10 Negotiation Failures

Failed negotiation examples illustrate the importance of communication in negotiation and reciprocity at the bargaining table

By on / Negotiation Skills

Here’s a list of some of the most notable negotiation flops – from deals that were over before they started, to those that were botched at the table, to those that proved disastrous well after the ink had dried.

10. Michael Bloomberg versus the New York teachers’ union

In 2010, New York State passed a law requiring its school districts to replace their old teacher-evaluation systems with more stringent systems. Local school districts and their unions were charged with specifying certain aspects of their new systems by January 17, 2013.

New York City stood to gain about $250 million in aid and $200 million in grants if it reached agreement on a new system. But on the deadline date of January 17, 2013, New York’s United Federation of Teachers (UFT) and New York mayor Michael Bloomberg’s office separately announced that a final, late-night negotiating session had collapsed. New York governor Andrew Cuomo ultimately imposed an evaluation system on New York City.

Both Bloomberg and the UFT had much to gain from a new teacher-evaluation system, including better teachers and state funding. They failed themselves and the city’s students in failing to bring a cooperative spirit to their negotiations.


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9. Simon & Schuster versus Barnes & Noble

As the last major retail bookstore chain in the United States, Barnes & Noble has been pressing publishers to make steep concessions to enable its survival against Amazon.com and other online retailers. The bookstore chain reportedly negotiated for significantly reduced wholesale prices for Simon & Schuster’s books and also tried to charge the publisher more to display its titles in its stores. Simon & Schuster resisted.

In January 2013, after months of impasse, Barnes & Noble significantly reducing its orders of Simon & Schuster titles and engaged in other hardball tactics, such as refusing to book the publisher’s authors for in-store readings.
Given that Barnes & Noble sells about 20% of consumer books in the United States, Simon & Schuster editors and their associated agents and writers were “apoplectic” about the bookseller’s decision to use them as a bargaining chip, the New York Times reported in March 2013.

In August, the two companies issued a joint statement saying they had resolved their disagreement. The details remain unknown, but any gains they achieved would be undercut by the profits each side lost during the months of impasse. Such hardball tactics often end up undercutting both parties to a negotiation.

8. Apple’s price-fixing defeat

In 2007, unhappy with Amazon’s low, flat price of $9.99 for e-books, five major U.S. publishers negotiated a new business model for e-book pricing with Apple, which was getting ready to launch the iPad.

Under the prevailing wholesaling model, publishers sold their books and e-books to retailers like Amazon, which then set their own prices. Apple and the five publishers negotiated to switch to a so-called agency model, which would allow the publishers to set their own prices for e-books in exchange for giving Apple a 30% sales commission. After at least one of the publishers threatened to delay the release of its digital editions to Amazon unless it switched to an agency model, Amazon reluctantly agreed, and e-book prices rose across the industry to about $14.99.

On July 10, 2013, a U.S district judge ruled that Apple and the publishers had engaged in a price-fixing conspiracy that resulted in consumers paying more for e-books. The story serves as a reminder that, in their zeal to reach a mutually beneficial agreement, negotiators often forget the importance of considering how parties away from the table will be affected by the final outcome of their deal.

7. Time Warner versus CBS

On October 31, 2013, Time Warner Cable reported a huge quarterly loss of television subscribers, the largest in its history: 306,000 of its 11.7 million subscribers had dropped the company. The bad news has been attributed largely to an impasse with television network CBS over fees, which led to Time Warner blacking CBS out of millions of homes in New York, Los Angeles, and Dallas for a month during the summer of 2013.

The parties’ ultimate agreement was viewed as a victory for CBS, which won a promise of significantly higher fees for its programming in the blacked-out cities as well as the digital rights to sell its content to Web-based distributors such as Netflix. Time Warner ultimately halted the blackout and conceded, fearing a mass exodus of subscribers if the dispute interrupted the start of Monday night football on CBS.

Time Warner’s focus on the pain it was inflicting on CBS blinded it to the likelihood that it would suffer from the blackout at least as much. As was the case in Barnes & Noble versus Simon & Schuster, such penalties tend to escalate disputes and drive parties even farther apart.

6. The Minnesota Orchestra dispute

In 2012, with the Minnesota Orchestra in a state of fiscal crisis, the Orchestra’s management proposed a 32% reduction in player salaries. The musicians rejected the proposal and refused to make a counterproposal, disputing the orchestra’s figures. With the musicians refusing to negotiate, management locked them out on October 1. Months of canceled concerts followed.

In April 2013, the orchestra’s illustrious music director, Osmo Vänskä, informed management that he would resign in September if the dispute led to the cancellation of the orchestra’s highly anticipated concerts at New York’s Carnegie Hall, scheduled for November.

In May, the orchestra officially canceled the remainder of its 2012–13 season. With the clock ticking toward the anticipated cancellation of the Carnegie Hall concerts and the start of the 2013–14 season, Minnesota community groups and foundations pooled funds to offer each of the musicians a onetime $20,000 bonus to help offset the proposed pay cut. The net result equaled an average salary of $104,500, a 17.5% reduction.
The musicians formally rejected the board’s offer. The Carnegie Hall concerts were canceled, and on October 1, Vänskä resigned. The orchestra’s future remains uncertain.


Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.


5. Bangladesh factory-safety agreements

On April 24, 2013, an eight-story building in Bangladesh known as Rana Plaza collapsed, killing an estimated 1,129 people, many of them low-wage garment workers who made goods for foreign companies.

In the weeks after the disaster, labor unions focused their efforts on persuading Swedish “cheap chic” giant H&M to take the lead on safety improvements for factories in Bangladesh. “Get H&M on board, the thinking went, and others would follow,” wrote Liz Alderman in the New York Times. Negative publicity marked a tipping point for H&M. Once H&M was on board, other European retailers began to follow suit.

On July 8, a European consortium of 70 brands unveiled its legally binding, well-funded agreement. The group committed to inspections of the garment factories of members’ Bangladeshi suppliers and to developing a plan to correct any safety problems.

Two days later, a group of 17 North American retailers (including Walmart, Gap, and Target) announced its own plan for factory safety in Bangladesh, centered on raising funds for safety improvements. The signatories’ promises are not legally binding, and the burden falls on factory owners to improve safety. Labor groups panned the North American agreement, saying it lacks the accountability of the European version. Caution and concerns about liability led to a weak agreement that seems likely to do little to improve factory safety.

4. A deep freeze between U.S. and Russia

On August 7, President Barack Obama canceled a summit with Russian President Valdimir Putin scheduled for September in Moscow, citing a lack of progress on a variety of issues. The announcement came on the heels of Russian’s decision to grant temporary asylum to former National Security Agency contractor and Edward Snowden, who made confidential data on American surveillance programs public. But Moscow and Washington have failed to make headway on a variety of issues, including arms control, missile defense, trade, human rights, and Syria.

Obama’s snub of Putin was both practical and symbolic. On the one hand, the American president made a calculated decision not to waste precious time during his last term in office on negotiations that seemed unlikely to advance. At the same time, the very decision not to negotiate could be seen as an aggressive negotiating tactic. As Russia expert Andrew Kuchins said to the Times, “Why don’t we let [Putin] hang in the breeze for a while?”
U.S.—Russia relations grew even frostier when Obama decided that neither he nor Vice President Joe Biden would attend the Winter Olympics in Sochi, apparently in protest of a Russian law that discriminates against gays and lesbians.

3. Obama’s gun-control defeat

In the aftermath of the December 2012 school shooting in Newtown, Connecticut, President Barack Obama moved gun control to the top of his legislative agenda. In April 2013, the Senate considered a bill that would implement universal criminal background checks for all gun purchases. Despite the support of 90% of Americans, the bill failed.

In their negotiations, Democratic senator Charles E. Schumer and Republican senator Tom Coburn, the original cosponsors of the bill, clashed on the issue of whether the government would create records of gun sales outside of gun stores. Schumer and the White House considered dropping the record-keeping component of the bill but backed down in the face of opposition from gun-control groups. Ultimately, many senators who voted against the bill cited the record-keeping measure as their primary objection.

In addition, senators from conservative states may have felt they had to choose between supporting the gun-control bill or a pending bill on immigration reform. Their constituents, they claimed, would turn on them if they reversed their previous course on both issues. The story serves as a reminder of the importance of carefully juggling negotiation initiatives.

2. North and South Korea talks collapse

On June 12, 2013 North Korea and South Korea were supposed to have met in Seoul to explore whether they could get beyond their decades-old divisions and forge a rapprochement. It would have been the highest government dialogue between the divided nations in years.

Then the news came that South Korea had appointed its vice unification minister as its chief delegate. Offended, North Korea demanded that the South instead send a more senior official. The South escalated the conflict by retorting that the North Korean’s proposed chief delegate was already of lower status than the South’s delegate.

The night before the talks were scheduled to begin, North Korea pulled out, insulted, South Korean officials told the New York Times. Experts criticized the South Korean government for botching a chance to engage with the North. The South had much to gain from conceding on the relatively minor delegate issue and allowing the North to save face. The saga illustrates the fact that the desire to save face can matter just as much in negotiation as the substance of a deal.

1. The U.S. government shutdown

On October 16, 2013 the House of Representatives and the Senate voted to end the 16-day government shutdown and extend federal borrowing to avoid a U.S. financial default. The bill was widely viewed as a defeat for Congressional Republicans in their battle with President Obama over the Affordable Care Act.

For weeks, Tea Party Republicans had demanded that Obama negotiate concessions on the Affordable Care Act and budget cuts, saying they would not vote to raise the U.S. debt limit or fund the government until he did. The president steadfastly refused. In the end, the Republicans gained only minor concessions from the Democrats on the healthcare law. The Republican Party’s approval ratings sank to record lows, the confrontation diverting public attention from the Affordable Care Act’s delayed rollout.

In negotiation, threats can be a useful tool to persuade reluctant parties to come to the bargaining table. But Congressional Republicans’ threat was ill conceived. They gave Obama no strong incentive to come to the table and failed to assess his BATNA, or best alternative to a negotiated agreement. Obama calculated that Republicans would take the brunt of the political heat if he refused to negotiate and the government defaulted on its debt.

Moreover, the Republicans 11th-hour decision to concede defeat, though fiscally prudent, conveyed that their threat had been an empty one. It also sent the message to Obama and the Democrats that they may be able to safely ignore similar future threats from the Republicans.


Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.


Originally published in 2014.

Comments

One Response to “10 Negotiation Failures”

  • Costas A.

    Referring to the Obama Putin dispute the analysis should have gone further in time. Because immediately after Obama’s refusal to meet Putin during the G20 meeting in Moscow, the use of chemical weapons in Syria caused Obama to decide to attack Syria on the justification of destroying chemical weapons. Putin disagreed, blocked any approval of that decision by the UN Security Council, and Iran threatened to take action against such a move. While the British Prime Minister had failed to pass a motion for an attack on Syria, President Obama was having problems in congress, and it was becoming clear that extreme Islamic organizations fighting Assad would gain, Putin proposed that the USA and Russia work together to destroy the chemical weapons. That agreement is the major success story in international negotiations and has up to now worked well and surprisingly smoothly since it is taking place in the middle of civil war. But furthermore it has opened the way for negotiations on solving the Syria problem and improving the lives of the population caught in the bloody civil war and enabled progress with the new Iranian president on the nuclear program of Iran. These are three very successful negotiations that showed that hard ball tactics do not work, and that President Obama failed but then had the courage to correct his position and facilitate three major negotiation successes, that were brought about by Putin’s flexibility in trying to maintain relations with the USA and at the time remove the time bombs of Syria and Iran from the agenda.He did this by meeting the requirements of the USA, Syria and Iran by relating his proposals to the real interests of all three states. Had the USA attacked Syria none of these agreements would have been possible.

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