Top Tech Company Avoids Million-Dollar Lawsuit/ Settlement With Negotiation Coaching
Severance dispute with former company executive resolved for less than $150,000
Technology Service Provider NDA In Force
- Publically traded company with dozens of Fortune 100 customers
- Annual growth rate of 45-percent
- Annual revenues of nearly $800 million
- Nearly 150,000 customers
Business Benefits Realized
- Reduced an initial severance pay demand from $2.8 million to less than $150,000.
- Set an important precedent and established a fiscally sound policy for future executive severances.
- Avoided a high-profile lawsuit that would have damaged the company’s reputation.
- Resolved the situation to the satisfaction of the former employee, creating a company advocate instead of an adversary.
- Created a new negotiation mentality within the company.
In retrospect, company executives and human resources (HR) managers realized they may have gotten themselves in hot water. They had recently dismissed a top executive for failure to perform just months before hundreds of thousands of dollars of the executive’s stock options vested. They had offered her six months pay – about $110,000 – and knew they were in the right. They even had the performance data to prove it. But the executive was a woman, and there were no women in top leadership positions at the company. And in the past, the company had moved underperformers into other positions rather than releasing them from employment. All in all, it didn’t look good.
The dismissed executive quickly perceived her advantage and struck hard. She threatened legal action and demanded a $2.8 million severance package. Then, she hired a top lawyer to add clout to her demands. The company’s legal and HR teams reacted with panic and fear. They knew this woman would be impressive to a jury, and they took her threats to sue seriously.
Doing some quick calculations, the lawyers estimated a legal battle alone would cost $750,000 – not to mention the damage to the company’s reputation. They recommended she be offered $750,000 in severance pay. HR wanted to offer no less than $1 million. Emotions were running high on both sides.
Before they could react too brashly, the CEO suggested they call the company leaderships negotiation coach and global negotiation expert Jim Camp. The company’s leadership had for the last six years completed millions of dollars in negotiations applying the Camp System of Negotiation and Camp’s coaching, and they recognized this type of expertise was needed to bring this negotiation to a successful resolution.
Applying the System
Once Camp took charge of the negotiation, he saw out-of-control emotions were a serious problem. According to neuroscience and Camp, all decisions are made emotionally. His key to negotiation is recognizing the emotions involved and using the Camp Negotiation System to keep those emotions in check.
To diffuse the emotionally-charged situation, he encouraged the team to consider the importance of setting precedent for similar situations in the future. He also helped the team understand that they were operating under a false sense of urgency, and that the potential lawsuit was still a long way off.
Camp then asked the team to determine a mission and purpose for this negotiation. Together, they established a mission and purpose of giving the former executive the opportunity to discover the opportunity for her to continue her career in the metropolitan area and to keep her family from possibly having to move. Then, they crafted an offer based on comments she had made to HR when she threatened the lawsuit: six months pay plus $20,000 to cover tuition costs she had already paid for her children’s private school, six months of health insurance coverage for her family, career counseling and new job support and the pledge of the CEO to support her future employment.
The next crucial step of the negotiation process was to create vision for the former executive; this would allow her to see the advantages of the package they were offering and help lead her to the decision of accepting the offer. Using a series of and checklists for execution, they presented the offer in a way that would minimize the former employee’s negative emotions and encourage her to move away from the adversarial position she had adopted.
The Remarkable Results
In a decision that stunned company leadership, the former executive accepted the severance package of less than $150,000. By using Camp’s coaching services and the Camp System of Negotiation, they had just saved a minimum of $650,000. In reality, had the team been allowed to pursue their initial strategy, the settlement number would have likely gone much higher or resulted in a lawsuit.
In addition to creating savings, they established an important and fiscally responsible precedent for their company’s future. After this negotiation, the company made this package – six months pay, six months health insurance and reimbursement for any expenses incurred in the expectation of being employed – the standard severance package for company executives.
The rapidly growing company also avoided damage to their reputation. Because they are the largest business in a relatively small city, a lawsuit of this nature would have made headlines and impacted the company’s standing as one of the best places to work in the country. Not only was this negotiation settled outside the legal system, it was also resolved in a way that satisfied the former executive – helping to ensure that she didn’t harm the company’s image by expressing negative opinions to other business leaders.
As a result of this negotiation’s success, the groundwork was laid for future successes. Afterwards, one team member wrote, “Jim, thank you so much for your help with that negotiation. We got it done and we’re all very satisfied with the outcome. You helped us create a vision that led us to a very reasonable position. I also have a case pending where we would appreciate your thoughts – may I call you next week?”