When people are planning to negotiate salary, I frequently see that they are given advice like "never be the first to say a number." While this is frequently correct, there are many other situations in which you are leaving a lot of money on the table if you let the hiring company establish a salary range. Why is this, and which is which?
We would be remiss if we didn't pause to discuss the psychological concept of anchoring here. Anchoring is our tendency to be "anchored" to the first number when making decisions. A simple example: Lets say I have an apple I want to sell you. I'm willing to part with my apple for a minimum of $5, but I'd really prefer to get more. For your part, you're willing to pay up to $10, but you'd really rather pay as little as possible. Now, let's say I speak first and I set my price at $12, because I'd really like to get at least $10, so I bumped it up a little bit. What happens next? We negotiate back and forth - you probably offer 8, I counter with 11, and we settle on $10. But what if you had spoken first and offered $3? We certainly would have ended up with a lower settlement. Anyone who has (like I have) been fleeced by a street vendor remembers this lesson rather ruefully - but we don't always think to apply it to our salary negotiations.
This effect is often subtle and very hard to avoid - in one classic study, participants wrote down the last two digits of their social security numbers, then bid on items. People who had written down bigger numbers made bids that were up to twice as high as people who had written down lower numbers - even though on the face, the numbers shouldn't be linked at all.
This is why it can often be so powerful to be the one to set the range. But there are other situations in which it doesn't work at all - usually, in situations where you badly want a settlement, but don't have enough information on what might be acceptable to the other party.
Every negotiation has a bargaining zone - the zone where my interests and your interests overlap. In the apple example above, our bargaining zone was between $5 and $10 - any price between that range is acceptable to both parties. But what if I was selling an apple and had absolutely no idea what you might pay for it? In that case, it might make sense for me to let you speak first and work from there - especially if I would take almost any price for the apple. That way, at the very least, I know that we can make a deal.
The goal, then, is to determine to the extent possible what your negotiating partner's bargaining zone is. We do this by identifying their walk-away point - the point at which the cost is too high and they would rather do something else instead of make a deal. This is when you start searching on glassdoor, indeed, and all the other salary websites to try to figure out what the average market pay for your position is. Then you can anchor the negotiation by asking for a high, but not unreasonable salary.
What else can you do? Try to figure out what that "something else" is that a company would rather do than say yes to the deal (sometimes called a 'BATNA,' a "best alternative to a negotiated agreement"). This can come in many forms - on a personal level, your BATNA might be to keep your old car rather than pay a cent over $10,000 for a new one. For a hiring manager in a salary negotiation, it could mean many things:
- Leave the position unfilled and restart the search for candidates
- Promote someone internally to take the role
- Not hire anybody at all
- Hire a candidate who is less qualified, but less expensive
And so on. You can see how trying to identify the best alternative for your negotiating partner can help you guess at what their bargaining zone might be - the worse their alternatives, the more eager they will be to make a deal.
So, you should speak first when:
- you have a rough idea of what your negotiating partner's bargaining zone is, so you are confident that your ask isn't so unreasonable that they leave the table immediately
- you know or suspect that your negotiating partner has bad alternatives to reaching a settlement with you
- you have less to lose - if you miss the mark and your negotiating partner leaves, you aren't going to be out on the street
You should let the hiring company speak first when:
- you have little to no idea of what your negotiating partner's bargaining zone is and you worry that your ask will be so unreasonable that they will leave the table immediately
- you know or suspect that your negotiating partner has good alternatives to reaching a settlement with you, so you want to be sure that the settlement is acceptable
- you have more to lose - you badly need this job and even a bad agreement (for you) is better than no agreement
Submitted May 07, 2019 at 03:48PM by conotocaurius http://bit.ly/2H6WmB4
