At one point or another, most of us have found ourselves in the midst of a chaotic negotiation process—one that takes much longer than hoped for, creates a great deal of stress, and squanders resources.
Now imagine having to face multiple such negotiations annually. For many years, that’s the situation National Football League (NFL) teams were in as they struggled to negotiate rookie contracts and get the players on the field before the start of each new season. Under its system, the NFL allotted teams a set amount of salary-cap room to be divided among their rookies. Rookies’ agents typically delayed negotiating with teams, reluctant to be among the first to reach a deal, particularly for first-round picks, writes Andrew Brandt, a former players’ agent and Green Bay Packers vice president, in an article on the website The MMQB. While working for the Packers, Brandt was frustrated that many agents seemed primarily motivated “to not look bad rather than doing what was best for the client.” Because of such delays, negotiations would stretch into the summer training season and sometimes even prevent players from taking the field during early games of the regular season.
In addition, the agents for top rookies came up with creative ways to negotiate around the salary cap, including negotiating salary advances and option bonuses. Moreover, teams ended up showering riches on their first-round rookie picks, leaving other rookies on the roster with considerably less. “Top rookies walloped NFL teams coming and going,” according to Brandt. Some of these highly compensated young players failed to live up to expectations, leading to disappointment all around.
Setting a new strategy
As they approached their 2011 collective-bargaining agreement with the players, NFL team owners were determined to overhaul the rookie contract-negotiation system. This wasn’t a difficult task, given that veteran players were tired of seeing rookies earn more than proven players and that rookies had “no voice” in the negotiations, according to Brandt.
The owners and the NFL Players Association (NFLPA) negotiated a new system modeled on the one used by the National Basketball Association. Under the system, each rookie draft pick receives a salary within a predetermined range and a four-year contract (with first-round picks open to being optioned for a fifth year). Most of the salaries are set at a nonguaranteed minimum and include a predetermined signing bonus.
From a distraction to an afterthought
Four years later, NFL teams are pleased with how the new system for rookie contract negotiation is playing out. In 2014, all 256 rookie draft picks were signed by June 17, about six weeks before the start of any of the teams’ training camps, according to the Associated Press (AP). Negotiations that used to take months now typically take just a few days.
The new system results in lower earnings for top rookies but reduces their risk of being perceived as overpaid if their performance fails to live up to expectations. And instead of distracting them from their training, contract negotiations have “almost become an afterthought for players,” according to the AP. Minnesota Vikings general manager Rick Spielman also noted that the system puts money in the hands of rookies sooner—in April or May rather than July or August. With the rookie showcase, draft process, and contract “finally out of the way, now it’s just football,” second-round Vikings draft pick Eric Kendricks told the AP. “And I couldn’t ask for more.”
Those who may be most disrupted by the new system are the players’ agents. With rookies receiving nonnegotiable salary offers, some players are negotiating better deals with their agents, and some are questioning whether they need an agent at all at the start of their pro-football careers. A “highly trained monkey could negotiate these numbers,” one top official from the NFLPA told Brandt. To prove their value, agents have been scrambling to negotiate relatively minor contract terms, such as when bonuses will be paid.
But don’t cry for the agents just yet—or the rookies. Although negotiating a rookie contract “has lost some of its luster,” writes agent Marc Lillibridge on the website Bleacher Report, the new system should help well-performing rookies “see the big dollars in their second contract. That is where the fun negotiations for an agent have gone.”
Do a negotiation audit
If the way in which your organization conducts its negotiations drives you crazy, think about whether a better process is within reach. Then set about becoming part of the solution. In particular, you might consider the following questions:
– What inefficiencies need to be resolved? Look beyond price negotiations to include factors such as timing, the number of parties, the format of negotiations, and the issues on the table.
– Do parties face incentives to drag out the negotiations or otherwise make them inefficient, as players’ agents did when negotiating on behalf of NFL rookies? How might such incentives be eliminated?
– Who should be involved in negotiating the new process? The NFL didn’t include rookies in its negotiations. However, it is often wise to give all key parties a role when negotiating a new bargaining process—even if that will make the talks more difficult—lest they feel mistreated and rebel when the new system is in place.
– Should particular deal terms be made nonnegotiable? For example, should salaries be preset or limited to a narrow range? Placing certain issues off-limits to negotiation might streamline the process but, again, could backfire if parties feel overly constrained.
Combining this advice with the process guidance offered in our opening story, “Negotiation logistics: Best practices for better deals,” and the advice on negotiation training in our Dear Negotiation Coach feature, you should be well equipped to set up your organization for smoother, more profitable, and less stressful negotiations.