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:

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]