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Seven Negotiation Lessons from Amazon’s Hq Disaster in Queens

16 March 2019

From Working Knowledge, The Harvard Business School:

As Amazon’s stunning pullout from New York fades into the news archives, its potent lessons for business negotiators risk being lost. Highly promising deals in diffuse multiparty settings with many potential spoilers, like Amazon’s planned headquarters in Queens, often collapse as a result of negotiating too narrowly with those who have formal power and authority. Negotiation experts have a patriarchal name for a version of this classic—and avoidable—mistake: Decide-Announce-Defend or DAD.

Along with gaining the full-throated support of New York Mayor Bill de Blasio and Governor Andrew Cuomo, Amazon officials understandably figured that the prize it offered New Yorkers would sell itself: 25,000+ jobs paying in excess of $100,000 each with all the ancillary economic benefits. Decide (on Long Island City, Queens), Announce (the choice), and Defend (from attacks) … and, if you’re still standing, you win.

Except, Amazon decided, announced, defended, lost, and abruptly pulled out, blindsiding virtually everyone involved. As New York’s chief negotiator for the deal mourned, this “was supposed to have been a coronation but instead was more like a coronary.”

. . . .

This surprisingly common result is why an “A” is often appended to DAD: “DADA” means Decide-Announce-Defend-Abandon. An apparently irresistible deal blessed by the top authorities runs aground on unanticipated opposition. The trail of such failed deals is long;

. . . .

For instance, consider the award of the 2024 Olympics to Boston over Los Angeles, San Francisco, and Washington DC. Boston’s successful bid was driven by the support of the state’s governor, Boston’s mayor, and many of its most influential citizens. Yet a small group of opponents catalyzed a local movement that, despite being outspent 1,500 to one by the bid’s boosters, ultimately caused the city to back out in 2015.

. . . .

The frequent failures of DAD-style negotiation have led some project advocates to seek consensus among all stakeholders. In a city like Queens, riven with many factions and political agendas, Amazon would never have reached full consensus and didn’t try. Requiring full consensus in a multiparty deal makes you hostage to the most extreme or reluctant party. When you can anticipate unconditional opponents, or skeptics with diverse agendas who may opportunistically band together, don’t hand them blocking power.

So let’s assume that, with many contenders, Amazon had powerful reasons to choose New York. Comparative advantages presumably ranged from a large and highly educated employee pool to big incentives and to local entertainment options galore—not to mention that, once Amazon’s new headquarters were built, much of New York’s congressional delegation could be counted on for political support . . . in addition to that from Washington State and elected officials from its other new headquarters in Virginia. Apart from avoiding the DAD and full consensus traps, what could Amazon have done to retain these New York advantages? What are the broader lessons for those facing similarly challenging negotiations?

. . . .

The goal should be to build “sufficient consensus” for a “winning coalition” in spite of potential blockers. This means earning enough support among enough of the right parties to gain agreement on your proposal and ensure successful implementation. Building such a sustainable winning coalition involves systematic steps that my colleague David Lax and I call a “negotiation campaign”.

  • In a complex, multiparty setting, don’t take victory for granted, ever. Today, social media can quickly amplify the views of even a few vocal opponents, giving voice to latent negative concerns of many otherwise passive groups. As Amazon learned, an apparent “movement” can seemingly spring up from nowhere. It can rapidly gain traction, surprising and thwarting the confident protagonists of an apparently popular project.

. . . .

  • Identify and nurture potential allies before you need them. To Amazon, the supporters seemed self-evident; after all, more than 200 cities desperately vied for the prize it bestowed on New York. Yet well-organized opponents overcame the unorganized supporters of the deal. Old-school reliance on the mayor and governor, powerful power brokers, proved unable to mobilize sufficient backing. Beyond cultivating elite support, a project sponsor should systematically work with community groups and local leaders so they feel intense personal and tangible stakes in the proposal. Detailed preliminary discussions with construction trades should make the huge amount of new work crystal clear. Early “job fairs” with sample applications could help persuade lower-skilled groups that thousands of new support jobs and training opportunities would be forthcoming along with the $100,000+ job bonanza for high-skilled workers. Community groups looking for improved parks, sidewalks, and local amenities could be nurtured at relatively low cost with “good neighbor” credible commitments. Failing to send CEO Jeff Bezos to New York to stroke the egos of local supportive politicians and learn firsthand of any qualms was a missed opportunity. Having identified and nurtured supporters, they can be activated in favor of your project if and as needed.

. . . .

  • Remember that negotiation does not end with a “yes,” but requires enough ongoing support for implementation and sustainability. The kind of negotiation campaign that I’ve sketched is designed to build a sufficient, sustainable “winning coalition” on behalf of an initiative like Amazon’s. But as this experience shows, an initial “yes” is only the entry point to a successful project, which requires sustained support for long-term success.

Link to the rest at Working Knowledge

At a recent lunch with a group of attorney friends, the discussion turned to negotiation successes and failures.

PG was reminded of an interest in Negotiations Studies from several years ago and did some online research to follow up with his lunch companions on a couple of discussion points.

Negotiation Studies is a serious field for academic research. The topic often overlaps both business and law schools since graduates of both will be involved in negotiations during their careers.

All business people, including authors, are likely to be involved in more than one business negotiation in connection with their work, so PG will drop a negotiation item into TPV from time to time. Publishing contracts immediately leap to mind. However, negotiated agreements with cover artists, editors and book designers are also possibilities for indie authors.

One of the basic ideas in Negotiation Studies is that a successful negotiation leads to a successful conclusion for both parties and, where applicable, a mutually-beneficial long-term business relationship. Seeking a win-win resolution is the optimum result for the large majority of business negotiations. The disastrous end of the Amazon/New York HQ2 negotiations results, as the OP indicates, at least in part, a failure to apply good negotiation practices and principles to putting the deal together.

One example of a poor negotiation outcome, at least in the United States, often involves negotiating the price and terms for buying a new or used automobile.

Shoppers worry about being subjected to high-pressure negotiation tactics, paying more than they should have paid for the vehicle, etc., etc. There are certainly enough short-sighted auto salespersons to provide some basis for that fear.

However, if the auto dealer or salesperson considers the lifetime value of a satisfied customer, it’s clear that being on the winning side of a zero-sum psychological manipulation sales session is not the best outcome.

One of the largest expense items for a great many businesses, including auto dealers, is attracting customers. Billboards, television commercials, radio ads, direct mail, the cost of an attractive dealership facility in a good location, etc., etc., are an enormous expenditure focused on having individuals who are interested in purchasing an automobile come to the dealership (and not go to a competing dealership).

If a customer has a positive car-buying experience, all sorts of additional benefits accrue to the dealership. When the time comes for the customer to purchase another automobile, are they more likely to return to a dealer (and individual salesperson) that provided them with a good acquisition experience than they are to take a chance on having a poor experience by patronizing an unknown dealer?

When it’s time to service their vehicle, is a satisfied customer more or less likely to bring the vehicle back to the dealership that treated them fairly (and, with a smart dealer, provides a positive service experience)?

If a friend or relative mentions they would like to buy a new car, is the satisfied customer more likely to recommend the dealer and salesperson who provided a good purchase experience and sold the vehicle at a fair price? Other than the purchase of a home, an automobile is likely to be the most expensive purchase a resident of the US (and perhaps other countries as well) will make during their lifetime. An auto dealer that makes the purchase process feel fair and easy is providing a service to the customer by reducing the anxiety that might otherwise accompany the expenditure of so much money.

Bringing the discussion back to authors and books, PG suggests the negative experiences that accompany some of the take-it-or-leave-it negotiation tactics many publishers employ do not redound to the publishers’ benefit over the long term. Effectively requiring that an author who feels competent to negotiate her/his own publishing contract to retain and pay for a literary agent is another poor business practice in the field.

Amazon, Draft2Digital, Smashwords, etc., are a delightful change for many authors who were previously published traditionally. Choosing their own editor and cover designer is another relief for authors who experienced revolving door editors and cover designs that were obviously created by the lowest bidder.

Legal Stuff, Negotiation

21 Comments to “Seven Negotiation Lessons from Amazon’s Hq Disaster in Queens”

  1. ““DADA” means Decide-Announce-Defend-Abandon.”

    Or maybe DADD for Decide-Announce-Defend-Divert.

    As others have pointed out NYC wasn’t on the first list, it only made the list by promising some great concessions.

    “Identify and nurture potential allies before you need them.”

    Doesn’t really come into play here as NYC as a pick was late in the picking. The real question was whether those in NYC wanting Amazon could overpower the ADS types that didn’t. Big surprise to nobody when Amazon decided that even the concessions weren’t enough to make NYC worth the trouble.

    I still think this was a part of Jeff’s ‘Two new HQs’, the worry that something like the NYC-ADS would queer the deal.

    • DADA fits NYC to a T.
      And not just the acronym.
      They are very much DADAists.

      • The winner of the internets for the day… Wish I had thought of that one.

        Excellent, sir! And so true.

        • It helps to be watching DOOM PATROL.
          (The bad guy playedby Alan Tudyk –a reason to watch right tbere–ran a team of villains called the Brotherhood of DADA. Surprisingly, NYC is well on its way to assembling one.)

          Awesome show that could never exist without streaming services.
          Weirdest coherent show on tv.

      • @ Felix

        Actually, in this case, it’s not DADA, but “нет, нет”!

  2. I’ll always wonder whether Amazon saw something potentially disastrous happening beyond the obvious, and used the opposition as an excuse to rescind their decision.

    Certain cities are already clogged, and their environs expensive, therefor providing a lower quality of life; with climate change, this is exacerbated. New York, lovely and fascinating and vibrant as it is, is not a place I’d live in – unless you can afford expensive Manhattan accommodations, a lot of time is spent on commuting. And the minute you are not healthy and mobile, you’ll find it extremely difficult to cope with city streets.

    It was an expensive deal to negotiate, so abandoning it had to be cheaper than staying, in some convoluted calculus of the deal.

    Just curious.

    • It’s possible, after all, Jeff didn’t make it this far by being an idiot. So, what was the game he was playing?

  3. For instance, consider the award of the 2024 Olympics to Boston over Los Angeles, San Francisco, and Washington DC. Boston’s successful bid was driven by the support of the state’s governor, Boston’s mayor, and many of its most influential citizens.

    The idea of adding the Olympics to the already horrific congestion of the Boston area is hardly my idea of a “victory.” I pity the poor commuters of 2024.

  4. PG suggests the negative experiences that accompany some of the take-it-or-leave-it negotiation tactics many publishers employ do not redound to the publishers’ benefit over the long term.

    I’d say that is the case for one area of the supply/demand curves. And that’s a segment in which many business negotiations take place, but books is not one of those businesses.

    The take-it-or-leave-it approach works well when there is a large supply of close substitutes. That’s the case with most authors. For each publishing slot a publisher has, he has choice of many close substitutes to fill that slot.

    For authors the publisher wants because there are no close substitutes, it’s an entirely different situation, and both parties can move to a win/win.

    When supply is so large that one party has no inclination to negotiate, and the other has no market power, take-it-or-leave-it rules.

  5. Except, Amazon decided, announced, defended, lost, and abruptly pulled out, blindsiding virtually everyone involved. As New York’s chief negotiator for the deal mourned, this “was supposed to have been a coronation but instead was more like a coronary.”

    Am I the only one who’s thinking it wasn’t Amazon who lost?

    Now, I didn’t go to Harvard and I don’t pretend to be a business guru, but in my limited experience, it’s normal to negotiate with those who have formal power and authority. Wasn’t it up to de Blasio and Cuomo to make sure the parties on the NY side of the deal were in agreement, not Amazon?

    • So let’s assume that, with many contenders, Amazon had powerful reasons to choose New York.

      That’s a reasonable assumption to explore. But the author explores only one aspect of the story. He doesn’t consider powerful reasons for choosing other places. We don’t know what Amazon’s internal evaluations show.

      So, I agree. We don’t know if Amazon lost.

      However, I think we do know that lots of people in New York lost. It’s difficult to see who won, and what they won. Did the NY negotiators think they were so much better than anyone else that Amazon had no other attractive choices?

      When the negotiations with Amazon were complete, why did NY negotiators neglect negotiating with their own people? Why didn’t they explain the deal? Why didn’t they sell it? Why did they leave an impression that NY would actually write a check to Amazon? Take money from other vital services and give it to Amazon? Why did they give the opposition all the ammunition and advantage?

      After Amazon decided to lave NY, the anti-Amazon people complained that Amazon didn’t dialog with them, and didn’t engage with them. The lesson here is that Amazon didn’t have to. They had alternatives. Probably powerful ones.

      The most powerful lesson here is one of colossal government incompetence.

  6. Stephen Kolcow, jr

    I think one of the big reasons, if not the biggest reason, was the call to force Amazon to unionize by labor activists. That would be the real deal killer. Amazon has been resisting unions for years.

    The troubles in NYC have not derailed plans for an Amazon warehouse in my area of upstate NY outside the capital of Albany.

    https://www.bizjournals.com/albany/news/2019/02/14/amazon-distribution-center-in-schodack-on-track.html

    The need for an East coast HQ, plus the warehouse in Schodack, plus what I have read elsewhere (and here on TPV?) about Amazon working on their own delivery capability all make me wonder if their goal is to be able to deliver to major cities within a day or two.

    • It is.
      They want to do same day delivery as cheaply as possible inas many cities as possible. They’ve been working on it for a couple years now.
      It wasn’t a factor in HQ2, though.

      Mostly it was tbat Amazon is getting too big for a reasonable span of control under the old structure. The needs for HQ2 now seems to be mostly about time zone differences. Once the set up shop in the empty office space in Arlington the biggest driver goes away. The rest they can work gradually.

    • If you have the population density, Amazon will deliver within a day even if you don’t ask them to. My California neighborhood is crawling with Amazon trucks and gig drivers who are constantly leaving nearby fulfillment centers and dropping stuff off. Those drivers have more time flexibility than UPS or USPS. For example, a teacher can get out of school at 3, pick up a trunkload of packages and deliver them in a few hours. The teacher gets some extra after-school cash, and Amazon gets a same-day pickup/delivery window that the established services can’t offer. If it’s not yet like that in NY, it will be.

  7. Did you just blame Amazon for this? Wow. ADS at its best. There is one person to blame for NY’s loss, and it ain’t Jeff Bezos.

  8. Seven Negotiating Lessons?

    I look at this Charlie-Foxtrot and I see only one: Do not do business with New York Mayor Bill de Blasio. He has no balls and his word means nothing.

    • I’m not sure it’s fair to blame him. The lesson might be more that NYC is more a collection of wild boars, and even if a few of them are friendly, there’s a bunch of others looking to rip your legs open.

  9. Amazon is I think a winner. They discovered that having reached an agreement the other party could not deliver. Instead they faced a likely endless series of demands and further negotiations with all sorts of diverse interests. They found this in time to pull out, which is what they did. And New York and some of its less well off citizens in particular are much the worse for it.

    • The cost of going to NY kept rising as opposition grew. This could easily have tipped the scales in favor of the other two sates.

  10. Over on the article, they are assuming there were reasons beyond the deal NY was offering for Amazon to go there. I don’t think there was. I think NY had to offer such an outrageously good deal to overcome all the crap Amazon knew they would have to go through. No one needs to offer Amazon 3 billion in tax credits to get them to move there, they just have to not be New York.

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