Offering Gifts—With Strings Attached

By — on / Business Negotiations, Daily

Adapted from “Give a Gift that Keeps on Giving (to You),” first published in the Negotiation newsletter.

It was the kind of windfall that would make any employee feel appreciated. In October 2009, Jenna Lyons, the creative director of New York–based fashion retailer J. Crew, received a cash bonus of $1 million from her boss, J. Crew Chairman and CEO Millard “Mickey” Drexler. The bonus seemed all the more generous given that J. Crew, like its competitors, had faced a steep drop in consumer spending since the start of the recession. Not only had the company reduced inventory and slowed store openings, but in February 2009, it cut 95 jobs in its corporate office and distribution centers, suspended 401(k) contributions, and eliminated merit-based raises.

Why give Lyons such a lofty bonus during tough times? In part because Lyons was widely seen as having revived J. Crew. After being promoted to creative director of the company in 2007, Lyons punched up the preppy clothing line with colorful, fashion-forward pieces that attracted influential customers, such as First Lady Michelle Obama. J. Crew posted stronger-than-expected sales in October, prompting the company to nearly double its third-quarter earnings predictions, according to the Wall Street Journal.

This brings us to the apparent inspiration for the bonus: J. Crew’s fear of losing Lyons, now widely in demand throughout the fashion industry. Reflecting this fact, the bonus came with significant strings attached. If Lyons left J. Crew within the next two years, she’d have to return the bonus in full. If she left between two and four years later, she’d have to repay half of it. More than a reward for good behavior, the bonus clearly was designed to give Drexler peace of mind that Lyons wouldn’t flee for greener pastures anytime soon.

When there’s something specific you want from a negotiation counterpart, you might try to get her attention by making a grand gesture that requires a concession or promise in return, as J. Crew did. Such “gifts with strings” can improve motivation and cement relationships, but they come with risks. How can you guarantee that your gift with strings will be appreciated and reciprocated? Here are three suggestions:

1. Remember your ethics. In business relationships, a key danger of gifts with strings is that they can resemble bribes. An extreme case would be a mayor awarding a contract to a construction firm in return for the promise of campaign donations. Before offering a gift with strings, consider whether your terms could be viewed as unethical, illegal, or otherwise unfair to outside parties.

2. Figure out what they want. When crafting your gift with strings, think about what the other side wants and figure out if you can give it. To the time-strapped employee, an offer of extra paid vaca¬tion days might be a more appealing gift than a bonus. From working closely with Lyons, J. Crew’s Drexler apparently felt confident that she would view the offer of four more years with the company as a vote of confidence and a promise of job security rather than a sentence to be served.

3. Show them the strings. Negotiation experts advise us to label our concessions clearly so that the other side will feel inspired to reciprocate. In a similar manner, when you offer a gift with strings, it’s important to communicate its contingencies clearly. Before your counterpart has a chance to accept the gift, explain why you are offering it and what you expect in return. If she has reservations, discuss them thoroughly. And if she turns you down, open up a conversation about how both of you can get more of what you want from the relationship.

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