NHL case study - solution

PROJECT – CONFLICT MANAGEMENT [CASE: “Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)”] [Written Analysis]

Submitted to: Miss Kiran Ali NUST Business School

Submitted by: NayabKiran|TehreemMasud|AroojAlvi| Hafiz Muhammad Umar Farooq|Muhammad WaqasRafiq Third Semester MBA 2K13 – Section A Date of submission: ___ Dec 2014

NUST Business School [NBS] National University of Sciences and Technology [NUST]

Conflict Management | Project

1.

Using one framework that you have covered in the course ‘Conflict management’,

discuss the barriers that exist to the negotiated agreement in this case. Which of the barriers is the most critical?

The conflicts and differences between NHL and players emerged during the early years of NHL’s existence when the players showed their mistrust on NHL regarding the true revelation of NHL’s revenues and profitability. Since then the conflict went on.The dispute between two parties has a long history which went through side by side along with NHL operations. This led to the creation of NHLPA in 1967, fifty years after the inception of NHL. Throughout the tenure of NHL, the dispute continued however it took a serious turn when in 1992 Bob Goodenow, the Executive Director of NHLPA union, led the players on their first ever strike in the history of NHL. Since then a war of attrition continued between both parties and both stood firm on their positions rather than interests. Both parties faced losses due to this prolonged conflict. This case is a real example of distributive or adversarial bargaining where both parties are trying to claim a scarce resource i.e. money whether in form of revenues, costs, salaries and marketing rights.In addition both parties took strong positions and thus this context involved the claiming of intangibles also. Even time and again negotiations between the parties couldn’t help to reach a mutually accepted agreement. Both side bargainers were unable to deal effectively with each other which made it a shadow negotiation. As a whole it was not only a loss for these two negotiating parties but the fans of hockey and the hockey as a game itself was at loss.

The barriers to negotiation in this case were evident thus making it quite difficult for both parties to attain desired result. These barriers not just prolonged the negotiation process but also severely affected both parties financially and their relationship with each other. Game was losing it fans and an overall bad image was being portrayed to outside world as media was covering every movement of both parties. These barriers can be broadly categorized under the following three headings:

1.

Psychological barriers: Barriers with respect to differences in perception, way of thinking and cognition.

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2.

Structural barriers: Barriers with respect to situational and contextual factors.

3.

Tactical barriers: Barriers with respect to behavior of parties.

Both Bettman and Goodenow had a history of negotiating before the 2004-2005 negotiations. As depicted in the case both had a strong past and performed well with regard to their assigned roles.Theyboth were seen as competent, capable and caring by their men under command. These similarities between the two also made this negotiation a tough bargain not only the differences in their positions, interests, perspectives, priorities and opinions.

Although these headings encompass a number of barriers, the most relevant and obvious in this case are appended next. Each type of barrier played its role in hindering effective negotiation.

Psychological barriers

Structural barriers

Tactical barriers

1.

Dilemma of trust

2.

Dilemma of honesty

3.

Ego and Conflict of positions

1.

Conflict of interest

2.

Power imbalance

3.

Role of media

4.

Role of hockey fans

1.

Behavior of both parties

2.

Threat

3.

Leadership style

4.

Skeptic behavior of players

PSYCHOLOGICAL BARRIERS

1.

Dilemma of trust: From start of the case it is obvious that players had distrusted NHL

and team owners. They had issues regarding the reporting of correct financials of the league and in their view; the league concealed the actual information regarding the revenues and profits generated by the game. Thus the players doubted that they are being paid less than what they Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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actually worth. The issue was so severe that at last it led to the creation of NHLPA which formally started bargaining on players’ collective rights. This distrusting attitude of NHLPA towards NHL continued throughout the case even when the NHL got its 2002-2003 URO independently audited by a Mr. Arthur Levit Jr. Moreover, Bettman didn’t have positive rapport with union which also led to distrust from players on him. This bad reputation developed over time and was shaped by NHL’s past behavior.

2.

Dilemma of honesty: The NHL was concern that how much of the information to be

shared with the players in order to make the league profitable and economically stable. It was so because NHL had in their mind that if they share all information than players will demand high salaries. This was the reason why NHL was in a mood to engage in this debate of information sharing before the existence of NHLPA, stating that teams were private enterprises and NHL is not liable to disclose financial information.

3.

Ego and Conflict of positions: As mentioned earlier, the heads of both parties i.e.

Bettman and Goodenow were competent and well-respected by their constituents. They were strong enough at their positions and both wanted to achieve their goals irrespective about the overall loss of hockey as a game and its fans. They were so mentally apart that when NHL argued that revenues and player costs are not in relation with each other, the union replied that the relationship already exists. Players were so strong at their positions that they were not psychologically ready to go ahead with salary cap and their salaries being tied up with revenues.

STRUCTURAL BARRIERS

1.

Conflict of interests: Both parties were having differentiating interests. The NHL was in

the opinion that players are being paid with high salaries, bonuses and remuneration. They demanded cost certainty through salary cap and linking salary with revenues. Their point of concern was that since 1995, revenues increased by only 160% but the players’ salaries boosted up by 240%. They wanted to achieve a system which will make the clubs economically stable and competitive.

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However, the NHLPA argued that players’ salaries should be determined by free market. Neither they were in the view to tie their salaries with the league revenues.

2.

Power imbalance: Even though both the parties used their own power moves available

with them, but a power imbalance was there between the parties. The NHL had an edge over players as they were the owners. They make the rules which can’t be challenged. This became obvious when Calgary Flames defenseman Mike Commodore agreed to play under salary cap which the NHL wanted. Next day another player of Montreal Canadiens Pierre Dagenais also agreed to play under salary cap. The power imbalance was also evident as the union made repeated concessions of initially 5% salaries rollback then to 24% then in principle agreed to play under salary cap however the limit of cap was not under consensus.

For players the only option was to play hockey in other leagues like in European teams otherwise they are will sit home as they play hockey as professionals not just for the sake of fun. Whether they’ll get on the ice or not was at the discretion of NHL not players. Moreover NHL can use their sports arenas for non-NHL events and at least earn some revenues.

3.

Role of media: As the issue of NHL was long outstanding and gained a lot of attention,

external stakeholder like hockey fans wanted to know what’s going on at the bargaining table and media is always ready to provide such information. Therefore role of media cannot be undermined. Moreover NHL was already involved in TV deals with major American broadcasters ABC and ESPN. Media as a platform was available to both parties to portray their image as good and present other as bad. At one of the occasion, media showed its doubtfulness against NHL as they refused to share their financials with the union. At another occasion it was media through which the cold relationship of both parties head was revealed to public. As mentioned in the case “media report that the two sides seemed to disagree not only on the CBA, but also on what constituted a meeting”. In this regards remarks of hockey agent Ritch Winter are also relevant. These hard talks increased the distance between both parties and made negotiation more public, egoistic and tough.

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4.

Role of hockey fans: Sports like other entertainment industries have huge fan base. Same

was the case with ice hockey which was a sport enjoyed by a lot of people. Fans usually have an emotional attachment with the sport they love. Therefore opinions of fans had a significant importance. This was realized by Bettman when league released a poll result which showed fans’ high concern regarding NHL’s financial health and their desire for implementation of cost certainty.

TACTICAL BARRIERS

1.

Behavior of both parties: Due to their clash of thoughts, perception and attitude, both

parties behaved in a disharmonized manner. Both were not ready to accept and understand each other concerns and made their stances rigid. Several times both parties utterly rejected each other’s proposals. Even they didn’t realize the impact of this conflict on external environment. This is a fact that ice hockey is rough game and physical injuries are quite common. But initially there were no rules regarding the safety of goalies. So from beginning players took league’s behavior as hostile. A sort of battle was going on between the parties. Starting off soon after the existence of NHL, this series of conflicts began which continued all the way.

2.

Threat: Somethreatening moves can be witnessed in the case. After the 1994-1995

season lockout, NHL proposed three components that included payroll tax system, unrestricted free-agency system and salary cap. Union rejected the proposal and proposed their own alternative schemes but that was rejected by NHL. To get to the settlement, Bettman placed additional demands and scaled back certain players’ rights. In his view, this step was taken to reduce cost but players took it as threatening move so as to quicken the negotiation process.

On March 19, 1999, Bettman wrote to Goodenow to enter a voluntary negotiation otherwise players would have to give major concessions in 2004-2005 sessions. After this, both parties started to prepare for the upcoming tough bargain. Also, 1992 strike event was a threatening move from players’ side which was ultimately resulted in victory of players for that specific issue of marketing rights.

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For players playing hockey was everything as one player Dagenais said “all I want is to play hockey”. Therefore Bettman announcement of lockout on September 15, 2004 was a major threat. In response signing of contracts by players to play in European teams was a threating move from players as this shows that they can play hockey at other leagues if NHL doesn’t move go along with union.

Meanwhile NHL allowed other parties to use their sports arenas for other activities was threatening move as this shows that they can earn money elsewhere if players don’t go along with NHL. So both parties used their power to threat other. However as a whole the game was losing its fans and both parties were at loss.

3.

Leadership style: One of the reasons which made this negotiation difficult was the

similarity between two heads of the parties. Bettman’s tenure in NHL proved very fruitful with respect to growth of NHL i.e. increase in number of franchises from 24 to 30 and increase in revenues. He also signed TV deal with ABC and ESPN, the two major American broadcasters. This was his tenure in which for the first time NHL players participated in Winter Olympics. However despite his achievements, he was criticized by players that he is motivated by money and not a hockey guy as he was former senior executive in National Basketball Association (NBA). Therefore, he didn’t have a good image in front of union. Goodenow on the other hand was a pure hockey guy. He was captain of Harvard’s hockey team back at his time. His journey till executive director of NHLPA is not abrupt. From his university he made it to professional hockey world then became an agent and then deputy to Eagleson and then to NHLPA. He also got his achievements during his tenure at NHLPA like increase in revenue, growth in NHLPA team and growth in players’ salaries.With regard to his communication style he was very direct with players and very helpful. He was energetic and militant advocate of players’ interests.

In view of above statements it can be said that both Bettman and Goodenow performed well, both were competent and respected by their subordinates. Moreover booth took over their positions in NHL and NHLPA in early 1992 and 1993 respectively bringing them at more or less Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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same experience level. These similarities in both parties’ leaders shaped their rigid thinking, strong positions and unaffectionate behavior which as a whole made the negotiation complex and prolonged. As mentioned in the case “they were negotiating in the dark shadow of their shared past.

4.

Skeptic attitude of players: With the start of NHL, the players doubted the financial

information shared by NHL due to lack of transparency with regard to financials of the league. This distrust engraved in the minds of players from early years of league’s establishment let to skeptic attitude by players. This skepticism continued and became so firm at even they doubted the independently audited 2002-2003 URO.This skepticism also made this negotiation complex and quite intricate.This skepticism became severe with the passage of time as league continually refused to give access to their financial books. In response NHLPA became firm on their positions and took this negotiation as a battle.

MOST CRITICAL BARRIER

All of the above barriers played their part in making this negotiation a tough bargain however, the psychological barrier of distrust standouts to be the most important one. A series of events as mentioned above and in the case show how distrust halted the players to accept league’s proposal. Distrust broke out in the early years of NHL’s existence and since then NHL failed to gain it back not even from hiring independent auditor that too a former Chairman of the Security and Exchange Commission. At this occasion also players doubted that whether he was provided with all relevant data or not. This distrust developed because of league not sharing information with players by saying that they are just the private enterprise and league is not obligated to share financials. Sports’ players usually have an emotional bond with their fans but even then NHLPA overlooked the poll results that revealed the fans’ concerns regarding league’s financial standing. Saskin, NHLPA’s senior director called the accounting as “garbage in and out”. This issue of distrust went through along through the case which ultimately made NHLPA rigid on their positions. In response the league became rigid too which lead to this war. This distrust was the root cause of all other barriers because doubt weakens every relation. The league’s credibility was at question and the both parties relationship remained combative. Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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As the barriers and their intensity increase, the intricacies of negotiation develop which are difficult to remove until and unless prompt and suitable negotiating strategies and tactics are applied by all parties. Level of significance varies but each and every barrier has its certain role and should be addressed. This case shows how the above mentioned barriers especially the issue of trust made this negotiation a battle even though both parties knew that their future is together if they want to remain in hockey business.

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2.

Is there any evidence that the parties understand these barriers exist? Analyze

whether the parties are effectively tackling these barriers?

As previously discussed, numerous barriers hindered this negotiation. NHL realized that players had no trust on financial information and thus believed that their salaries and worth are undervalued. NHL understood this critical barrier and thus hired independent auditor who was a credible person to audit 2002-2003 URO. Although this technique to remove doubts from the players’ minds didn’t worked, as the player were of the view that all relevant information was not being provided to the auditor, but this shows that NHL did understood this barrier of distrust. Also, the use of fans’ polls to make players understand the unstable economic condition of league was also as step by league to implement cost certainty i.e. salary cap and linkage of salaries with revenues.

In every negotiation role of third parties is very important and it becomes more important as the parties become stringent on their positions and there is lack of trust. NHL realized that the deadlock between the parties is very strong and both parties have become so rigid at their positions. So on February 11, 2005, NHL engaged other parties like owners of the teams, GMs and coaches hoping that this will break the deadlock.

U.S. Federal Mediation and Conciliation Service also played its role. On request of their director, both parties met with U.S. federal mediators in Washington D.C. Though, Bettman and Goodenow were not present but at least both parties came to one platform to avoid further stalemate in the negotiation.

Union made proposals of salaries rollback and in in principle accepted payroll tax system and salary cap were also some so that a mutually agreement can be made. Despite union distrusted the financials of league, they did realized that this deadlock will pose losses to both NHL and players, thus the players started offering concessions and moved towards cost Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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certainty. NHL also stared increasing salary cap limit and relinquished their demand of salary linkage with revenues in order to reach some sort of settlement.

Secret meeting between Saskin and Daly was also a step to tackle the negotiation barriers. Because of this process move to build consensus behind the scene made it possible for the first time when both parties radically moved from their rigid negotiating positions. In addition, when Bettman cancelled the 2004-2005 season, there were rumors that backroom phone calls were made by owners and players. Though it was too late but at least players took a step toward making an agreement.

Above mentioned steps taken by both parties help them to heal their reputation, rebuild trust and alter their positions. All these steps made substantial progress toward settlement.

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3.

What are power moves? Identify and explain the power moves being used by each

negotiating party?

Power play a vital role in the process of negotiation as it increases the probability to attain desired goals and enhances one’s advantage over the other. Simply, it can be said that if party A is able to get things done from party B which the party B otherwise will not do by his own, then party A has power over B. When a negotiator assumes that he has less power than the other, he then seeks to increase the power to off-set or counter balance the other party and tries to maximize his share of potential benefit. Parties play tactics in order to take advantage or block other party’s power move. Power also lies in the position you hold in a negotiation. The position can be strong because of the hold over the information, resources or that one has a strong BATNA. From the case it is evident that both parties’ heads had different perspectives, interests, priorities and opinions. Bettman and Goodenow were different and competent, but due to their positions, past achievements, capabilities, competence level and respectability, both held certain power. Therefore, as both parties had power, both held firm at their position thus made this negotiation more complex. In ensuing paragraphs it is elaborated which type of power was held by which party and what power moves they made to achieve their objectives and get to the settlement.

NATIONAL HOCKEY LEAGUE

Legitimate power: The case shows that both parties had power. NHL was responsible for all the operational and administrative tasks. By virtue of the system and hierarchy NHL especially Bettman had the legitimate power. He was the NHL commissioner and had the responsibility to supervise and work on behalf of the entire league. His responsibilities included from policy making, allies with TV channels, informational handling, and financials to resource control (money, supplies, human capital, time, equipment, services and support). He had the control over financials, sports arenasand season declaration. There was also a huge power distance between him and the players, since he did not have any direct contact with the players but with the owners only (as it Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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is evident from the hierarchical structure). Any collective bargaining agreement (CBA) required his approval first. Because of this power, only he had the authority to declare a lock-out, scale back player salaries to cut costs and impose other systems like salary cap. This shows that he held legitimate power of responsibility i.e. using the power to help the dependents. Power moves which he, on behalf of NHL, played in this case with regard to his legitimate position include locking out the players for 1994-1995 season and scaling back players’ rights like eliminating salary arbitration and per diems etc.Moreover, NHL successfully secured a unified commitment from all 30 team owners in favor of 2004-2005 lockout. This was because of a bylaw that no team owner can reveal this lockout information.

Informational power: The NHL had the entire information about the league’s financials. Initially when NHL was formed, players showed their concern regarding the sharing of such information but NHL played used their power by stating that league is not obligated to share information as teams are just private enterprises.

Reward/Punishment Power: Bettman had power either to reward or punish the players regarding the CBA and proposals. In the case, lock out is the biggest example for the use of punishment power. In the season renegotiation request, he clearly warned the NHLPA for the major concessions in case the union didn’t come up for voluntary negotiation. Similarly based on the unified commitment for season lock out any member/owner involved in breaking the rank was fined heavily.

Pressure tactics: Bettman cut cost by scaling back players’ salaries which was assumed as pressure tactic to decrease the negotiation time and that players should accept the proposal so that season could be started before it’s too late. Similarly the throwing “take it or leave it” approach with a deadline before the decided lock-out could be declared.

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Contextual power: Both league owners and NHL had their BATNA available with them. League owners were either private or corporations who had their own businesses and hockey was only a side business. NHL allowed sports arena to be used for non-league events during the lock-out on 45 days instead of 31 on rolling basis.

Agents, Constituencies and External Audience: League involved other parties in order to increase the negotiation pressure over the union such as reaching out to media and players and talking about the lock-out all in hope to break the impasse hiring an independent auditor to get the 2002-2003 URO audited and meeting with U.S. federal mediators.

NATIONAL HOCKEY LEAGUE PLAYERS ASSIOCIATION

Legitimate Power: Goodenow was elected as executive director of the union. He worked for the rights and interests of the players. He had control over the dues to be paid by the players to the league by the year end. By virtue of the system, Goodenow used his legitimate power so that NHLPA can sustain as a potential lockout or strike was expected after expiration of CBA. So, in order to increase their power, NHLPA did not cut licensing checks to players, and held dues that were to be paid by the players at the end of each year.

Referent Power: He was a hands-on leader, with good rapport among the players. He worked for the players rights and contributed in the organizations growth and success to a great deal. He had a strong hockey background and had been a professional player therefore players and entire union took him as a real hockey guy.

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Contextual power: Like NHL, union also had their BATNA. Players started signing for the European league. They did not want the salary cap. But for the love of game, they stayed firm to negotiate their terms otherwise joining the European league was their alternative. Agents, Constituencies and External Audience: NHLPA held meeting with teams’ representatives to ensure unity. They also involved media highlighting the misrepresentation of revenues and losses, and all the meetings that had been conducted between the two parties. They also met with U.S. federal mediators along with NHL.

POWER MOVES IN CONTEXT OF SHADOW NEGOTIATION

Shadow negotiation: It is the complex and understated game played by the negotiators before and after they get to the negotiation table. It deals with the “how” of the discussion instead of “what”. It is most obvious when there is an unequal balance of power among the participants. There are three strategic levels that can be used to tackle this shadow negotiation. These are power moves, process moves and appreciative moves.

Power Moves: Negotiators take some actions when they see that the other party is not persuasive enough to negotiate. These actions called as power moves help them to bring and keep parties at the negotiation table. The parties are better off if they negotiate and worse if they won’t. There are three types of power moves that can be employed:

1.

Offer incentives

2.

Pressure levers/ Put a price on Status Quo

3.

Enlist support

Both parties used the combination of above power moves. They offered incentives to each other, pressurized each other and enlisted allies with other members of their respective parties.

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Bettman, was successful in signing TV deals with main broadcasters of America such as EPSN and ABC enlisted their support but at the same time he failed to establish good relationship with the union. The reason for his failure according to some critics was that he was not a hockey guy. He was a former senior executive of National Basketball Association (NBA) and a New York lawyer. Consequently, people perceived him as a greedy person who has no love for hockey.

The participation of NHL chief Legal officer, Bill Daly in negotiation was another attempt to enlist support by the Bettman. Bill Daly stood out as one with joint virtues of being well respected by both parties the union and the League. “Union” headed by Goodenow, NHLPA Executive Director also used power move of enlisting support by having Ted Saskin NHLPA Senior Director at the negotiation table. His less confrontational nature made him an effective communicator of the union’s interests.

The differences and similarities between Bettman and Goodenow posed them with problem that they were negotiating in the dark shadows of their shared past.”

In 1992, union used the power move of pressure lever by going on strike to get their desired CBA. The strike started off just before the start of the season and lasted for 10 days. The agreement was reached and union was victorious.

Before the start of 1994-1995 season, league used pressure lever and locked-out the players for the very first time because no agreement was reached over the new CBA. This time the lockout lasted for 104 days. The agreement was finally reached and this time league won the negotiations.

The league was not satisfied with their 1994-1995 CBA negotiation that was supposed to expire until 2004. Bettman made an offer to Goodenow at the end of 1998-1999 season. He invited for voluntary renegotiation and again used pressure lever by notifying them if they rejected this Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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renegotiation then the players have to face foremost concessions in the coming 2004-2005 season. Though, this offer was rejected by the union.

In response to it, the league enlisted support and allied with its 30 team owners and joined commitment to lockout 2004-2005 season. The league used pressure lever by reporting 2003-2004 financial reports stating the operating revenues of $1.9 billion and losses of $273 million. It also stated that 75% of the revenues were incurred as player’s cost ($1.4 billion). This was done to make the union realize that they are the main reason behind their losses. Since 1995, salaries increased to 240% as compared to 160% increase in revenues.

Publicizing the results of the fan poll was also a pressure lever and an attempt to get support from fans. Theresults showed the fans’ concerns about the league’s financial health. It was meant to demonstrate that league’s main concern was economic stability and competitiveness.

2002-2003 season losses of about $3 million hit the wall street journal. Union projected an offer of 5% salary rollback. In counteroffer, league proposed their first salary cap demand by limiting team payrolls but this time it was reduced from average payroll of $44 million to $31 million. No agreement was reached but both offered incentives to eachother.

Union used pressure lever and publicized its mistrust about the losses stated by the league financial reports.

League enlisted support by hiring Arthur Levitt Jr. (former chairman of the Securities and the Exchange Commissioner). He carried out the 2002-2003 URO independent audit to clear out the financial position of the league. It was another way to make their position strong as it was an attempt to enhance their credibility and impartiality.

League played another hardball tactic to pressurize union by writing a letter to Goodenow and modifying additional 19 aspects of the CBA. This pressure lever tactic embittered the union.

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A week before the expiration of the CBA, union offered incentives by making another offer of 5% rollback in salaries, a payroll tax system, changes to rookie salary contract, and revenue sharing but it was rejected because it doesn’t contain salary cap.

League used pressure lever power move by announcing lockout 2004.

Numerous players publically supported the union strategy thus attempted to enlist support from fans and general public through media.

In 2004, union again offered incentives and came up with another proposal that surprised the hockey world by offering 24% salary rollback, a better payroll tax, concessions of rookie salary cap and salary arbitration but no salary cap. The Counter offer was of salary cap, eliminated salary arbitration and restructures of the salary rollback.

In 2005, League again played used pressure lever to threaten the union by the cancelation of the entire season.

Lockout was publically announced by the league and used power move of offering incentives by reaching out to players.Individuals were involved in order to break the deadlock.

On February 14 2005, Daly and Saskin met secretly to alter their negotiation position. Both came up with new proposals but were not accepted by either party. This was a process move where both parties tried to build consensus behind the table but league offered “take it or leave it” with a deadline of 11am the following day. It showed that league had enough of it and after this they will not negotiate further putting a full stop to their discussion. It was a pressure lever power move. There is a limit to each party’s power and position. The conjoint problem faced by both parties is “position entrenchment”. The league made its position clear to union and as well as to public that they will not deal unless until “cost certainty” is included in the agreement. Contrary to it, Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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union positioned itself in a way that no deal will be signed if “cost certainty” is included in the agreement. Both parties were not ready to deviate from their stated positions that lead to the cancellation of the 2004-2005 season.

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4.

What would you do next if you were negotiating on behalf of NHL? What would you

do if you were negotiating on behalf of the NHLPA? What might the two sides consider doing to end the impasse? The main point of concern for NHL was the increasing costs in form of players’ salaries as it impacted the overall economic stability and financial strength of the league. However, the main point of concern for NHLPA was accurate financial information sharing as they believed that the players were undervalued that’s why NHL is hiding actual financials. NHL wanted to implement cost certainty through salary cap and linking salaries to revenue as the overall profits were shrinking. But union believed that NHL is capable of paying high salaries as in actual they are earning more but under-reporting their revenues and over-reporting their losses. Union therefore desired that free market should determine salaries. Although there were various underlying other tangible and intangible issues involved but it was more of a tough distributive bargain on a key resource, money.

If we would have been in place of NHL, we would have done the following. These points are from NHL’s perspective only. Steps to be taken jointly are elaborated in the later part of the analysis:

1.

Propose a salary cap of 44 million so that we would be able to reach a final settlement at

approximately 45 million.

2.

Propose a salary cut of 26%. (24% of salary roll back was offered by NHLPA before the

cancellation of season).

3.

Propose a luxury tax to balance the financial position of top 10 very strong versus the 10

weakest teams.

4.

Restrict the team owners to avoid over bidding of players in order to cut the costs.

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5.

Include a mediator who can take the negotiation forward. Selection of mediator should be

made in consensus with union.

6.

Make an audit team which should in addition to NHL’s representatives should include

union members led by an independent auditor so that union’s trust can be rebuild.

From NHLPA’s perspective, we would have done the following:

1.

Grade the players in terms of their earnings. Grade A players will be those who are

earning higher salaries, Grade B will comprise of medium earning players and Grade C will be those earning low salaries. Propose a salary cap of $47 million which should be divided in with respect to these grades.

2.

No Luxury tax due to the hard salary caps.

3.

Instead of straight up salary cuts, players’ salaries should be artificially slowed over those

three years: first year by 2%, 2nd year by 4% and 3rd year by 6%.

4.

Current rules for player salaries, contract lengths etc would change in accordance with

proposed salary cap.

5.

Minimum salaries should be raised to bring a balance between the high ended teams and

the low ended teams.

Things to be considered jointly by both parties to end the impasse:

All stakeholders involved in this prolonged negotiation put in a lot of efforts, time and resources to reach a mutually acceptable agreement however still the issues were outstanding. After going through the case, following is recommended which both parties can do in order to end the impasse:

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1.

The league and the union should carry on their negotiation even after the cancellation of

their 2005-2005 season. They should adopt a win-win approach (integrative strategy). It means that both parties should have a positive attitude towards each other. They should resolve the conflict in a manner that it is beneficial for both the parties. Both parties should understand their responsibility towards the problems of the Hockey Association. They should be direct, open and flexible in their communication and come up with creative agreements to reach a mutual outcome.

2.

Both parties in order to gain mutually should focus on their interests rather than their

rigid positions. As both parties have different needs and interests, thus issues can be modified to fit in with needs and interests of each party.

3.

To permit some certainty for budgeting and to control cost, some salary cap is needed to

be imposed on the players. Other benchmarks apart from the revenues can be used by the league to obtain the cap. Such as average salaries of other national leagues sports can be used as opening point, then later bonuses and annual salaries can be decided.

4.

The league should be fair and honest in displaying their financial indicators so that the

salaries and other financial issues can be decided accordingly and the element of mistrust is removed from the union side. This can be done through a joint audit team. This team should comprise of both NHL and NHLPA members plus an additional independent auditor to mediate and remove biasness in the audit. In this way the union would be able to know the actual financial position of the league and trust would rebuild.

5.

NHL organization is using political model of behavior to achieve its goals. Political

model focus on many intra-organizational problems that imitates their personal goals. Both league and the union had different goals, interests and values that made them diverged from what is of great interest and substantial for the entire hockey association. They are persistently negotiating CBA for their organization as a whole. Instead they should focus on common goals and negotiate on the terms that will benefit the hockey association and the game itself.

Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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Conflict Management | Project

CONCLUDING REMARKS

The most important thing which both parties should take care of is their relationship. This is not a one-time buying – selling deal. Both parties have to live with each other till hockey is alive in this world. They should do everything to save their relation as it is a lifelong bond.NHL is nothing without hockey players and players stand nowhere if there is no organization who will manage this sport. As in corporate organizations both operational and administrative departments are essential, here also both players and the league are vital.Moreover, they should also realize that due to this war diehard fans of hockey are also suffering for no reason and overall it’s a loss of hockey. So both should try to repair their relationship and create mutual gains situations rather distributive one. This would at the end help both parties and both will be winners.

Negotiating on Thin Ice: The 2004-2005 NHL Dispute (A)

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