Mikhail Prokhorov Shows American Management the Rules of Successful Negotiation
Amidst the rancorous, but phony effort of House Republicans to vote for the “repeal” of the Obama health care reform law, you may have missed the much more socially important news that the New Jersey Nets are terminating efforts to acquire Carmelo Anthony from the Denver Nuggets. If so, that is why I am here; to keep you up-to-date on the really important issues in life.
For those of you who have been out of it and not up to date (or just don’t give a damn) regarding the vicissitudes, scintillating and momentous commotion surrounding the future of Carmelo Anthony, allow me to update.
For reasons that defy intelligent explanation, ever since LeBron “King” James announced on national television his decision to “take his talents to South Beach,” the sports world has been a-twitter (literally) over the future of forward Carmelo Anthony. This guy is a good basketball player, but really? (If Anthony is so good, why was he drafted after Darko Milicic of the Minnesota Timberwolves? But then again Dwayne Wade was, too!) Anyway, for the past six months there have been wild rumors, frenetic and surreptitious negotiations all centered around an effort to pry Anthony away from the Denver Nuggets. Of course, for ego or money (probably both) Anthony has been the instigator in all this by rejecting a puny $65 million dollar, 3-year contract extension offered by the Nuggets. This mystery of Anthony’s future has generated more rumors than Bill Clinton ever did in his heyday.
Wisdom is Where you Find It
So why even write about this silliness? Well, believe it or not, there is a lesson to be learned here. And, even more remarkable, it has taken a Russian businessman to teach us this lesson.
Mikhail Prokhorov, the Russian multi-gaggle-billionaire who now owns the New Jersey Nets (the team everyone bet Anthony would end up joining) put the kibosh (is that a Russian word?) on the whole process, at least as it pertained to his Nets.
On January 19, Mr. Prokhorov told an assembled media mob, “I am not happy with the way . . . this deal has gone until now. It has taken too long. It has played out in public and it certainly has taken a toll on the players . . ..” He continued, “I think management did a great job, but there comes a time when the price is simply too expensive. I’m instructing our team to walk away from the deal.”
Now bear in mind, Carmelo “Melo” Anthony is a native of Brooklyn. (Seems he wants to be paid enough money to buy the bridge for his mom.) The Nets are due to move into a new stadium in Brooklyn next year and Anthony was seen as the centerpiece for the rebuilding of what has been a forlorn NBA franchise. Having a native Brooklynite as the foundation of the team would build a natural fan base and could mean millions in future profits. But for Prokhorov, money was clearly not an issue. No matter what he might have offered to acquire or pay Anthony, he would not miss it.
So what is the lesson here? Mr. Prokhorov has vividly demonstrated his understanding of one of the most basic principles of successful negotiation. Namely:
Never be so enamored with a potential deal that you can’t walk away.
Whether it is buying a car, home or any other major negotiation, most of us make the mistake of “falling in love with the deal. ” Because we’re unable to walk away, we end up with the proverbial short end of the stick. All too often we become so caught up in our interest in closing the deal that we lose sight of our own best interests. The most important strategy for any negotiation is not to know what you will do to make the deal; it is a firm understanding of what you won’t do to make the deal. And, then having the inner strength to abide by that line.
That’s why consummating a successful negotiation can be such a delicate balance. If what you seek is unreasonable, the deal will probably not be made; if what is asked of you is unreasonable, the deal should not be made. The key is not to see how much you can get, but to clearly understand how much you are willing to give. Operating under such a philosophy will mean that sometimes a deal with not be made and you will need to have the strength to walk away. But by staunchly adhering to this philosophy, more often than not, you will end up with an agreement that gives you even more than you thought you could get.
Mr. Prokhorov should be given credit. Despite the obvious benefits of adding a popular, talented, local player to his team – one who could, in fact, be the core of the team – and with resources to do the deal not an issue, he had the strength to walk away when the deal crossed the line of what he was not willing to do. (Maybe that has something to do with why Prokhorov is a billionaire in the first place!)
But this negotation might not end here. Prokhorov may also understand another crucial principle of successful negotiation: When one party walks away from the deal because the terms and conditions are too onerous, there is a tendency for the party of the second part to do strange things to save face.
With Prokhorov walking away, the Nuggets may discover that no other team will be willing or able to offer as much as he did. The alternative for Denver, then, is to lose Anthony to free agency and receive nothing in return. This could send them back to Prokhorov on bended knees. The bottom line is the deal may be dead and if so it was because it was a bad deal for the Nets. But if it does get done now, it will be at the price of being a better deal for Prokhorov and the Nets.
And the Moral of the Story . . .
There is no magic to successful negotiating. Anyone can be good at it all the time. Despite the fact that most suggest that in order to be successful at negotiating one must be rigid, aggressive, and intimidating and seek to take as much from the deal as possible, these are really a recipe for acrimony, friction, frustration and failure.
Real success in negotiating, on the other hand, is based on understanding the difference between bartering and negotiation, being willing to appear to give up more than is received and – most important of all – learning to never be so in love with a deal that you can’t walk away.
And, it takes a Russian to teach us the lesson.