Negotiation, Mediation and Facilitation
The 2004/2005 National Hockey League dispute jeopardized the career and reputation of many players, clubs and unionists. The league and union members sequentially engaged each other in unsolved talks. The parties remained determined but unwilling to let go of their demands. Unlike other sports dispute negotiation processes, the National Hockey League (NHL) and National Hockey League Players Association (NHLPA) geared towards darker moments owing to unresolved negotiations (Malhotra & Hout, 2006). NHL championed for club owners’ demands while the NHLPA represented players. Thus, the two negotiation partners engaged in a pull and push negotiations primarily driven by the contrasting motives of the parties involved.
The 2004/2005 league negotiation was about a collective bargaining agreement (CBA) between the club owners and the national league players. The collective bargaining agreement focused on a new players’ salary plan. Like other income driven activities, the NHL looked up to low salary expense for players while the players opted for higher wages for the sporty services. The differences can be traced back to the1992 strike that saw players demand their consent for inclusion in posters and other value-based marketing items (Malhotra & Hout, 2006). The strike was followed by the 1994/1995 lockout and the 1998/1999 CBA negotiation. Therefore, the strikes and renegotiations paved way for the ultimate 2004/2005 season lockout under the leadership of NHL and NHLPA.
The NHL used the 2004/2005 league season to champion for reduction of players’ salaries since the cost of paying players had skyrocketed above the revenue collected. The NHL was adamant about the CBA renegotiation since it enacted a similar demand during the 1998/1999 negotiation. The organization’s representatives presented their demands in two requests during the 2004 negotiations. First, the league owners demanded inclusion of salary cup for players. Second, the league requested connection of salary payable to the clubs’ revenue (Malhotra & Hout, 2006). As such, players’ salary would be paid up to a specified level. The second demand required clubs to pay their players out of a specific percentage of the revenue earned. The players’ association opposed the NHL’s proposals terming it an absurd attitude against the rights of players. The ideological fallout gave a wrong start for the negotiations thereby explaining the stern differences between the parties from the word go.
The continuous standoff between the parties led to the collapse of the negotiation on 15th September 2005. The NHL and NHPA failed to reach an agreement in the new CBA. NHL refused to drop either of its demands while NHPA wanted nothing less than a salary increase (Malhotra & Hout, 2006). At the end of the negotiation time, no agreement was reached and the NHL locked out the season’s games. The decision prompted over 150 players to seek untroubled European hockey leagues and a loss of approximately $2 billion in revenue. Thus, the negotiating parties failed to reach an agreement within the stipulated time, which forced the league management to suspend the games.
Internal Issues that undermined the Agreement
The most evident impediment to parties’ ability to reach a negotiated agreement during the 2004/2005 NHL dispute was the misunderstanding of the “people-problem” concept. None of the parties showed good knowledge of the difference between “people” involved in the fracas and the “problem” itself (Novick, 2019). NHL’s persistence in cost reduction undermined their ability to acknowledge the difference between the players and the union’s demand for a pay rise (Malhotra & Hout, 2006). The disagreement featured a better opportunity for the league’s managing body to reassess their response to players’ concerns. NHL was not new to the players’ demands and had another opportunity to act appropriately. However, they opted to focus on the revenue problem as opposed to the players’ demands. The league took cover in the rise of operational cost to deny the players their right. Thus, the NHL clouded their resonate ability to effectively negotiate with the fear for reduced revenue.
The HNL’s prejudged assessment of the CBA delayed the progress of the negotiation right from the beginning. The institution’s prejudgments after the 1999 negotiations prepared a bad landing ground for the 2004/2005 CBA negotiations. Instead of assessing the salary and revenue as the problem, the institution viewed the players and their association as the problem (Rascher, Brown, Nagel, & McEvoy, 2007). Their undertaking set a wrong precedence for the negotiation since it weakened rational assessment of the problem. NHL had more focus on the substance of the CBA than in the aftermath relationship of the CBA. Thus, NHL’s approach was positional bargaining that set the substance of CBA against the CBA’s relationship.
The lack of morals and goodwill also undermined the parties’ ability to reach an agreement. NHL and the NHLPA approached the negotiation with their demands without offering something for the other party in a compromise of their own. The negotiators were self-centred, emotional, and inflexible (Novick, 2019). The parties’ willingness was described by misleading perceptions of “your problem”. The parties viewed each other as inferior yet none was willing to ideologically be in the other’s shoe to have a clearer vision of their demands. As such, each party foresaw the other giving in without considering what they are willing to sacrifice to allow the negotiation to be fulfilled. Therefore, both parties showed no clear goodwill, which hindered their ability to reach an agreement.
The concept of communication also had an immense impact on the ability of the parties to reach an agreement. The parties largely disregarded and misinterpreted each other on many occasions. NHLPA’s mistrust of the NHL was caused by miscommunication between the two parties. The revenue report released by the clubs under NHL furthered the mistrust with NHLPA arguing that the clubs were intentionally communicating wrong revenues to suit their pay cut demands. At some point in February 2005, Saski alluded to have had several meetings with the NHL negotiation team but the Daly-led team refuted the report claiming the meetings in question were informal (Malhotra & Hout, 2006). The improper communication denied the parties the opportunity to see the situation in each other’s perspective. Therefore, the parties withheld crucial information from the beginning thereby clouding their ability to reach a negotiated agreement.
2. Importance of Value Creation during the Negotiation
The market value creation ought to be a considerable substance of negotiation but both parties never paid attention to it. The parties approached the negotiation with imbalanced leverage for each other’s interest without looking into the general impact on the hockey sports market. The decision costed the national league approximately $2 billion in revenue loss. The parties’ lack of knowledge for the value creation as a negotiation substance cost them the power of negotiation (Malhotra & Hout, 2006). With no common interest to save the league from losing $2 billion, each party not only focused on their demands but also overlooked the creation of value in the market to support the economic viability of their negotiable demands. The perception of primarily considering the creation of value would have stopped the parties from taking agreements they would have rejected. For instance, after the lockout, some players opted to take the salary cups simple because neither they nor the clubs had a substantial economic base to make alternative decisions. If the $2 billion would have been included as a substance of negotiation, some clubs would have had enough income to renegotiate their own terms with players hence forcing NHL to comply with their internal arrangement. However, loss of revenue jeopardized the clubs position to negotiate independently thereby leaving the NHL to assume all negotiation powers on their behalf.
In addition, the value creation for the sport should have been the greatest outcome of the negotiation. The NHL should have focused on the value creation as the greatest asset for the agreement, which would have prevented unwarranted loss of the entire season’s revenue (Gee, 2009). The economic presumption would have allowed the league to make the highest income out of the agreement. As such, the NHL’s loss of salary cup to NHLPA would have only been a necessary evil. However, losing the entire season’s revenue due to lack of agreement was the worse off outcome in the failed negotiations. The league’s loss of the none-negotiated value creation implied losing the clubs annual investment. At the end of it all, both parties put up with no deal while they had all opportunities to make a great deal from the CBA. Therefore, the parties’ unconsciousness of the value creation cost them $2 billion in revenue and an agreement.
The lack of a bottom-line on value creation worsened the situation. Neither of the parties had in a mind a presumed amount of league revenue as a bottom-line for the negotiation. The parties negotiated on the margin of nil to infinite depending on what the sports market would get (Beardsley, Quinn, Biswas, & Wilkenfeld, 2006). The parties only acknowledged the cost of their loss after the lockout and players’ mass relocation to Europe. A revenue creation bottom-line would have cleared unrealistic demands and hardness out of the parties. NHL failed to compel the players to take a salary cup or attach their salary to a fixed percentage of revenue. The NHLPA also viewed salary increase as the only counter offer. Therefore, it is not surprising that the parties never reached a negotiated agreement.
3. Benefits of having a Deal
The NHL and the NHLPA should have taken advantage of the simplicity of the negotiation method of dispute resolution to fulfill the agreement. The procedure required the aggrieved parties through their representatives to address the problem in pursuit of an agreement. The parties had the opportunity to amend several changes in the CBA based on equal representation and flexibility of the base substance. They had the structural and procedural tools of negotiation at their disposal. In addition, the CBA was a renegotiation agreement proposed in 1999 and gave both parties considerable time to assess the need for the negotiation and adequately prepare for the talks. By all circumstances, the parties were supposed to have a deal by the end of the negotiation period. None of the parties would have lost much from the negotiations if they reached an agreement. NHL and NHLPA were morally bound to understand the circumstance that led to the setting of the CBA renegotiation. Thus, they should have taken advantage of it together with good knowledge of the game, free will to negotiate, demands, and future interest of the game to negotiate.
The future of the league was also in the hands of the disputed parties. The league owners and the players ought to have set aside their adverse differences and considered a focal point for their differences (Norem, 2001). The decision would give them a centralized approach to their differences compared to the position-based approach used. However, the negotiation process proffered opportunity to create a mutual interest with regard to objective standardization, which was overlooked by the parties, particularly the NHL. The approach guaranteed a win-win situation but that too was undermined by the parties’ acts. NHL was very adamant on its salary cut and linkage of salary to revenue. Thus, it would have rescued the league, clubs, and players from making unnecessary moves.
Creation of $2 Billion Revenue in the Deal
The $2 billion revenue should have been a considerable factor to lure the parties into an amicable solution. In exception of the players’ financial loss, the $2 billion revenue loss during the lockout was sufficient to have a deal. The parties never assessed the revenue loss that was associated with their actions. They assumed a two-man show between the NHL and the NHLPA as the only entities in the negotiations (Malhotra & Hout, 2006). Losing $2 billion amounted to an entire 2004/2005 season’s revenue that would be used to pay players and run few operational functions. The realization of this loss only hit the NHL and NHLPA after the lockout when some players opted for the cupped salaries. Had the information been highlighted as a negotiation substance, both parties would have reconsidered their positions and amended the CBA to have a deal. Thus, the inclusion of the $2 billion revenue as a negotiation substance would have sufficiently influenced a deal.
4. The Barriers to the Negotiation
The 2004/2005 NHL dispute failed to reach an agreement due to several barriers that undermined its fulfillment before the collapse of time. The negotiations were crippled by deliberate miscommunications, psychological malpractice, and position based tactics. The most visible barriers in the case study are as discussed herein.
The negotiations were blurred with unfavorable power moves that undermined fair negotiations between the parties (Ury, 2000). The NHL misinterpreted its league management authority for an overall authority on the decisions of salary and revenue. The organization constantly made unconsented moves through instructions on what is expected of the other parties, players, and fans. Such instances built a reputation of power defiance by NHL thereby usurping other parties’ equal participation ability in the negotiation.
The first instant of power move applied by NHL was a deliberate misrepresentation of facts during the negotiations. The institution made many presumptive comments that denied its negotiating partners opportunity to follow hence earning itself uncensored leadership position. The negotiation roles portrayed two equals enraged in a misunderstanding (Fields, Collins, & Comstock, 2007). However, by NHL deliberately issuing information that confuses its partner NHLPA, the institution undermined the thresholds of fair negotiations in which parties are expected to have equal access to information. For instance, the NHLPA’s legal representative accepted having had several meetings towards 15 February 2005 but NHL legal officer denied claiming none of the meetings was official. The result was confusion across the NHLPA camp that portrayed them as followers of the NHLA’s predominant power moves. Such deliberate moves would not defend the need to make negotiation talks independent of trust. None of the two applied since NHL showed an act of power move rather than negotiation tactics. The aftermath made it unbearable for NHLPA to verify or make factual assertions out of the NHL’s negotiation moves. In addition, after the NHL’s meeting with all club owners in 2004, the organization became a defiant ambiguous negotiator who accepted nothing less than salary cup and connection of salary to revenue. Thus, the situation further undermined NHPLA’s negotiation position.
The parties also engaged in psychological wars that prevented the attainment of a negotiated agreement. NHL’s pre-dispute’s new regulations barred clubs from revealing information about their discussions to the public, which kept NHLPA and fans in total darkness. The organization further removed their counter offers and left behind a demand of salary cup meant to intimidate the players’ union into entering a negotiation as soon as possible. The body assumed that leaving the players in the dark would subconsciously make them jump into the conclusion in favor of NHL. NHLPA found itself in a stressful situation engineered by NHL’s psychological war. Though late, NHL’s fruit of psychological power moves showed up after the lockout when some players opted to rejoin the league due to limited options. Like Mike Commodore stated, “I don’t want to spend the next uh, as long as my career lasts, I want to play here in the American Hockey League” (Malhotra, & Hout, 2006). Such position shows a harm-twisted player who was ready to do anything after the lockout to save his career.
The NHL case never matured into a negotiated agreement due to complicit mistrust between the NHL and NHLPA. From the beginning, NHLPA was opposed to the proposal of having players assist club owners bid their salaries. The union argued for a free market system to determine salaries (Staudohar, 2005). The same applied to NHL’s new demands in the CBA. NHLPA based its argument on the mistrust of the clubs’ financial reports that were coupled with under-reporting of revenues and overrated losses. The union publicly admitted to mistrusting the financial report issued by the league officials. Thus, the union acted in cold shoulders during the negotiations with continuous demand to have independent personnel audits the league’s financial reports as proof of their commitment (Malhotra & Hout, 2006). However, the club owners rejected that request and left NHLPA with no option but to reject NHL’s CBA proposals. Therefore, the negotiation was clouded with mistrust that prevented negotiation until the lapse of agreement time.
Blame Games and Focus on Revenue
The negotiations never materialized due to blame game between the NHL and the NHLPA. The NHL accused the players’ union of being unrealistic, reporting that over the last two CBA, they have increased players’ salaries by 240% while revenue staggered behind at 70%. The NHL argued that the clubs do not have enough revenue to support more salary increase. On the contrary, the NHLPA blamed NHL for being overprotective on club owners and exploiting players (Fisher, Ury, & Patton, 1991). The union alluded to the connection of salary to revenue that pegged a fixed percentage on revenues for salaries. Instead of cupping salaries, NHLPA proposed a free market system in which salaries would be determined by market forces. In addition, the NHL’s greatest concern was revenue as opposed to players’ interest, which is the greatest factor of production. Thus, these two issues also prevented actualization of a negotiated agreement between NHL and NHLPA.
The 2004/2005 NHL disputes exemplify circumstances of unfruitful negotiations. None of the parties took advantage of agreement facilitation factors available at their disposal. NHL was not ready to let go of its demands and so was NHLPA till the lapse of the negotiation time. Their unresolved dispute led to a lockout that caused players, fans, and owners revenue for the 2004/2005 league season. The negotiations were barred by lack of trust, power moves, blame games, and focus on revenue.
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Rascher, D. A., Brown, M. T., Nagel, M., & McEvoy, C. D. (2007). Where did National Hockey League fans go during the 2004-2005 lockout? An analysis of economic competition between leagues. An Analysis of Economic Competition between Leagues (August 7, 2007).
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