Power Play for Howard

Organizational Negotiations – MGT/445

Power Play for Howard

In the National Basketball Association (NBA), players and teams negotiate multi-million dollar contracts every year. The risks, costs, and benefits of each potential decision affect the outcome of the negotiations. In the negotiation for Juwan Howard prior to the 2002-2003 season, the Miami Heat and the Washington Bullets attempted to secure a contract with the basketball star. Summarizing the Juwan Howard negotiation case, followed by an analysis of the benefits, costs, and risks for the player and the teams highlights the advantages and challenges faced in a high-profile negotiation. 

Case Summary

This case describes the negotiation process of Juwan Howard, free agent forward of the Washington Bullets, by his agent David Faulk. Faulk’s objective was to solicit a $100 million contract offer for his star player. Wes Unseld, manager of the Washington Bullets, offered a seven-year, $78.4 million contract. Faulk refused Unseld’s offer. In an attempt to gain Howard for themselves, Miami Heat manager Pat Riley offered $100.8 million, luxury hotel suites, and limousine service. The Heat prevailed, and Howard signed. However, a dispute arose between the Miami Heat and the National Basketball Association (NBA).  

NBA officials concluded that the Heat had exceeded the salary cap set by the NBA. Because of this dispute, the Washington Bullets obtained another chance to bid for Juwan Howard. The Washington Bullets matched the Miami Heat’s bid and offered Howard $100.8 million, plus an additional $4.2 million to cover state income tax (Lewicki, Saunders, & Barry, 2006). Ultimately, Juwan Howard stayed with the Washington Bullets and played for the team he loved.

Tangible and Intangible Benefits

Had either team been successful in securing Juwan Howard’s contract, they would have benefited from the increased profits and advertising associated with his fame and growing fan base. In contrast, Juwan would have received the significant monetary reward that he believed his time and skill deserved. At the conclusion of the negotiations, Juwan Howard stayed with his original team and secured the salary that he desired.

Evaluation of Cost

From Juwan Howard’s perspective, successful contract negotiations would have secured him a seven-year contract, paying full market value for his talent. Conversely, the cost to Juwan was the effort he would put into his training and game play. Because these were critical years for Howard, he wanted to receive the best value for that effort. If Howard had chosen another team to play for, he risked the possibility of receiving less than market value for his talent. In contrast, if Juwan Howard decided to play for the highest bidding team and then failed to perform as expected, his lackluster stats would weaken his market value. Additionally, Howard had a personal attachment to the Washington Bullets and leaving the team would prove costly from an emotional standpoint. Bullets supporters had developed an emotional bond with Howard. Failure to negotiate his return would have severed this bond and resulted in a substantial personal loss for his fans; however, if the Washington Bullets reacquired Howard, it would revitalize the team.

Like any business, shareholders expect a financial return on their investments. Juwan Howard was expected to win games for the Washington Bullets and improve their ranking. Bullets manager Wes Unseld wanted Howard back to continue team development, win games, improve his team’s ranking, and ultimately, please stakeholders. The cost for Juwan Howard was more than 100 million dollars for seven years. Unseld’s risk, if the team performed poorly, was losing his reputation as a negotiator and manager.

The Miami Heat could not sign a contract with first round draft choice Alonzo Mourning, so they focused their attention on Juwan Howard. Heat manager Pat Riley was in charge of negotiations and believed that Howard’s proven skills would help the Heat win more games. Although Riley was willing to pay more than 100 million dollars to acquire Howard, an earlier promise to Mourning prompted an investigation by the National Basketball Association (NBA). This ultimately cost Riley the contract for Juwan and tarnished the reputation of the Miami Heat.

Evaluation of Risks

Contract negotiations for professional athletes open the door for an array of issues, such as those experienced in the Juwan Howard case. In professional sports, turning a profit and winning championships are difficult to come by. Because of this, owners and managers are willing to go to extreme measures to gain an edge. Juwan Howard was a hot commodity in 1996, as was evident in the details of the case. Howard was a successful young talent at the highest level in professional basketball. Not only was Howard a good player, he also had the potential to become one of the NBA’s all-time greatest. Because of this, several teams were willing to pay the asking price to acquire his talent.

Wes Unseld was in a bind regarding Juwan Howard’s contract. The team publicly promised to do whatever it took to keep him in Washington; however, because of the salary cap under the new Collective Bargaining Agreement (CBA), the Washington Bullets did not have enough money to keep Howard. Not only could Washington not afford him, the public outcry to keep him and potentially win their first championship in 20 years was not going to change that. The Miami Heat had spent beyond their means and had made what most would consider false promises. The Heat risked their franchise future by continuing to negotiate with Howard and fight their claim with the league that they had done nothing wrong.

For this reason, Juwan had no choice but to turn back to the Bullets for an offer. Had Howard waited around for the Heat’s legal battles to be resolved, he would have lost millions. Other teams were in the same situation as the Bullets; they could not afford him. Juwan Howard was fortunate because the contents in the CBA that initially hurt him came back to help him in the end. League officials granted the Washington Bullets what is known as Bird rights. Named after basketball legend Larry Bird, Bird rights allow teams to pay amounts that exceed the salary cap to retain players that they already have under contract (Zegers, 2010). The Bullet’s Bird rights were restored, and they could match the Miami Heat’s offer to acquire Juwan Howard.

Conclusion

Knowing the limitations of an organization is one of the most important steps in the negotiation process. In the case of Juwan Howard, the Miami Heat did not have the bargaining power necessary to back their offer. Ultimately, Juwan Howard received the salary that he desired and gained the added benefit of remaining with his original team. In contrast, the Miami Heat not only failed to sign Howard, they received scrutiny from the NBA and lost the respect of their peers in the negotiating process. Although mistakes such as these are unfortunate, like many historical blunders they help to ensure a smoother process in the future.

References

Lewicki, R. J., Saunders, D. M., & Barry, B. (2006). Negotiation (5th ed.). Boston: McGraw Hill

Zegers, C. (2010). About.com. The New York Times Company. Retrieved from http://basketball.about.com/od/collegebasketballglossary/g/bird-rights.htm