Friday, December 19, 2014

Learing Negotiation from McLaren

Learning Negotiation from McLaren

It was very interesting to watch the moves of McLaren team this year. They had two drivers in the form of former world champion Jenson Button and Kevin Magnussen who was having his first year.

McLaren had already announced that from next year ie. 2015 they are going to use Honda engines. Honda engine is supposed to be on par with the Mercedes engine or even better, if grapevine is to be believed. Honda also wanted to have two good drivers.

So McLaren went on targeting good drivers and finally netted Fernando Alonso who broke off his Ferrari contract two years earlier than expected and signed on the dotted line for McLaren.

When Alonso informed Ferrari that he would like to move away, they immediately approached Sebastian Vettel and he took advantage of his mid year points clause to get out of Red Bull.

Red Bull immediately signed on Daniil Kvyat of their sister team Toro Rosso and announced to the world that Sebastian Vettel is going to Ferrari. This put Alonso under pressure as Ferrari hadn't announced the signing of Vettel or departure of Alonso.

McLaren too remained tight lipped on their driver lineup. When questions were asked to Eric Boullier, team principal of McLaren that by it may be difficult for Jenson Button to find a competitive drive so late in the season if they don't re-sign him, he said that he is not concerned with it as that is the problem of Jenson Button's management team. All in all it appeared that Eric Boullier as well as Ron Dennis didn't want Jenson Button.

Without having any competitive drives around, Button even contemplated leaving F1 altogether for a drive in a sports car category.

McLaren knew that with a new engine, they will find a lot of challenges integrating it with their car and hence experienced drivers were necessary. Also, Jenson Button was known to give excellent feedback to the engineers. His knack of reading tricky situations like partially drying wet surfaces and making tyre calls are legendary. So McLaren obviously knew that it would be better to have Jenson Button along with Alonso. However, Jenson Button was hired at a huge salary because he was the 2009 World Champion. Clearly McLaren didn't want to pay him that much.

At a time when two teams had folded up from F1, everybody was aware of the financial challenge the companies were facing. The McLaren team also sent out information that they were delaying the news of their driver lineup because they are waiting for some sponsors. If they find enough sponsors then they may hire Button along with Alonso, else they will hire Kevin Magnussen. This also put pressure on Jenson Button and he also made statements that he is not much worried about salary but wants a competitive drive.

After pushing him to the wall, the McLaren team then sat with Button and told them clearly that if only Button would take a massive pay cut, then they will hire him. Else they won't be able to. In the negotiation when you keep the other party hanging and when their options diminish, they are likely to succumb. So same thing happened here and Jenson Button agreed to McLaren to sign on the contract at 8 million salary.

If Jenson would not have signed, then McLaren would have said that they offered Button a contract but he declined. So they would have put the blame on him. McLaren though are paying about three times more to Fernando Alonso. Though one knows that McLaren is greedy. However, in tough financial environment they don't care about ethics and just want to get the contract at their own terms.

Normally if you hire an employee in such situations, he/she is going to be demotivated. However, McLaren know that Jenson Button would love to beat Fernando Alonso to prove himself. So motivation will not be a problem even though Button would be angry. Also at the age of 35, Button doesn't have many more years left. It is a cruel world indeed. However, for all practical purposes one can learn negotiation from McLaren team.