There is one word. Naiveté. Amazon thought that the people they negotiated with actually had the power to make an agreement. And on New York’s side: 1) the leaders who negotiated the deal, thought they could negotiate a deal in private; and 2) the other leaders (the ones who were not involved in the negotiation) in New York thought that Amazon ought to choose a deal that is less than the best they could (and did, in fact) negotiate in good faith.
So, there is plenty of blame to go around. But I believe that the political leaders in New York should bear most of the blame. Let’s start with the leaders who made the deal. They should have known that making deals in secret would generate a backlash (fiercer than the circumstances of the actual deal would justify) from those who weren’t involved—because they weren’t involved. Getting all of the interested parties involved is change management 101 and the people in charge of the negotiation dropped the ball.
Make no mistake about it, I realize that it might not have been practical for everyone to participate in the actual talks. That is why guidelines for such negotiations need to be laid out prior to the beginning of talks. And, as I have pointed out in my previous post, the guidelines should be part of a bigger plan which provides context and dare I say a vision upon which negotiations can be driven. Having a well-formed plan (one that has been vetted by all the stakeholders in advance) provides the foundation for substantive negotiations whose agreements will hold up over time.
Now let’s get to the progressive (their term not mine) politicians who have criticized Amazon for negotiating the best deal that they could from the cities they identified as potential candidates for their HQ2. They are naïve in believing that any business isn’t going to locate in a place that gives them the best advantage. Tax rates are just one of many criteria that Amazon (or any other company) will take into consideration when deciding on where to locate. The cost of doing business in a location which includes wages (which is affected by cost of living) and the community’s attitude toward business) is a major factor in a businesses decision about where to locate. But, other considerations (the availability of a properly skilled workforce or the robust supply chain necessary to support the business) are important.
What happened here is an excellent example of a theme laid out in my previous post that leaders of communities/organizations who want to win deals need to lay the groundwork for success. In New York’s case that would have been making sure that they struck a deal that was within limits agreed to in advance by those affected by the deal. This would include (very importantly in this case) what kinds of tax breaks might be provided and concessions that the city might demand in exchange for making the City an attractive place for Amazon to locate.
And, while businesses definitely have a responsibility to the community, they also have a responsibility to their shareholders. Political leaders who don’t understand this are bound to lose deals that are good for the people they represent. This doesn’t mean that all deals are good deals and politicians with well formed plans (that contemplate what is good for the community) will provide guidance, i.e. when to say yes and when to walk away from a deal.
Finally, both Amazon and the politicians who negotiated the deal did an awful job of communicating the terms of the deal (once again, a rookie failure for any change management program) making it easier for those opposed to the deal to achieve the objectives and put the kibosh on the deal.
This deal got as far as it did because New York city is a very attractive place for a business to locate and because New York’s leadership short-circuited the process—allowing a flawed deal to be agreed. It might have been successful if the players had done their homework in advance and had a plan.
— you can find this (days earlier) and other posts at www.niden.com
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