In 1994, the Walt Disney Company faced an unexpected succession decision after its president and CEO, Frank Wells, died in a helicopter crash. Disney chairman and CEO Michael Eisner believed his longtime friend Michael Ovitz, the founder and majority owner of successful Hollywood talent firm Creative Artists Agency, or CAA, as it is known, was the perfect choice for the position of president.
At CAA, Ovitz was earning $20 to $25 million per year, far more than Disney had paid Wells—and, indeed, more than any CEO in the United States was earning at the time. But to land him, Eisner felt compelled to match Ovitz’s current salary. After discussions with the chair of the Disney board’s compensation committee, Eisner agreed to pay Ovitz $24.1 million per year. Ovitz also negotiated a potentially lucrative termination clause in the event he was fired without cause within five years.
But when Eisner told Disney’s two other senior-most executives that he was hiring Ovitz, they both said outright that they would not report to Ovitz. According to the executives, Ovitz would be a bad fit with Disney. Nonetheless, Eisner pushed ahead with his decision and secured the unanimous approval of Disney’s board.
The hiring proved disastrous. Ovitz had expected that he and Eisner would co-lead Disney, but Eisner and other top Disney executives believed that Eisner should remain in full control. In the wake of the resulting turmoil, Eisner felt compelled to dismiss Ovitz after just 14 months on the job. Despite the short stay at Disney, Ovitz walked away with severance payments of $38 million in cash and about $100 million in Disney stock options, an astounding figure that triggered a shareholder lawsuit that took 10 years and many more millions to litigate.
In Ovitz’s agreement with Disney, what went wrong? He thoroughly negotiated the terms of his employment with Eisner but failed to negotiate the role he would play within the organization.
We tend to think of leaders as people who seldom need to negotiate. According to popular belief, their position of power enables leaders to issue directives without discussion, spend more time talking than listening, and easily tamp down troublesome conflict.
Nothing could be further from the truth, writes Tufts University professor Jeswald Salacuse in his new book Real Leaders Negotiate! Gaining, Using, and Keeping the Power to Lead Through Negotiation (Palgrave Macmillan, 2017). Whether a leader is a CEO, department head, or manager on the night shift, she will find it necessary to negotiate constantly to lead other people. Leaders not only negotiate often but also have to negotiate to achieve their goals, according to Salacuse. And to do so, they must draw on negotiation skills not normally associated with a top-down leadership style, such as listening closely, collaborating, and making concessions.
The primary tasks of leadership— including setting a direction, creating a team, managing conflict, and motivating others—all require strong negotiating skills, writes Salacuse. And to become effective leaders in the first place, we need to negotiate a compelling role for ourselves within the organization.
We negotiate our roles not only during the hiring process but also with our coworkers throughout the length of our tenure.
Two leadership negotiations
Whether you are applying for a leadership position with a new company or seeking to move up in your current organization, you will face two significant negotiations: one for your position and one for your role, writes Salacuse in Real Leaders Negotiate!
The process of negotiating your position includes discussing and agreeing on your title and responsibilities, determining how much power you will have, bargaining over pay and benefits, and so on, with those who have the authority to appoint you. Although such negotiations can continue after you’re on the job, you will agree on most of the terms before your first day of work. Eisner and Ovitz appear to have spent ample time negotiating the financial terms of Ovitz’s position at Disney, for example.
By contrast, negotiating your role involves reaching agreement with many others in the organization on the functions, priorities, and limitations of your job. We negotiate our roles not only during the hiring process but also with our coworkers throughout the length of our tenure. We do so by discussing any concerns they have about our abilities and qualifications, listening to their hopes and fears for the organization, and working with them to set the scope of our duties.
Leaders often focus so much on negotiating their positions that they neglect to adequately negotiate their roles, according to Salacuse. Ovitz was very successful at negotiating high compensation, but he failed to negotiate the role he would play as Disney’s president. A failure to negotiate those differences led to an untenable situation.
The roles we play
How can we effectively negotiate our leadership roles? Salacuse finds guidance in “role theory,” a school of thought from the social sciences. Drawing on theatrical metaphors, role theory assumes that our behavior is influenced by our social roles, just as stage actors act according to their roles in a play. The expectations that others have of us, and our own expectations of ourselves, in turn determine our social roles.
The role that a leader chooses to play is influenced by the expectations of those who hired her and her followers, as well as her expectations for herself. Conflict can arise when those expectations vary from one group to the next, as happened with Ovitz at Disney. By negotiating our role, we can better align expectations and head off conflict.
Salacuse recalls how he negotiated a new role when he was being considered for the position of dean at Tufts’ Fletcher School of Law and Diplomacy in the 1980s. During visits to the school, Salacuse asked the various people he met with, including students and high-ranking university officials, to share any concerns they had about the school. Many constituents shared the view that the school was resting on its laurels. In particular, the university provost told Salacuse that he was being recruited specifically to strengthen the caliber of the school’s faculty.
Consequently, upon taking the position of dean, Salacuse broke from his predecessors, who had been former U.S. ambassadors rather than academics, by becoming actively involved in the hiring and promotion of the school’s teachers and scholars. In one case, after consulting with a review committee, Salacuse decided not to renew the contract of a young instructor who was the protégé of a senior faculty member known for being territorial and combative. As part of a campaign to have the decision reversed, the faculty member sought to convince students that Salacuse had acted arbitrarily and beyond his authority as dean.
Salacuse held an open meeting for students at which he explained the decision and responded to questions for more than two hours. By taking time to answer questions openly and honestly, Salacuse convinced the students that he had acted appropriately and within his role, and the controversy dissipated. During his eight-year tenure as dean, Salacuse oversaw the turnover of 70% of the Fletcher School’s faculty and achieved his goal of rebuilding the caliber of the school. By negotiating the scope of his role both before being hired and on the job, Salacuse positioned himself to achieve his goals as well as the school’s.
5 guidelines for negotiating your leadership role
In Real Leaders Negotiate! Salacuse gives the following advice for leaders looking to set themselves up for success:
1. Don’t over-rely on your job description.
It’s too easy to jump to incorrect assumptions about how you should behave on the job based on your understanding of the position’s requirements. You should not assume that the functions and tasks you feel called to carry out as leader align with how those you are to lead view your position. Instead, prepare to negotiate your role with constituents both within and outside the organization.
2. Consider the expectations set by your predecessors.
When negotiating a new business deal, we often start with a clean slate—but this is usually not the case when negotiating a leadership role. Your counterparts will have certain expectations of how you should carry out your role based on the habits and precedents of those who filled the job before you. It’s crucial to understand those expectations. If you want to go in a different direction, you will need to develop a strategy to shift others’ expectations.
3. Assess constituents’ level of support.
As you plan your role-negotiation campaign, identify the various constituents involved to determine who supports you already and whom you will need to persuade to come on board. This support will be critical to your ability to pursue your goals. Don’t allow yourself to become isolated and alone in the organization, as Ovitz appeared to do.
4. Negotiate your role constantly.
It would be a mistake to view negotiation of your leadership role as a one-off deal that can be concluded a month or two into your tenure. In fact, the best leaders continually negotiate their roles, working to understand and adjust others’ expectations as they set new initiatives and goals. Just as diplomats tend and cultivate their relationships with other nations, writes Salacuse, leaders of all types need to strive to stay connected to their constituents, both within and outside the organization.
5. Prepare for changes in scope.
Your own actions and those of others may cause the nature and scope of your leadership role to change over time. It’s often the case that organizations give successful leaders increased autonomy as time goes on. But if decisions you make turn out poorly, don’t be surprised if your superiors place new limitations on your role. Stay attuned to those shifts and continue to negotiate your level of freedom.