Smyth said in an interview it wasn’t a $100,000 difference. If it were just about that, he would have….and stopped himself.

    The EIG is effectively trying to throw Smyth under the bus for their blunder but the average fan in the know, would recognize it for what it is.

    However, given it’s Alberta and they seem to take things as gospel, I’m starting to think Leaf and Oiler fans aren’t too far apart in accepting bad moves by management for the sake of profit.

    Reply
  2. Tania

    Hi Dave,I’m not sure if you’re the same Eaves I met at the convention through Ginger.At any rate, this trade, as a lifelong Oiler fan, pisses me off to no end.It was more than financial reasons why it wasn’t made. Smyth wanted a NMC put in, which is different than a no trade clause. No move meant he couldn’t be sent down for conditioning in case of injury thereby opening himself up to be waived.The EIG group has to do a lot to get me back as a fan, and I’ve been a fan since I figured out I loved hockey.Kevin Lowe’s made some conflicting statements that don’t jive with a fan that isn’t drinking the company kool-aid.Comments he’s made:- they weren’t going to pay for emotion but for statistics. This doesn’t make sense because they paid for emotion with the signings of Roloson, Pisani, Moreau, and Staios.- they said that they had the contracts listed according to priority on whose contract was up for negotiation. This doesn’t make sense as Staios and Moreau were both signed past this year. In fact, in both Staios and Moreau’s case they would have been in a better position to hardball given their bad years this year, with Moreau missing most of it due to a stupid punch he threw and Staios being out with various injuries. Instead of negotiating with Smyth they extended contracts for those two players.Also, in saying they paid for statistics, they didn’t need to sign Roloson to a long-term 3 year deal 3 million + given his age.Pisani had one good playoff run.Smyth, on the other hand had his contract ending at the end of this year. During the summer the Oilers told him they would negotiate with him after the hockey season, probably hoping he’d have a bad year.He’s currently on pace to score 40+ goals in one of his best years, factoring in he’s missed 10+ games due to a broken thumb.With the salary cap and the trading of Pronger, they could have signed him.They had other players who are having sub-par years whose contracts end this year instead of Smyth: Sykora, for example. Bad mistake by the Oilers and you look at how badly they’ve done the last two games you’ll see why.They can’t compare this to the previous trades pre-cap because they were one of the teams pushing for the cap to remain a viable contender.And Smyth said in an interview it wasn’t a $100,000 difference. If it were just about that, he would have….and stopped himself.The EIG is effectively trying to throw Smyth under the bus for their blunder but the average fan in the know, would recognize it for what it is. However, given it’s Alberta and they seem to take things as gospel, I’m starting to think Leaf and Oiler fans aren’t too far apart in accepting bad moves by management for the sake of profit.

    Reply
  3. David Eaves Post author

    Hi Tania, it is indeed the same David Eaves – I know Ginger through Action Canada.

    It would be interesting to know what was the specific term that caused Smyth to walk.

    Lowe’s oddest statement was that the Oiler’s wouldn’t pay for emotion. In essence Lowe is saying that they won’t recognize any value, be it in merchandising, fan loyalty, team morale, etc… that player’s emotion might generate.

    We could argue over what premium this may have, but taking it off the table sends a powerful message to your remaining players (and fans): don’t care about or get emotional about the team because we don’t reward that. Nice message!

    Reply
  4. David Eaves

    Hi Tania, it is indeed the same David Eaves – I know Ginger through Action Canada.It would be interesting to know what was the specific term that caused Smyth to walk.Lowe’s oddest statement was that the Oiler’s wouldn’t pay for emotion. In essence Lowe is saying that they won’t recognize any value, be it in merchandising, fan loyalty, team morale, etc… that player’s emotion might generate.We could argue over what premium this may have, but taking it off the table sends a powerful message to your remaining players (and fans): don’t care about or get emotional about the team because we don’t reward that. Nice message!

    Reply
  5. Tania

    Glad I found your blog, Dave!

    Actually Smyth didn’t walk. He thought they were close enough in negotiations and only found out on a ticker on TV that he was traded to the Islanders.

    Lowe said that through the negotiation process they thought they should have a backup plan should they not be able to reach an agreement with Smyth and they didn’t want to risk losing him in the off-season through free agency and get nothing in return.

    Which is odd because they told him they wouldn’t be re-negotiating his contract until the summer and then 2 months ago re-started negotiation.

    Lowe saying that they don’t pay for emotion is not logical given they spent most of the season signing for emotion.

    I’ve watched and listened to every single Oilers game I could. I’ve watched all their games live here in Vancouver but since Smyth was traded I haven’t been able to.

    Trial separation if you will, until EIG decides to smarten up and prove they want to be something beyond contenders.

    I hear he’s going to be on after hours on HNIC tonight. I hope CBC doesn’t take the same position the Edmonton media has and softballing him questions but instead asks him the hard questions and doesn’t let him get away with conflicting answers.

    I read a post of yours before on restaurants in Vancouver. I recommend The Boathouse on English Bay. They’re having their yearly lobsterfest. But for an appetizer give their seafood tower a shot. It’s my favourite “affordable” seafood restaurant. If money’s no object then check out The Cannery.

    CinCin on Robson is a great place to eat too.

    Reply
  6. Tania

    Glad I found your blog, Dave!Actually Smyth didn’t walk. He thought they were close enough in negotiations and only found out on a ticker on TV that he was traded to the Islanders.Lowe said that through the negotiation process they thought they should have a backup plan should they not be able to reach an agreement with Smyth and they didn’t want to risk losing him in the off-season through free agency and get nothing in return.Which is odd because they told him they wouldn’t be re-negotiating his contract until the summer and then 2 months ago re-started negotiation.Lowe saying that they don’t pay for emotion is not logical given they spent most of the season signing for emotion.I’ve watched and listened to every single Oilers game I could. I’ve watched all their games live here in Vancouver but since Smyth was traded I haven’t been able to.Trial separation if you will, until EIG decides to smarten up and prove they want to be something beyond contenders.I hear he’s going to be on after hours on HNIC tonight. I hope CBC doesn’t take the same position the Edmonton media has and softballing him questions but instead asks him the hard questions and doesn’t let him get away with conflicting answers.I read a post of yours before on restaurants in Vancouver. I recommend The Boathouse on English Bay. They’re having their yearly lobsterfest. But for an appetizer give their seafood tower a shot. It’s my favourite “affordable” seafood restaurant. If money’s no object then check out The Cannery.CinCin on Robson is a great place to eat too.

    Reply
  7. Pingback: Why relationship management matters - even in the NHL

  8. Steve

    Hi David, I had to follow up on our conversation about the Smyth deal. I think there’s another lens to view the situation, not “emotion”.

    Ryan Smyth was making $3M/year in Edmonton to play a game he loved. He was offered a $2M raise to continue playing the game he loved in the city he loved. Do you make $5M a year to play a game?

    His value on the ice was measured in goals and he was not a 50 goal scorer. Penner was a great replacement this year, he fills the spot left behind on the first line better than Smitty could. Penner is younger, bigger and only makes $4.3M which is less than what Smyth was offered. Maybe that makes up for the loss in merchandise…

    As far as relative value goes, any salary measured in the millions of dollars is a good deal. Smyth made more than the average Albertan, do Oil CEO’s make that much money in a year? He was being paid $3M on a team that barely made the payoffs each year, which also usually lost against Dallas in the first round.

    If Ryan Smyth really wanted to stay in Edmonton because he loved the community, he had the opportunity. $5M is comfortable in Edmonton!

    Other Oilers were rewarded for “emotion” and will volunteer in the community. Ryan’s work will be missed for sure, his Molson Cup win’s every month were donated to the Stollery Children’s Hospital.

    The decision had nothing to do with relationships or “emotion”, it had to do with hockey – the Oilers were losing. I saw a picture of Kevin and Ryan walking and talking together while on the road, in Detroit I believe. The team didn’t win their road trip so Kevin made a move at the deadline. I think they talked about what could happen if the team lost, it was a risky move to trade Ryan. Remember, this team is a “small market team.” Personally, I wanted Smyth to sign in the off-season but he chose Denver, he could have returned like Reasoner did after we traded him for Samsonov – Poor Marty, played with the team then traded right before they goes to the Cup final! Although he is making $1M again and seems quite happy playing hockey in Edmonton.

    I think it’s a great opportunity for a guy to play hockey for a living, be a role model for kids and have the funds to make a difference in the community. Smyth signing in Edmonton would have been a far different headline than the Penner deal. I think it’s great that people can be paid salaries that are measured in millions of dollars. I think the Oilers made a VERY generous offer of $27M to allow Ryan to continue to work in Edmonton. I think it’s unfortunate he chose not to sign. But this was about scoring goals and not much else, Ryan was recognized and rewarded for his work in Edmonton.

    A small market like Edmonton (lol) can’t afford to pay everyone big league salaries, regardless of whether or not they win the Cup. It’s why Jason Smith (Captain of the team, not Ryan) was only making $1M. Staios wasn’t offered $5M and neither was Pisani. I think Ryan was treated very well in Edmonton. Ryan was offered the job, but he didn’t take it. I think the most important part is that there are expectations attached when playing hockey for millions of dollars, e.g the community – relationships matter. If Ryan REALLY wanted to stay in Edmonton, he had 5 million reasons.

    Reply
  9. Steve

    Hi David, I had to follow up on our conversation about the Smyth deal. I think there’s another lens to view the situation, not “emotion”.Ryan Smyth was making $3M/year in Edmonton to play a game he loved. He was offered a $2M raise to continue playing the game he loved in the city he loved. Do you make $5M a year to play a game?His value on the ice was measured in goals and he was not a 50 goal scorer. Penner was a great replacement this year, he fills the spot left behind on the first line better than Smitty could. Penner is younger, bigger and only makes $4.3M which is less than what Smyth was offered. Maybe that makes up for the loss in merchandise… As far as relative value goes, any salary measured in the millions of dollars is a good deal. Smyth made more than the average Albertan, do Oil CEO’s make that much money in a year? He was being paid $3M on a team that barely made the payoffs each year, which also usually lost against Dallas in the first round.If Ryan Smyth really wanted to stay in Edmonton because he loved the community, he had the opportunity. $5M is comfortable in Edmonton!Other Oilers were rewarded for “emotion” and will volunteer in the community. Ryan’s work will be missed for sure, his Molson Cup win’s every month were donated to the Stollery Children’s Hospital.The decision had nothing to do with relationships or “emotion”, it had to do with hockey – the Oilers were losing. I saw a picture of Kevin and Ryan walking and talking together while on the road, in Detroit I believe. The team didn’t win their road trip so Kevin made a move at the deadline. I think they talked about what could happen if the team lost, it was a risky move to trade Ryan. Remember, this team is a “small market team.” Personally, I wanted Smyth to sign in the off-season but he chose Denver, he could have returned like Reasoner did after we traded him for Samsonov – Poor Marty, played with the team then traded right before they goes to the Cup final! Although he is making $1M again and seems quite happy playing hockey in Edmonton. I think it’s a great opportunity for a guy to play hockey for a living, be a role model for kids and have the funds to make a difference in the community. Smyth signing in Edmonton would have been a far different headline than the Penner deal. I think it’s great that people can be paid salaries that are measured in millions of dollars. I think the Oilers made a VERY generous offer of $27M to allow Ryan to continue to work in Edmonton. I think it’s unfortunate he chose not to sign. But this was about scoring goals and not much else, Ryan was recognized and rewarded for his work in Edmonton.A small market like Edmonton (lol) can’t afford to pay everyone big league salaries, regardless of whether or not they win the Cup. It’s why Jason Smith (Captain of the team, not Ryan) was only making $1M. Staios wasn’t offered $5M and neither was Pisani. I think Ryan was treated very well in Edmonton. Ryan was offered the job, but he didn’t take it. I think the most important part is that there are expectations attached when playing hockey for millions of dollars, e.g the community – relationships matter. If Ryan REALLY wanted to stay in Edmonton, he had 5 million reasons.

    Reply

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