Splitting the difference is a time-honored and often successful negotiation strategy. But, according to Roger Dawson, author of Secrets of Power Negotiating, the real rule is that one never offer to split the difference oneself, but should always encourage the other person to offer to split the difference. “Don’t fall into the trap of thinking that splitting the difference is [always] the fair thing to do.” Rather, “by getting [the other side] to offer to split the difference, you put them in a position of suggesting the compromise. Then you can reluctantly agree to their proposal, making them feel that they won.”
The technique seemed to work during the last-minute time extension period in the recent Johan Santana-New York Mets talks that saw the two-time Cy Young winner become the highest paid pitcher in history. The talks were unusual in that the client (Santana) was requested to be a part of the negotations along with his agent (although unlike the A-Rod talks, the agent was allowed to stay in the room). Per the New York Times:
Both sides had yielded considerable ground since negotiations began: The Mets signed off on six years, and [agent Peter] Greenberg and Santana caved from their initial demands of a seven-year extension. But it was getting late, and they were $5 million apart. This time, neither side was willing to budge.
At the Mets’ request, [Santana] had flown to New York from his home in Florida, and was sitting in a room with Greenberg, and the Mets’ senior executive vice president, Jeff Wilpon.
Rather than negotiate an extension to Santana’s old contract, which would have paid him $13.25 million for 2008, the two sides decided to draw up a new contract. They settled on the length of the deal Thursday, but both sides said they remained far apart on the money.
Mets’ GM Omar Minaya and Tony Bernazard, the team’s vice president for development, pushed for Santana’s face-to-face involvement, and he told the Mets he wanted $140 million, $5 million more than they were willing to pay and $12 million more than the previous offer.
They split the difference, deciding on $137.5 million.
The Mets could wind up paying Santana as much as $157 million if the $25 million option for 2014 is exercised or vested. That option, which was added Friday, can vest and become a player option if Santana either throws 215 innings in 2013 or averages 210 innings over the last two or three years and is on the active roster in September 2013. Or, it kicks in if he wins one Cy Young award while finishing in the top three in another year, or if he finishes in the top three in three years. There is no signing bonus, but Santana will be paid $19 million this year, $20 million in 2009, $21 million in 2010, $22.5 million in 2011, $24 million in 2012 and $25.5 million in 2013, his last guaranteed year. Included is a $5.5 million buyout if the option does not vest.
What’s odd about the report is that it seems Santana’s appearance only caused the sides to agree to split the difference. Was it really necessary that he fly to New York? Did his presence pressure Greenberg to capitulate? Does it matter, since presumably Santana was fine with the compromise? Anyway, the amount ceded by Greenberg is nothing compared to the option that could vest. But even if that option doesn’t materialize, the Mets could be on the hook for a considerable sum if Santana’s arm deteriorates and the triggers events never happen. It’s speculated, for example, that the Mets can probably only get a three or four year disability insurance package on Santana, meaning that the last few years of the deal could be quite costly.