Contract Negotiations Case Study
From peace negotiations between countries to professional sports contract negotiations, these meetings of parties occur daily in every society and result in both positive and negative outcomes. Negotiations occur on both high and low levels and are necessary to reach agreements for limited resources, work together to create something otherwise impossible, or resolve problems between parties (Lewicki, Saunders, & Barry, 2006). In the National Basketball Association, the stakes are high during contract negotiations and can make or break a team resulting in major changes to the relationship between the organization and a professional athlete.
Negotiations for Juwan Howard Agreements for limited resources and rekindling a relationship are the roots of the Juwan Howard contract negotiation with NBA executives becoming one of the “most intricate and controversial episodes in recent sports history” (Lewicki, Saunders, & Barry, p. 616, 2006). This historical event began with the moment Howard was drafted to the Washington Bullets by the NBA in 1994. As a respectable individual on and off court, Juwan Howard was entering a world of politics, money, and the legalities of contract negotiations and collective bargaining. Howard started off in the professional league with below market compensation for the first several seasons with the Bullets moving on to become a free agent for a short time. This new status brought interests from other professional athletes yet Howard remained loyal to his team in Washington. That loyalty was short lived when the new general manager for the team abruptly changed Howard’s direction. After terrible offers and broken commitments, Howard became the interest of Miami Heat manager Pat Riley rated as the fourth most desirable player in the NBA following Michael Jordan and Shaquille O’Neal. Riley would become caught in a scandal of forbidden undisclosed agreements between player Alonzo Mourning and Juwan Howard. This agreement exceeded the cap allowed to each team for player salaries and was kept quiet by Miami Heat owners and managers violating the NBA’s requirement to notify new player salary agreements as they occur. Once discovered, Howard’s deal with Miami Heat was dissolved by NBA attorneys concluding the contract null and void with the inability to fit Howard’s base pay under the approved salary cap. Howard was once again deemed a free agent by the NBA and the Washington Bullets were approved by the organization to enter into contract with Howard with no limit to salary caps becoming Howard’s best backup plan and making NBA history (Lewicki, Saunders, & Barry, 2006).
Benefits of Contract Negotiations
Intangible Benefits. Intangible factors directly or indirectly influence parties involved in a negotiation process as fundamental psychological motivators. These factors include recognizable yet not easily quantifiable forms such as time, experience, or leverage. Ignoring intangible factors is impossible as they can have a tremendous influence on the negotiation process and outcome. These benefits are often engrained in personal values and emotions. Intangibles can pose a major problem during a negotiation when the parties involved fail to understand how he or she may affect the decision making process if tangibles dominate the negotiation (Lewicki, Barry, & Saunders, 2006). Intangible benefits exist throughout the negotiation process in the case of Juwan Howard’s contract deal. The Washington Bullets owner, Abe Pollin, made a promise to fans that the managers and owners will do anything to keep Howard in Washington because of the love for Howard as a player. These emotions come into effect during the negotiation process as Howard felt strong as a player for the Bullets and did not want to lose that experience. Unable to shrug off his feelings for the Washington club, the Bullets were provided with another opportunity to win him over after the initial rejection (Lewicki, Saunders, & Barry, 2006).
Tangible benefits. The tangible benefits in the Juwan Howard case are the salary and perks of the seven-year contract. The first offer made by the Bullets for $78.4 million was made well below his projected value with little enthusiasm. Once other teams showed their offers for Howard, Washington increased their offer to $84 million. Bullets executives stated the offer was what the team could afford to pay Howard, nothing more. He was forced to make a decision to accept the offer with less tangible benefits and more intangible benefits or to consider trading teams. Ego satisfaction is often as important as achieving tangible benefits and Howard did not feel either (Lewicki, Saunders, & Barry, 2006). Howard’s decision to entertain offers from other teams welcomed the tangible offers of a higher salary of $100.8 million, hotel suites, limos, bonuses, and an allowance to run a youth basketball camp from the Miami Heat. The negotiations of Howard’s team did not stop there, eventually receiving more game tickets for Howard. These tangible benefits attracted Howard to Miami enough to let go of his former team (Lewicki, Saunders, & Barry, 2006).
Costs Associated with Contract Negotiation
The costs associated with Juwan Howard’s contract negotiations include the contract price for Howard’s salary, the impact on the salary caps of both prospective teams, the impact on the fans and the clubs they support, and even the jobs of the managers and other teammates.
For Juwan Howard, going from $3.4 Million per year to an initially offered $11.2 million per year simply to stay in Washington would appear to be quite a compliment. Howard viewed himself worth much more and was offered a $14.4 Million position with Miami. Without thinking of the future conflicts for the Washington fans, coaches, and teammates, Howard began looking at the large sums of money and what he could do with it. Essentially, he put on blinders and refused to see how everything was playing out (Lewicki, Saunders, & Barry, 2006).
For Washington, offering Howard the $11.2 million a year and maintaining enough money to bring in additional talent was a step in the right direction for the club and the fans. When Howard decided to become greedy, the offers continued to climb, even though the club would suffer. The offers climbed all the way to $13.5 Million per year before all of the offers were placed under the microscope. In the end, Howard found himself back with Washington at $15 Million per year with a seven-year contract (Lewicki, Saunders, & Barry, 2006).
For Miami, initially offering a promise to Alonzo Mourning, the costs would only escalate. The offer to Howard was $14.4, additional offers to Tim Hardaway and to P.J. Brown with bonuses and breaking the promise with Mourning yet still bringing him in at just under $7 million per year brought the NBA to investigate the entirety of the agreements. When everything was out in the open, bad publicity, the ire of the league and other owners, and the penalties and lost players reflected Miami’s inability to estimate costs correctly (Lewicki, Saunders, & Barry, 2006).
Risks Associated with Contract Negotiation
The risks associated with negotiating Juwan Howard’s free agency contract from multiple perspectives were numerous. The Washington Bullets general manager, Wes Unseld, was determined to keep Howard in Washington yet did not want to put all his chips on the table at once and set up boundaries from the start. Beginning low in the negotiation allowed Washington to leave room in the salary cap to potentially acquire other talent and build a stronger foundation around the Washington Bullets franchise. However, by doing this they were inherently risking losing one of their most valuable players and faced declining ticket sales as a result of letting go of a player the city rallied around (Lewicki, Saunders, & Barry, 2006). Pat Riley, the general manager for the Miami Heat, had other intentions surrounding the negotiation of acquiring Howard. Riley decided to try a different tactic by offering all his chips on the table at once. This tactic of offering full price allowed Howard to see his true value and have a bargaining position to come back to with Washington. Riley played the risk that Howard would accept this deal and immediately vacate Washington leaving Miami in a better position to win a greater number of games. Riley also risked that Howard’s salary would reduce the salary cap causing less talent to be acquired later because of salary cap restraints. In addition, Riley also faced the question of whether Howard was worth the money offered to him and whether he would perform to the expectations of a player within that pay grade (Lewicki, Saunders, & Barry, 2006). Juwan Howard himself took the greatest risk in this negotiation. By playing both sides of the fence, he could be portrayed as greedy, overhyped, and not relatable to the public causing his value to dramatically decrease. By not accepting the offer with Miami initially and playing the counter-offer game with Washington, he also played the risk that Miami would back out on the high price contract and Washington could offer less than originally intended due to his value position. Last, by counter offering multiple times, Howard risked the factor of losing up to 50% of his value if both teams backed out due to the cap restrictions for other teams. This would have equated to a loss of up to 50 million dollars (Lewicki, Saunders, & Barry, 2006).
Conclusion
As seen in the negotiations for professional basketball player salaries and player acquirements, the stakes are even higher for both parties involving tangible and intangible factors, associated cost and risks, and legal ramifications when performed outside the National Basketball Association jurisdiction. Much like any other form of negotiation, this tactic is another game of life with high and low stakes resulting in both positive and negative outcomes (Lewicki, Saunders, & Barry, 2006).

References
Lewicki, R. J., Saunders, D. M., & Barry, B. (2006). Negotiation (5th ed.). Boston, MA: McGraw Hill.
Lewicki, R. J., Saunders, D. M., & Barry, B. (2007). Negotiation: Readings, exercises, and cases (5th ed.). Boston, MA: McGraw Hill.