Archive for June, 2014

When will making the first offer help your negotiations, and when will it hurt?

iStock_000015867912SmallBy:  Steve Martin, CMCT

Recognizing the Chicago Bulls managing partner’s reputation as a ruthless negotiator, in 1996 Michael Jordan’s agent made a decision to ‘take the Bulls by the horns’ and table an audacious $52 million salary request. The parties settled at $33.14 million, a record that remains the single highest annual salary in NBA history. For Jordan and his agent, making the opening offer was a strategy that clearly paid dividends.

By way of contrast when the sportswear manufacturer Lacoste adopted a similar strategy in their negotiations with tennis star Andy Roddick the result was disastrous. They tabled an opening offer which included a clause reducing the value of the contract by 75 per cent if Roddick were to fall below 15th in the world rankings. Unbeknownst to Lacoste, Roddick had already made the decision to retire if he fell in the world standings and so Roddick’s agent ‘reluctantly agreed’ to Lacoste’s terms in return for a larger annual guaranteed sum. In this example submitting the first offer did nothing to help the Lacoste bottom line.

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