Case Study Analysis Part A: “Power Play for Howard”
Learning Team B
Maria del C. Perez
MGT/445
February 20, 2012
Dr. Anne Hallcom

Case Study Analysis Part A: “Power Play for Howard” In the case study of “Power Play for Howard,” Juwan Howard, a free agent basketball player is looking to begin negotiations to obtain at least a $100 million dollar contract for his services. As a Washington Bullets team current player, his manager extends an invitation to this team first. He receives an offer from their organization; it is far below what he is looking to obtain. He decides to look elsewhere. Miami Heat offers him a deal that was too good to be true. They offered $100.8 million, seven-year contract with nice incentives; Juwan Howard agrees to their terms and signs their contract. Prematurely, there is excitement by the new agreement that he thinks is binding (Asher & Brubaker, 2007). The Bullets’ General Manager, Wes Unseld would soon hear back that the contract was invalidated by the basketball league in which they were governed by. The forward, Howard would continue with the Washington Bullets although arbitration takes place. In the end, the decision is made in favor of the Washington Bullets. In this paper, Learning Team B will take the reader through the tangible and intangible benefits, costs, and risks that took place for Juwan Howard, the Miami Heat, and the Washington Bullets- who would later to be known as the Washington Wizards (Asher & Brubaker, 2007).
Benefits: Tangibles and Intangibles
Evaluating the Power Play for Howard case study from the perspective of stakeholder benefits enables one to understand easily why the stakes were so high in the negotiation process. For Juwan Howard, a $105 million contract with the Washington Bullets would not only mean he gets to continue to stay in Washington where he loves “playing and living” (Lewicki, Barry, & Saunders, 2006, p. 616), Juwan will also finally realize his dream of living in a home with “elevators inside” (p. 617).
According to Lewicki et al. (2006), “the management of tangibles…,” while resolving the “intangibles” are important characteristics of the negotiation process. In this context, the tangibles in Howard’s case are the specifics of the contract terms. For example, the initial $78.4 million dollar contracts offered by Wes Unseld, General Manager of the Washington Bullets, the $100.8 million dollar contract offered by the Miami Heat’s Pat Riley, and the final $105 million contract with the Washington Bullets, are both tangibles of the negotiation process. Additional tangibles include the bonuses, hotel suites, and limousine services offered to Howard by Unseld and Riley as perquisites to entice him to sign with either team.
Intangible benefits, according to Lewicki et al. (2006), are the “underlying psychological motivations that…influence the parties” (p. 8). For example, Howard’s desire to “win” a $100 million contract so he can remain with the Bullets is a direct intangible attribute that influences the outcome of his negotiation process (Lewicki et al., 2006, p. 8). Moreover, the prospect of a 23-year-old living in a luxurious mansion with elevators who walked away from a $78.4 million dollar contract because it is below his market value demonstrates that money is certainly a key intangible motivator for Howard.
For Wes Unseld of the Washington Bullets and Patrick Riley of the Miami Heat, the stakes were high as well. Winning the contract negotiation for Wes would mean his team had a chance at making it to the playoffs. This intangible benefit would bring prestige to Wes if his team were to win the National Basketball Association (NBA) championship; a windfall for any coach. The benefit for Riley would mean another well-executed strategy in terms of the formulation of a winning team.

Costs: Juwan Howard and General Managers
Negotiation strategy planning must define the cost and resistance point for parties involved. “The resistance point is established by the value expected from a particular outcome, which in turn is the product of the worth and costs of an outcome” (Lewicki et al., 2006, p. 39). Understanding the interests, costs, and resistance point of the parties involved will provide insight into possible solutions and assist in creating a successful negotiation plan.
The book The Business of Sports provides insight into the perspective of team general managers in negotiating contracts for players’ salary. Rosner and Shropshire (2010) state in the book The Business of Sports that team general managers can estimate the resistance point the team would pay a player. The salary estimation is calculated by evaluating the amount of potential revenue the player would generate for the team. The result of the salary estimation is the players’ marginal revenue product.
The decisions by the teams’ general managers to agree to a salary higher than the players’ marginal revenue product would result in a decrease of profits for the team. If the team managers can negotiate with the player to sign a salary lower than the players’ marginal revenue product, the teams’ profits would increase (Rosner, Shropshire, 2010, p. 339). Juwan Howard’s perspective on the cost of the negotiation was to achieve the highest salary possible. Juwan Howard considered the contract salary, bonuses, and benefits as he analyzed the cost associated with the contract negotiations. Juwan Howard’s perspective was to sign a contract that offered the highest salary and bonuses and provided the most benefits. In the case of A Power Play for Howard, the first offer was by The Washington Bullets. The Washington Bullets initial contract to Juwan Howard was $78.4 million. The second contract offer from The Washington Bullets was $84 million. To compete with The Washington Bullets, Miami Heat offered Juwan Howard $91 million with bonuses around $3.5 million. Miami Heat also offered luxury hotels and limousine service for Juwan Howard. Miami Heats’ final contract offer to Juwan Howard was $95.2 million and $6 million in bonuses (Asher & Brubaker, 2007).
Risks: Juwan Howard and General Managers Many people have heard the saying, “time is money.” In the case of Juwan Howards’ contact negotiation between the Washington Bullets and the Miami Heat, the time spent negotiating a contract for the athlete could make a significant impact on the amount of money Juwan would earn, or possibly lose. The importance in arriving to an offer suitable to Juwan, what would become his team, the NBA, and fans would take time, but also a tremendous amount of negotiating from all parties. The franchise offers such large contracts because of the revenue the sport brings in. Fans are attracted to teams with a competitive dynamic, and a high profile line up; in other words, a team with a number of ‘elite’ players. At the time the trade was considered, Juwan had already established his name in the industry and was considered a high demand key player. Juwan knew he had the fortunate opportunity to ‘shop around’ for the best contract. However, he also had to take into consideration if he spent too much time as a free agent shopping around, he could miss a contract that could instead be offered to another high-demand player.
Both teams’ General Managers’ knew they needed to offer a contract attractive enough to earn Juwans’ attention, while still ensuring the contract did not exceed the cap and any rules associated with the NBA that could eventually backfire. Both managers would need to forecast the season with Juwan as a player on the team to help come up with a contract competitive enough to encourage Juwan to sign, while still offering additional perquisites and benefits to stand out above the other team. The Washington Bullets had a great run with Juwan Howard on their team. The Bullets’ knew without Juwan, the team would suffer tremendously. Fans would likely follow Juwan to his new team, therefore affecting the revenue for the Bullets negatively due to a decline in ticket sales, merchandise purchases, and other revenue outlets. Therefore, the best thing to do would be for the Bullets to come up with an offer to keep Juwan on their team. With the negotiating going on, Juwan was at risk of not been picked by any team if the Bullets were not able to come up with an offer fast. Juwan was declining other offers in the meantime, and other players were signed instead. In the end, Juwan chose to stay with his “home team,” the Washington Bullets. Many believed this was the best decision Juwan could have made, and posed the lowest risks. Juwan was already established on the team and was well known by the people who supported the Bullets’, internally, and externally. The chances of Juwan forming the same relationships and performing as well with a new team were not guaranteed, and in the end, along with the numbers in the contact, these factors were significant in the decision Juwan made.
Conclusion
In conclusion, the case of Juwan Howard has many interesting issues. The tangible benefits of staying in Washington, such as acquiring his dream home, a large contract, and not having to relocate were evident during the negotiation process. The intangible benefits present on the negotiation, such as the winning drive, walking away from the 78.4 million dollar contract, and personal satisfaction with the final decision.
Cost evaluation for both sides of the negotiation was also an important point to be considered. It had to work well for both the player and the teams for a deal to be completed. Risk is always an important factor from the perspective of both sides. The teams want to make sure that its player is going to be compensated for his work as well as feel that he receives the best deal for his personal interest so the player performs as expected. The player also has some risk involved; not necessarily knowing exactly what situation he would be getting into by going to another team. By choosing to stay with the Bullets, Howard minimized his risks, and still was paid at a level that he thought was acceptable. References
Asher, M., & Brubaker, B. (2007). Negotiation: Readings, Exercises, and Cases (5th ed.). Retrieved from The University of Phoenix eBook Collection database.
Lewicki, R. J., Saunders, D. M., & Barry, B. (2006). Negotiation (5th ed.). Boston, MA: McGraw Hill. Retrieved from The University of Phoenix eBook Collection database.
Rosner, S., & Shropshire, K. (2010). The business of sports. (2 ed., p. 339). Sudbur, MA: Jones & Bartlett Publishers.