Running head: CASE STUDY ANALYSIS PART A: “POWER PLAY FOR HOWARD”

Case Study Analysis

Claire Henry, Kathy Addison, Jeremy Seay, Jacinta Little

MGT/445

August 13, 2010

Case Study Analysis
Negotiation is a mutual place where conflict management and conflict resolution takes effect. For example, Juwan Howard was only 23 years old, when he was drafted into the National Basketball Association. Juwan was known for a hard working man, which acted responsibly with dignity and class, off the basket ball court and everywhere. During 1996 and 1997 in his sophomore season, besides becoming a Superstars, he was the highest paid basketball among other players, but the NBA voided his contract soon after. Howard had no choice but to return to the Bullets, signing a contract for seven-year that was worth $100 million. During this case study, the learning team B will evaluate the costs, benefits and risk of negotiation from the perspective of all parties associated with the case study analysis of “Power Play for Howard”.

Case Summary
The Miami Heat felt that having Juwan Howard on their team would take them to victory since they had not win for the last 6 years. Juwan Howard talent would definitely increase the chances of having a good year in winning. However, keeping Alonzo Mourning another talented player was important to the team also, therefore, Riley promised him “ to make him the highest paid player on the team” which conflicted with Howard’s contract. The NBA identified a problem with the negotiation of Howard’s contract. They observed an overpayment of four million, which exceeded the salary caps. This overpayment comes with a $5 million penalty to the team. So, the NBA dissolved Howard’s contract before he was able to sign it. In the mean time, Howards’s agent (David Falk) was negotiating with the Bullets, while this confusion was going on, using the Miami Heat offer as a starting point of negotiation. The NBA maintained that Alonzo Mourning contract agreement was signed prior to Howard contract. The Miami Heat challenged the NBA’s decision in court for the penalties and the bonuses of Tim Hardaway and PJ Brown that were included in the four million overpayment.

Howard’s Perspective (Jeremy)

Washington Wizard's Perspective
Benefits, Costs and Risks from the Washington Wizards' Perspective The battle between the two teams provided a clear demonstration of distributive bargaining. Distributive bargaining involves a highly competitive negotiating process that usually results in one winning party. In the case study the Wes Unseld, general manager for the Washington Wizards held a firm stand against the Miami Heat even when the odds were against retaining one of the NBA’s “fabulous five.” Although the Washington Wizards won the outcome, some of the costs and risks involved in the process could have been avoided. The first costly mistake that put the Bullets at risk of losing Juan Howard took place during the 1994 NBA draft. The Washington Wizards, formerly known as the Bullets, drafted Juan Howard in his junior year from the University of Michigan. Juan Howard was the fifth player chosen for the NBA draft making Howard one of the most sought-after rookies in the NBA. However, John Nash, the former general manager for the Bullets, refused the player’s initial request for a $24 million six-year contract and instead, offered an 11-year $37.5 million contract with the option of becoming a free agent in after the second season. Nash succeeded in his efforts to “low-ball” Howard’s salary below the market rate, but failed to consider the negative effects of his decision. Although Howard accepted the Bullets contract, the offer left the new player with a sense that the club devalued his abilities. Despite disappointing beginnings, Howard proved himself to be a valued player, teammate, and role model. John Nash did not take into consideration that after two seasons the Bullets not only risked losing a top pick player, but also a young player with NBA experience. Rejecting Howard’s initial request placed the Bullets in the position of spending additional tens of millions just to keep the high performing player after only two seasons.
Throughout the 1996 negotiations, the Bullets maintained offers slightly above competitors, taking firm stands on figures even at the risk of losing Juan Howard to the Miami Heat. The Washington Bullets had not made the NBA playoffs in years and was in the process of building a stronger team by recruiting players such as Rod Strickland, one of the NBA’s top point guards. Losing Juan Howard jeopardized the Bullets chances for breaking its losing streak and making the playoffs. Furthermore, supportive fans and ticket holders are the lifeline to the club’s success. The Bullets would also have to face disappointed fans and regain their confidence and support. Winning seasons also increase revenue from ticket sales. The Bullets planned to change its name to the Washington Wizards and move into the MCI Center, a new 20,600 seat facility in the heart of downtown the following year. The Bullets desperately needed to build the morale of its fan base to fill those seats. Juan Howard faced an even greater risk of losing his contract with the Miami Heat when the NBA rejected Howard’s contract with the Miami Heat. Juan Howard’s final deal with the Miami Heat ended with a contract for $100.8 million plus additional incentives. However, disputes about the contract lead to arbitrations between the NBA and the Miami Heat. If Howard decided to stick with the Miami Heat losing the dispute meant voiding his contract. Howard faced the risk of other teams within the league offering no more than $40 to $50 million for seven years. This also meant that Howard faced the embarrassment of taking a $50 million pay cut. The Washington Bullets also had high stakes at risk based on the NBA’s decision. The Bullets could only sign Howard if the league restored the teams “Larry Bird” rights that allowed teams to exceed salary caps when resigning players. When Juan Howard announced his acceptance of Miami Heat’s offer, the Bullets lost their “Bird” rights. However, if the NBA restored the “Bird” rights the Bullets would have no limits on the cost of resigning Howard. The NBA restored the Washington Bullets’ “Bird” rights permitting the team to resign Howard and the Washington Bullets final contact cost nearly $26 million more than the initial offer. In the outcome, Juan Howard received the biggest tangible win, a $105 million seven-year contract. Nevertheless, the Bullets also gained the intangible benefits of restoring the relationship with one of its top performing players, the confidence of its fans, and the opportunities of filling the seats of the new MCI Center.

Miami Heat's Perspective
According to the Miami Heat, the negotiation for Juwan Howard had an outcome that was not expected. Pat Riley, the Heat’s president and coach, offered Juwan Howard a seven-year contract worth $100.8 million in cash and bonuses. “Successful negotiation involves the management of tangibles (e.g., the price or the terms of agreement) and also the resolution of intangibles. Intangible factors are the underlying psychological motivations that may directly or indirectly influence the parties during a negotiation” (Lewicki, Saunders & Barry, 2006, p. 8). The deal offered Howard tangible items such as the cash salary, limo service, luxury suites, game tickets and the $5,000 to start a basketball camp. Part of the intangible items offered to Howard was security both financially and psychologically. Howard also had the chance to become one of the higher paid players in the league offering a feeling of self worth.
As the contract was about to be finalized, the National Basketball Association stated that through verbal and nonverbal contracts, the Heat had violated the league’s salary cap. The violation was based from a statement made by a the player Alonso Mourning, who insinuated that he was offered a deal by the Heat that was over the amount of Juwan Howard. Perception, according to Lewicki, Saunders and Barry (2006), is information stated in such a way that leaves the impression that the statement is true or is perceived to be true (p. 39). The Mourning’s statements caused the National Basketball League to review all contracts and determined that the Heat had violated the salary cap based on a discrepancy or perception on whether bonuses were likely or unlikely. Bonuses were based on criteria or events that may be difficult to achieve in a normal season. The bonus offers gave the players a goal that may be achieved through hard work and exceptional playing. According to Lewicki, Saunders and Barry (2006) the “differences in expectations about the likelihood of future events can permit the parties to invent a solution that addresses the needs of both” (p. 92).
The Heat gambled by making offers to players to stay competitive and the risks could devastate the team for years. If the league determined that the contract to Mourning was official, in a worst case scenario the team would lose Mourning, Howard, lose draft picks, fine the team and suspend the coach (Lewicki, Saunders & Barry, 2007, p. 623). The Heat’s coach and owner maintain that they had not broken any of the league rules concerning salary and negotiations. However, the league determined that Howard’s contract was void, which once again placed him on the open market. Breakdown in communication between the league and the Miami Heat created an outcome that would forever be carried in the hearts of Miami fans.
Conclusion
As a strategic negotiation approach people need to use to their advantage, what is best on a contract agreement for them-selves. What was revealed in the Howard case study, one can summarized that to achieve positive results for all parties involved in negotiations each parties must define the issues and the ultimate goal to achieve. Juwan Howard was smart enough to compare and contrast his personal values. He proceeded with ethics and integrity, by conducting himself in a professional negotiation manner to conclude with a win-win situation for all parties involved.

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References
Lewicki, R. J., Saunders, D. M., & Barry, B. (2007). Negotiation: Readings, Exercises, and Cases (5th ed.). Boston: McGraw Hill.
Barry, B., Lewicki, R.J., & Saunders, D.M. (2007). Negotiations: Readings, Exercises, and Cases, 5e. Retrieved from www.ecampus.phoenix.edu.

Vantage points
1. Impose the $5 million penalty against the Heat and season suspension for Coach Riley.
2. Give concessions to Miami for it to stay competitive in the league during the season.
3. Leave the case to courts to settle the matter.
Diagnosis
Impose Sanctions against the Heat
For the NBA to pursue its allegations of salary cap violations against the Bullets it would have to seek imposition of the $5 million penalty against the Team and a season long suspension of Coach Pat Riley.
The league maintained it had evidence that the Heat had an agreement with its center Alonzo Mourning prior to signing Howard - a violation of salary cap rules. The league also maintained that that the bonuses in the contracts of Tim Hardaway and PJ Brown were not tallied the cap by Miami, and that those bonuses should have been included. These allegations, as expected, were denied by the Heat camp.
Voiding Howard's contract with the Heat and imposing severe penalties on the team may have been the right thing to do, but many things would have to be given consideration - the Heat can contest the matter in court and the league could face a backlash from Miami fans and other fans of the league who might view this action as too much on the part of the NBA. Remember, the Heat took pains to prepare for drawing Howard to Miami unloading several of its high value players to make room for Howard. Now left with a shallow roster of talents, Miami will be facing an uphill challenge to stay competitive and maintain its base of loyal fans in market rich Miami.
If the Heat decides to slug it out in court, as would be expected if the matter reaches arbitration, the players union and the team owners would be coming into the picture as the union was supporting Howard and the Heat was getting sympathy from some team owners. In that situation, a lock-out scenario could be inevitable and it's one scenario that the NBA - from Howard Stern down to the last man in a team's staff - dreads.
Give Concessions to Miami
The NBA can opt not to pursue sanctions against the Heat as a concession. At the same time the league should recognize the Heat's disadvantages- if losing Howard is not enough, losing key players just to make salary room for Howard has given a serious dearth in team competitiveness. The league should stay away from giving impressions that it favors certain teams.
Coach Riley had suggested that the Bullets' first round pick should have been given to the Heat. Giving Miami concessions would allow it to stay competitive and maintain their fan base.
The NBA decided that that Washington can keep the players it had signed up after renouncing Howard - Tracy Murray and Lorenzo Williams, Rod Strickland and Harvey Grant. These are high caliber players that Washington could not have been able to sign up if their initial deal with Howard pushed through in the first place. Sure the Bullets forfeit their next year's first-round draft choice for the right to re-sign Howard still they got a huge concession in this case.
The league can also require the Bullets to release one or both of their free agent signings (Tracy Murray and Lorenzo Williams) and pay the difference between the final offer for any player cut and the deal they signed with the Bullets.
In the overall picture, Washington became a powerful team by a stroke of circumstances. And the Heat just had to start from scratch, again.
Leave the case to courts to settle the matter
The Heat had gone to Florida state court and was granted a temporary injunction. According to the Heat, the judge's order stated that Howard could not sign with another team, and that the league could not approve Howard's contract with the Bullets, unless the contract recognized the prior validity and superiority of Miami's contract. If the Heat won the case it would have been disastrous for the league as its powers to scrutinize and approve player contracts will be put to question. Team owners can follow suit and bend the salary cap rules then bring the matter to court and have a reference case to peg against.
On the other hand, if the league wins the case and Miami gets sanctioned, the Heat would claim that David Stern succumbed to pressure by the Bullets and, more importantly, by the players' union -an idea that would not sit well with a lot of team owners.
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