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
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
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

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
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

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.


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

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

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

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