PROGRAM ON NEGOTIATION

AT HARVARD LAW SCHOOL AN INTER-UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION

SALLY SOPRANO I
TEACHING NOTES Sally Soprano I involves a salary negotiation between an opera singer and an opera company. OVERVIEW Sally Soprano is a distinguished older soprano who has not had a lead role in two years. The Lyric Opera has a production of Norma opening in three weeks, and the soprano who had been engaged to sing the title role has developed a condition requiring surgery before the performance. The Lyric is eager to hire Sally, and the trustees have authorized the business manager to offer up to $45,000 for the lead. Naturally, the Lyric, which is a not-for-profit organization, would like the salary to be lower, if possible. The original soprano hired for the lead was to have been paid $30,000, and the rather inexperienced secondary soprano is being paid $14,000. (Industry practice is that lead roles receive about twice the amount received by secondary role singers.) Four years ago, at the height of her career, Sally received $22,000 for the lead role, but inflation and an increase in operas popularity have nearly doubled the salary scale since then. Sally desperately wants this role, which could give her a chance at a forthcoming television special. She would be willing to sing the part for nothing, except for the impact on future engagements and reputation. Her salaries for secondary roles over the last two years have ranged from $10,000 to $18,000; more than a year ago she received $12,500 for singing the secondary role in Norma at the Lyric. Last year, an inexperienced soprano who sang the lead role is rumored to have been paid more than $24,000. MECHANICS Time Required: 20 - 60 minutes: preparation (preferably outside of class) 20 - 35 minutes: negotiation 45 - 60 minutes: debriefing 2 people Confidential Instructions for Sallys Agent Confidential Instructions for Lyric Operas Business Manager

Group Size: Materials:

These notes were written by the Harvard Negotiation Project. The exercise was written by Norbert Jacker and Mark Gordon. Copies are available at reasonable cost from the Program on Negotiation Clearinghouse, online at www.pon.org or by telephone at 800-258-4406. This case may not be reproduced, revised or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation at Harvard Law School, 518 Pound Hall, Cambridge, MA 02138. Telephone: 617-495-1684, Fax: 617495-7818. Please help to preserve the usefulness of this case by keeping it confidential. The original case is copyright 1979 by Professor Norbert S. Jacker. New material copyright 1982, 1985, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

PROCEDURE 1. Distribute roles before class and ask participants to prepare individually in advance of the negotiation. (This case can be prepared in class in about 20 to 30 minutes. However, the shorter the preparation time allowed, the more likely that participants will resort to positional bargaining.) 2. In class, divide participants into teams of two and allow 20 to 30 minutes for them to negotiate. You may want to review the roles with the Lyric Operas business managers and Sally Sopranos agents separately before the negotiation. 3. Collect the outcomes of the negotiating groups for use in the debriefing. Outcomes include not only the salary, but perks, intangibles, side agreements (e.g., for advertising), and an assessment of the quality of the working relationship. DEBRIEFING When the outcomes of the negotiating groups are displayed to the class, the wide range in possible outcomes for this negotiation will be apparent. The following questions may be used as a basis for class discussion. 1) Strategy and BATNA a) What things might you do if you do not reach an agreement at the bargaining table? b) What strategies did participants use in each role? c) What is your Best Alternative to a Negotiated Agreement (BATNA)? d) What is the value of the BATNA in terms of the currencies that will be on the table in the negotiation, e.g., dollars, publicity, risk, etc.? e) What is the price at which you walk away from the negotiation? The bargaining zone for Sallys salary in this simulation ranges from zero to $45,000. The first step in preparing to negotiate is for each party to determine his or her BATNA. Each should know exactly what it will do if no agreement is reached. The other sides BATNA should also be estimated. Once you have estimated your BATNA, you may wish to consider the minimum (or maximum) salary and other conditions that would be of equal utility to your client. That package is the reservation price or reservation value. Having an estimate of ones own and the other sides BATNAs provides a reference point for evaluating offers and gives every player more power at the negotiating table. Options can be evaluated more critically, and parties can be clearer about what they need to reach agreement. f) g) Did you think your BATNA was stronger or weaker than the other sides? What can each side do to improve its BATNA?

Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

Some people have a curious reaction to this game. They feel they should accept less for their client because their clients alternatives are poor. This feeling is independent of the fact that the other party is unaware of their poor BATNA, and that they are unaware of the relative strength or weakness of the other partys BATNA. A poor BATNA may justify being more risk-averse, but this does not necessarily mean one must ask for less. Attention would be paid to the effect of a poor (or good) BATNA on ones negotiation style and strategy. 2) Standards and Criteria a) (To a pair of negotiators): You settled on a price of $X. Why? Where did that number come from? Criteria or standards for evaluating proposed options should be objective, that is, external to the will of either party, so each feels its interests are being protected. Such criteria can be principles that the parties agree should govern the outcome, such as fairness or efficiency. At times, the objectivity is ensured by outside expertise. The objective criteria themselves can be the subject of much negotiation. An agreement based on such criteria can free up the parties to invent options more creatively, knowing that the final evaluation will exclude those that do not meet the criteria agreed upon. In this instance, there are many standards or criteria upon which to base an outcome. A listing of these standards is supplied in Appendix A. b) Which standards seemed more persuasive? Why? One challenge in this case is the availability of a broad range of external standards. Not all standards are equally persuasive. In general, those standards that fit this situation more closely (e.g., this role, this opera company, this year), are more persuasive than those more general in nature (e.g., general inflation rate in opera salaries over four years). While no one standard is the most fair, open-minded negotiators may be able to settle on an appropriate range of fairness. Once thats done, they may split the difference or try to invent new options that add value to one side at little or no cost to the other. 3) Interests and Creative Options a) What non-monetary interests does each side have? What monetary interests do they have that go beyond this particular negotiation? How did you talk about each sides interests? b) What options, other than straight salary, did you explore? This situation allows for the creation of various options separate from salary that could maximize joint gains for the parties. (See Appendix B.) While this game can be negotiated in a very distributive manner, by focusing only on the salary issue, there is ample room for integrative bargaining. Fisher and Ury, in their book, Getting to YES, distinguish between interests, which are the underlying concerns of each party, and positions, which are the stands, or positions, taken by each party on the issues being negotiated. They argue that by focusing on interests rather than positions, parties can engage in integrative bargaining and find creative ways to make all parties
Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

to the negotiation better off. Positional bargaining occurs when parties do not focus on interests. In positional bargaining, each party typically identifies a bottom line, an opening, and a fall-back before negotiation begins. After the opening position is offered, each party makes small concessions, based on their fall-back strategy. Concessions are made grudgingly, until a compromise position is found or until the parties reach an impasse. This type of bargaining builds little trust between the parties, as there is no opportunity to develop a relationship and no incentive to explore each others interests. The result is a process that moves backward from an opening position, rather than forward toward a creative outcome. Most distributive bargaining follows this positional approach. Focusing on interests compels the parties to listen carefully to each other to discover what each believes is really important. Interests define the problem in a way that allows for collaboration and creativity in fashioning a solution. The endeavor becomes one of joint problem-solving, rather than adversarial positioning. The parties can explore possibilities for joint gains and tradeoffs, resulting in a positive-sum rather than a zero-sum agreement. In order to explore the interests of parties at the table, the negotiation process should include the opportunity to brainstorm possible approaches to problems without the commitment to options proposed by either party. This encourages creativity and joint problem-solving essential to integrative bargaining. 4) Agency Issues a) What was the nature of the commitment you gave to your client? b) Was it final and binding? c) Was it subject to client approval? d) Was it discussed explicitly or just assumed? Given that the negotiator is an agent, questions may arise as to the scope of the authority of the agent and the role of the principal in the negotiation. Generally, the principal would be present if there is a need for education of the principal or for reality-checking. Many clients feel anxious during the negotiation and find it difficult to hold firm where appropriate. Whatever the authority, in most cases the agent would wish to reserve final decisions for the client and to allow time to consider the proposed agreement. This does not mean the agents cannot or should not agree on a recommended settlement, which would not be renegotiated without new information. CONCLUSION This case offers participants insight into what they believe constitutes success in a negotiation. Is it winning by doing better than the other side? Or is it achieving an objectively good outcome
Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

for both parties? Some participants will not settle this case, although that is against the interests of both clients. The question, Would more information about the other sides BATNA and interests have made this case easier or more difficult to negotiate? may reveal how participants define success in a negotiation. Collaborative problem-solvers tend to say that more information would have made it easier to negotiate a good outcome, because it is easier to maximize joint gains and to decide on an appropriate salary standard when there is full information. Those who say it would be harder may be out to win the negotiation; they fear that revealing their BATNA may weaken them and that the negotiation will deadlock with each side trying to extract the last dollar from the other. [Special note: This issue can be tested by following-up the Sally Soprano I debrief with negotiation of Sally Soprano II, also available from the PON Clearinghouse. The facts are the same as in Sally Soprano I, except that as a result of a discussion between Sally and the Lyric Operas artistic director, all available information is known by both sides.]

Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

Appendix A: SOME POSSIBLE CRITERIA FOR ESTABLISHING A SALARY

Below are some of the possible standards by which one can establish a salary for Sally for her performance of Norma. Note: The first and the last are not independent or objective standards.
$45,000 $45,000 what Lyric is willing to pay to get her to sing last title role in Norma x 2 (for inflation in opera salaries) + $1,000 (because time is short) last title role x 2 (for inflation in opera salaries) same premium (2.75 x secondary) Sally received 4 years ago when she sang lead best recent secondary role x 2 (for lead) + some adjustment for inflation what Lyric paid last years lead + 25% for inflation Sallys last secondary role with the Lyric x 2 (for lead) + 25% (one years inflation in opera salaries) what Lyric would have paid Renata Risingstar, the soprano originally cast as Norma last years secondary role x 2 (for lead) + 25% (one years inflation in opera salaries) less than Lyric would have paid the other singer because Lyric preferred her to Sally current secondary role x 2 (for lead) Sallys lowest-paying secondary role in the past 2 years x 2 (for lead) + 25% (inflation) what Lyric paid Sally last year (secondary role) x 2 (for lead) Sallys lowest-paying secondary role in the last two years x 2 (for lead) Sallys highest-paying recent (secondary) role lowest payment Sally has received in the last 2 years + 50% (inflation) what Lyric paid Sally last year for secondary role lowest payment Sally has received in the last 2 years what Sally said shed be willing to accept for the lead role in Norma

$44,000 $38,500 $36,000+ $31,250 $31,250

$30,000

$30,000

$29,999

$28,000 $25,000

$25,000 $20,000 $18,000 $15,000 $12,500 $10,000 $0

Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

Appendix B: ILLUSTRATIVE COMPONENTS OF AGREEMENTS

Percentage of gate to go to Sally: X percent of excess over average gross ticket sales X percent of excess over last five operas put on by Lyric X percent of ticket revenues after Sallys name is publicly announced minus average ticket sales in three weeks prior to opening X percent of ticket revenues over Lyrics break-even point After 75 percent of seats sold for a given performance, X percent of ticket revenues if house is 75 to 85 percent full, Y percent of ticket revenues if house is 85 to 95 percent full, and Z percent of ticket revenues if house is 95 to 100 percent full Advertising Lyric agrees to $X advertising budget Lyric agrees to increase existing advertising budget by $X (or X percent) For every three dollars increase in the Lyrics advertising budget, Sally will contribute a dollar to the Lyric (subject to ceiling of $X contribution by Sally) Sally and her agent get input into content of ad campaign Sally gets superstar comeback buildup in Lyrics advertising Superstar perks for Sally: Enormous limo for Sally during entire run of Norma Dressing room and hospitality room, each with big star on door, fully stocked with goodies Dozens of roses to be thrown up on stage by adoring fans (to be planted by Lyric) after each performance Huge opening night gala, complete with show-biz stars, searchlights, and lots of media Other components Sally and Lyric agree to create records and tapes of the performance; they will cut a deal on the royalties and jointly negotiate with the recording company. Sally and Lyric agree to pack first three rows with enthusiastic fans each night to precipitate tumultuous ovations. Sally agrees to conduct master classes at the Lyric, locking in long-term employment for Sally and opera world notoriety for Lyric. Sally agrees to specifically plug the wonderful people at the Lyric on national prime-time TV if the television deal comes through. Lyric agrees to hire the best make-up artist in the business to make Sally appear more youthful and vibrant. Lyric agrees to pay Sally $100,000 for the role (payable over 20 years, so present value is about $20,000). Lyric pays Sally $45,000 and she agrees to contribute half to Lyrics newly established Sally Fund to aid struggling young sopranos.

Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)

SALLY SOPRANO TEACHING NOTES

Sally sings for nothing in charity run of Norma and Lyric contributes all net proceeds to the Sally Fund. Lyric pays Sally $45,000 and she agrees to match dollar for dollar any corporate contributions to the Sally Fund that are raised by the Lyrics business manager. Sally gets an extra $5,000 and agrees to buy any unsold tickets at half the box office price (up to a ceiling of $10,000) and to arrange for distribution of those tickets to students in arts programs, retirement homes, widows, orphans, etc. Lyric flies Sally down to Brazil for a quick face lift.

Original case Copyright 1979 by Professor Norbert S. Jacker. Copyright 1982, 1985, 1986, 1988, 1989, 1990, 1995, 2004 by the President and Fellows of Harvard College. All rights reserved. (Rev. 03/04)