Welcome to the Salary Negotiation Do-It-Yourself guide. I know it will help you find success in your salary negotiation.
Because each person and negotiation is unique, I am going to walk you through salary negotiation principles that you can apply to your situation. I will try and share only the most useful 80-20 principles, so that you can get maximum value and have your greatest success.
I will cover the four negotiations steps and Influence Triggers:
- Information Exchange
- Explicit Bargaining
- Influence Triggers
The guide is still a work in progress. Please submit your email below to be notified when the guide is ready.
First off, I want you to know that you already have what it takes to be a competent negotiator. The same set of communication and cognitive skills that got you to where you are today personally and professionally, are the same tools you can use again in your negotiations. And everyone can improve their skills through self-analysis and practice.
To be good, you must learn to be yourself at the bargaining table. Anxiety hampers our negotiating ability. Hinders ability to think on our feet, narrows our creativity and causes us to seek for simplistic solutions. If you don’t feel comfortable using certain tricks or strategies, they won’t work. While you’re thinking about your tactics, the other side is giving out vital clues and information that you are missing. You don’t need to be tricky. But you need to be alert, and wise. The best negotiators play it straight, ask a lot of questions, listen carefully, and concentrate on what they and the other party are trying to accomplish. The key is to get as much reliable knowledge and information about the situation and other party as possible.
Good negotiators have the following attributes:
- Willingness to prepare – key to success in all negotiations
- High expectations – people who expect more, get more
- Patience to listen
- Commitment to personal integrity – being trustworthy and reliable
2. Bargaining Plan
Preparation is key to negotiation success. The best indicator for successful negotiator is a willingness to prepare. Even spending a few minutes preparing before a negotiation will be helpful.
G. Richard Shell has a great Bargaining Plan template in the appendix of his book “Bargaining for Advantage”, which is a truly excellent negotiation book. I tweaked his template of 10 questions that you should ask yourself as you prepare for a negotiation. He recommends having a separate page for each question so you can add lots of notes. You will see that a lot of the questions you won’t be able to answer fully until you get to the information exchange phase. You can download the template and I will walk you through the 10 questions.
1. Problem Statement
Problem statement: I must negotiate with __________ to solve the following problem: ___________________ (go into detail).
2. Expectations and Decision Makers
- My specific, high expectation is: _______________
- My specific bottom line is: ________________
- Who is the target decision maker?
- Who are the influencers? Should I negotiate with these people first?
High achievement comes from high aims. Research shows that the more specific you vision of what you want and the more committed you are to that vision, the more likely you are to obtain it.
Why a high expectation rather than a goal? Expectations is what you expect to happen. Will feel worse when missing an expectation than a goal. Goals give us direction, but expectations give us weight and conviction to our statements at the bargaining table. We are most animated when we strive to achieve what we feel we justly deserve. The more research we do that confirms our expectations are possible, the stronger our expectations become, which will make us more persuasive. Lyndon Johnson said, “What convinces, is conviction.”
If you’re not sure what is a realistic high expectation for you, wait to fill that out until you do page 6, “Authoritative standards and norms”.
Bottom lines vs. expectations. The human brain has a hard time focusing on multiple things under stress. During negotiations we often hone in on our bottom line. We want instead to hone in on our expectation. Your results will either be just above your bottom line or you expectation. So know what your bottom line is, but focus on your expectation: write it down, discuss it with others, and bring paper with you so you don’t forgot it. Weak expectations are because you are afraid of failing and the feelings that come with it. Don’t let these feelings get in the way.
Story of student who took a photo of himself in Wharton Business School years before he ever attended there. There is power to writing down and visualizing our expectations.
3. Needs and Interests
Underlying needs and interests: mine & theirs: shared, ancillary, or conflicting. (do two columns for mine & theirs).
Negotiations are about people, their goals, needs, and interests. Effective negotiators can see the issues from the other side’s point of view. Try and understand what the other party really wants. The more you know of what the other side wants, the more your leverage can increase. Perhaps the most important skill for negotiators is being able to see shared or complementing interests.
Not easy because we all have biased perceptions, we are competitive, and sometimes the other party is unaware of their real interests, or unable to articulate them.
- What do I lose if there is no deal?
- What steps or alternatives will reduce these losses? (Improving your BATNA – Best Alternative to a Negotiated Agreement)
- If no deal, what will they lose?
- Can I influence their alternatives, or make their status quo worse?
- Does leverage favor you, the other party, or about even? Who has the most to lose overall from no deal?
- For whom is time a factor?
- Can I commit the other party to norms that favor my result?
- Can I form a coalition to improve my position?
Understanding leverage (power to influence others) is key, because even an average negotiator with leverage will do well. These questions will help you see who has the most leverage at any point in time. Leverage is dynamic – it changes as time passes and situations change.
Three types of leverage: positive, negative, and normative. Positive leverage is when you have something the other side wants. Every time you hear “I want” or “I need”, your positive leverage increases. Negative leverage is when you have the power to make the other party worse off. Using this, or even hinting at this type of leverage is dangerous because it can destroy relationships. More powerful than positive leverage because of loss aversion. And lastly normative leverage is based on people’s desires to stay consistent to norms and standards.
In salary negotiation your positive leverage is at its peak when you have an offer, because they have indicated that you are their top choice. Once you accept, all that leverage is gone. You improve your chances for success when you ask for things when your leverage is at its height. Employees asking for a raise could use negative leverage (threats to leave), but doing so risks damaging relationships. It would be rare for an outside employee to have any negative leverage over a hiring manager. Normative leverage in salary negotiations would be to use metrics or salary comparisons that the employer respects to use a fairness argument to get a higher salary.
People with a lot of economic, social, and political power do not always have the most leverage. Leverage is situational. (child has situational power – eating broccoli – they know it is important to you, and you can’t force them to eat it.). You peak situation leverage is after you have a job offer.
Leverage also changes over time. Who is not in a rush and happiest with the status quo? They have the leverage.
Leverage is based on the other party’s perception of the situation, not fact. You have the leverage the other side thinks you have (for the moment).
To increase your leverage, alter the situation (or at least the other side’s perception of the situation) so that you have less to lose, the other side has more to lose, or both by:
- Gain information about what the other side really needs
- Acquiring credible power to make the other side worse off
- Framing your needs under principles and norms that are hard for the other side to walk away from.
- Binding yourself to a course of action that forces the other side to concede
- Improving your BATNA (seeking alternative solutions to your problem that doesn’t require the other party’s cooperation).
- Form a coalition using relationships and shared interests – leverage social proof, gives you better alternatives.
Leverage rules are often reversed in relationship situations (family, co-workers). You would never make threats to walk away or that you have better options elsewhere. Revealing that something is very important to you and are passionate about it is more likely to get you want you want in this situation because you are signally it is important to you and they want to keep the peace. Doing this is a market transaction would cause you to lose all your leverage.
5. Proposal Options
Explore these three options:
- Build on shared interests
- Bridge conflicting interests
- Be creative
6. Standards and Norms
Authoritative standards and norms. Three columns: Mine, Theirs, My Counter-Arguments. List the standards or norms you have. List theirs that correspond to them. List your counter-argument might be. Do you need to make your arguments in front of a sympathetic audience?
Standards and norms are the bread and butter of negotiations (comparable salaries, salary inflation, company policy). People who deviate too far from these norms are seen as unreasonable. Relying on standards and norms use two powerful psychological triggers in humans: consistency and authority. I’ll go more into these two principles later, but we have strong drives to maintain consistency and fairness in our words and deeds and to defer to authority. Negotiating based on authoritative standards and norms leverage these two principles.
Which standards to use? The ones that put your argument in the best light, but especially the ones the other party uses or has used in the past. They respect those and want to be consistent with themselves. Know the standards they like and try to use those. Don’t tear those standards down unless you absolutely have to. Know what the company’s publicly stated goals are use them against them. Don’t argue from your point of view. Argue from their point of view. This is called a consistency trap.
Our Human tendency is to defer to authority. Hiring manager will say their position is “company policy”. Argument wrapped in authority. Push back and defend your position!
Okay, so how do you do the research on what comparable salaries are? I have a spreadsheet that I use when doing this research for clients, which I’ve included as a part of this guide. Let’s open it up and I’ll walk you through how to collect and present the information.
I don’t like to do rigorous research for myself or others until I have a job offer, because you can spend a lot of time researching salaries for jobs you might never be offered. But it is a good idea to do some quick research to see what ballpark other people are making so you can answer the questions about salary ranges well enough to defer the conversation until you’ve been given an actual job offer.
Okay, so here is an example of a document I prepare for my clients. It shows average salaries for comparable jobs from a variety of sources, listed in the order of trustworthiness. [talk about each source and the doc you put together]
To gather these sources, I visit each of the sites and pull together the relevant information onto one spreadsheet. Then the client and I decide which jobs are most relevant to the job you are applying for and come up with an average.
This document may be emailed as part of a counter offer, or shown in person, or just talked about, but the point is, you have reliable information to counter the salary research/ranges the employer is using.
7. Third Party Moves
- Can I use a third party as leverage?
- Can I use a third party as an excuse?
- Can I use a third party as an audience?
- Can I use a third party as a coalition partner?
You can use third parties for various reasons throughout a negotiation. These questions will get you thinking about your options.
8. Situation and Strategy Analysis
- The situation as I see it is: balanced concerns, transaction, relationship, tacit coordination.
- My basic style is _____________, so I need to be more _____________ in this situation. Women: don’t be afraid to look pushy.
- The situation as they see it is: transaction, relationship, balanced concerns, tacit coordination.
- What is their expected strategy? Competitive, problem solving, compromising, avoiding, or accommodating?
|Balanced Concerns: High Perceived Conflict over Stakes, High Perceived Importance of Future Relationship Between Parties.
Use problem solving or compromise. Be insistent without being aggressive. Be imaginative and patient. Explore all options. Compromise only when time is short.
|Transactions: High Perceived Conflict over Stakes, Low Perceived Importance of Future Relationship Between Parties.
Use competition, problem solving, or compromise.
|Relationships: Low Perceived Conflict over Stakes, High Perceived Importance of Future Relationship Between Parties.
Use accommodation, problem solving, or compromise.
|Tacit Coordination: Low Perceived Conflict over Stakes, Low Perceived Importance of Future Relationship Between Parties.
Use avoidance, accommodation, or compromise.
You bargaining strategy will be different depending on what type of negotiation situation you in. The four types of situations are balanced concerns, transactions, relationships, and tacit coordination. Salary negotiations are almost always balanced concerns or transactions. I’ll talk about each one briefly.
Balanced Concerns: High Perceived Conflict over Stakes, High Perceived Importance of Future Relationship Between Parties. These are business partnerships, joint ventures, employment disputes, long term supplier relationships. You want to do well, but not so well you damage the relationship. Salary negotiations, especially raise requests, are often balanced concern situations.
Transactions: High Perceived Conflict over Stakes, Low Perceived Importance of Future Relationship Between Parties. Divorces, home sales, car sales. Civility is expected, but no accommodation need be made for cooperation to exist between the parties in the future. Leverage counts. While relationships are important after a salary negotiation, being a respectful, but hard bargainer, will win the respect of your future employer. So you could use the tactics of a transaction situation.
Relationships: Low Perceived Conflict over Stakes, High Perceived Importance of Future Relationship Between Parties. Marriage, friendships, work teams. Treat the other party well. Don’t worry about money, only relationship. This is not a salary negotiation. Unless you are so valued by your employer, that they just want to take care of you and will overpay you without you asking. Extremely rare.
Tacit Coordination: Low Perceived Conflict over Stakes, Low Perceived Importance of Future Relationship Between Parties. Traffic intersections, airplane seating. Don’t really need a negotiation, just tactful avoidance of conflict. This is not a salary negotiation.
So now we know what type of situation we are win. What bargaining style should we use? There are five: avoiding, compromise, accommodation, competitive, and collaborative (problem solving). For balanced concern situations, where the stakes are high and the relationship is important, like salary negotiations, we should use a problem solving strategy, and if that doesn’t work, compromise. Problem solving is the hardest strategy, but the best. You will need to be imaginative and patient and explore all the options. Be insistent without being aggressive. Resort to compromise, or splitting the difference, only when time is short.
For transaction situations, which salary negotiations can also fall under, we can use a competitive strategy, problem solving, or compromise. A competitive strategy is a traditional negotiating strategy where there is a winner and a loser, where you use your leverage the make yourself as best off as possible, and the other side worse off. You don’t care as much about the relationship.
For relationships, it is best to use accommodation, problem solving, and comprise. For tacit coordination use avoidance, accommodation, and compromise.
So what if you are in a balanced concern or transactional situation and your dominant negotiation style is avoiding or accommodation? You probably should bring someone in to help you in those situations, or really coach you up. Likewise if you are a highly competitive person is a relationship situation, you probably should bring someone in who has better people skills.
So what is your dominant negotiating style? You probably already have a hunch, but if you want to find out, go here to take the Bargaining Styles test found in appendix A of G. Richard Shell’s “Bargaining For Advantage”. The last time I took the test I was primarily a compromiser (9) and collaborator (7), with lower competing(5)/accommodating(5) and avoiding (4) scores. So when I go into a balanced concerns situation I have to remind myself to be patient, to not settle of the first fair standard, to not make concessions too quickly, and to question my own assumptions.
Let’s talk about the five negotiating styles and their strengths and weaknesses.
Competing: High competitors enjoy negotiations because it provides an opportunity to win. They have strong insights into leverage, deadlines, how to open, how to position final offers, ultimatums, and other aspects of traditional negotiations. Competitive people can dominate the bargaining process and be hard on relationships. The loser can feel taken, coerced, or abused, which affects future dealings. They focus on issues that are easiest to count in terms of winning and losing (money, and overlook non-quantitative issues.
Weak competitors don’t see negotiations as win-lose, but as a dance and a game. Dance in which parties treat each other fairly, solve problems, or create trusting relationships. Others view them as non-threatening, which can be an asset. In large stakes, the low competitor will be at a disadvantage.
Collaborating: High collaborators enjoy negotiations because they enjoy solving tough problems in engaged, interactive ways. Instinctively good at probing beneath the surface of conflicts to discover basic interests, perceptions, and new solutions. Assertively and honestly committed to finding the best solution for everyone. Needlessly make simple problems big ones in an effort to practice their skills. Irritates people who want closure or don’t have time.
Weak collaborators dislike using the bargaining process as a creative process. Want the problem clearly outlined beforehand with an agenda and preset goals. Brings clarity and order. Low collaborators might be a bottleneck in brainstorming sessions.
Compromising: High compromisers are eager to close the deal by closing the gap between positions. When time is short or the stakes or small, this is a good thing. Others see you as relationship friendly, reasonable person. Often rush the negotiation process unnecessarily and make concessions too quickly. They don’t question their own assumptions and rarely ask enough questions of the other side. Satisfied with the first fair standard that is presented even if more fair standards are available that would be more advantageous to them.
Low compromisers are men and women of principle. Won’t give in when the stakes are high. But they also tend to make an issue out of everything which is very annoying. Makes them seem stubborn, more concerned with winning an argument than closing a deal. Hard to close a deal when time is short.
Avoiding: High avoiders are adept and deferring and dodging the confrontational aspects of negotiations. Appears to others as having graceful tact and diplomacy. Permits a dysfunctional group to function. Use clear rules, unambiguous decision making authority, and hierarchies to avoid conflict and substitute for negotiations. Like using email, memos, hired agents, intermediaries that minimize need for face-to-face confrontation. Can be a bottleneck for decision making in contentious situations, and often make these situations worse by not communicating. High avoiders pass up many opportunities to ask for things that would make them better off, even when the other party is perfectly happy accommodating their needs. Leads to their dissatisfaction.
Low avoiders have little fear of interpersonal conflict. Some even enjoy it. They have a high tolerance for assertive, candid bargaining. Can fight hard all day, and share drinks and stories with the same person in -the evening. Helpful in labor relations, law, M&A. These people are viewed as lacking tact and being overly confrontational. Seen as troublemakers in bureaucratic settings. Frustrated by bureaucracy and office politics.
Accommodating: High accommodators derive significant satisfaction from solving other people’s problems. Good relationship building skills, good awareness of other’s emotional states, body language, and verbal signals. Great when bargaining within teams, long-term sales relationships, and providing customer service. Weakness: place relationship about the outcome of deal – vulnerable to competitive people who take advantage of them.
Low accommodators are more concerned with being right than persuasive. Can’t see the other’s point of view. Think there is only one right. Interferes with group decision making. Makes other people think they don’t care about them, which lowers their willingness to cooperate.
Is there an optimal style for negotiators? No. All styles can be successful. But be careful, because whatever your style is, you assume other people behave the same way you do, which is not the case. You will need to use different bargaining styles depending who is on the other side of the table. Try and figure out what type of negotiator they are, then adjust to their style. Negotiate something small with them first before you get to the big stuff to figure it out. When you have a style match, things go well, but you have to be flexible. If your counterpart is a collaborator or avoider, you might be able to get a higher salary because they want you to be happy and want to have a good long-term relationship with you.
We all have core personality traits that inform our bargaining styles. Which parts of negotiations do you enjoy and not enjoy? Build on those talents.
A simpler way to break down negotiation styles is cooperative vs. competitive.
Lawyers who were rated as “effective” negotiators by their peers, 75% were cooperatives, and 12% were competitive. Perfectly reasonable, cooperative people have the potential to become great negotiators. Better at building lasting relationships when you’re not an a-hole.
Men are more assertive, more likely to interrupt. Women listen more and pay more attention to emotional rapport. Women choose to negotiate less often for salary & promotions. 43% of men negotiate their first offer out of college. Only 7% of women. They use “fairness” arguments, which can work, but only if their counterparts are on the same relationship wavelength. Women: don’t be afraid to look pushy.
All cultures are different. You’ll have to do your homework to know your own culture and customers. Two most important things:
- Most differences will be in form (communication styles), not substance. Most important issues will still be money, control, and risk.
- How do parties perceive their relationship?
So now you know what type of situation you think you are in, and what your primary bargaining style is, what type of situation do they think it is? If you think it is a balanced concern situation and they think it is a transaction, you could be taken advantage of. Ask them questions to get a feel for how important your relationship is vs. the transaction so you can be best prepared.
9. How to Communicate
Best mode(s) of communication? Agent, face to face, teleconference, telephone, email, IM? Why?
Deciding How to Communicate. Do you need an agent? If there is a major contrast in styles between negotiators, like if you are going against a highly competitive person and you are not one, you might want to get an agent. This is not very common in salary negotiations, but hiring me to be your coach could be like hiring an agent if you choose to communicate mostly through email.
Assuming you will do the negotiation, there are pros and cons to the mode of communication.
Face to face. The pros are that you can get all the non-verbal communications that will be missed over the phone or email. You can develop real relationship that will help with the deal making process. The cons is that if your counterpart is a much more experienced negotiator than you, you could be taken advantage of and not be able to respond in the way you would like to if you had more time. Also, it is hard to set up face to face meetings.
Telephone. Much more convenient that face to face, and you get intonation and voice inflection, but no other non-verbal communication. Harder to develop relationships.
Email. Very convenient, a clear record of back and forth, easy to provide lots of backup data to support your arguments. Levels playing field between people with different levels of experience, and you can leverage coalitions quickly. Good for introverts. Negatives is that you miss the non-verbal communication and opportunity to develop relationships. Resolving issues will take longer and it is easy to reach impasse because there is no body language. Your message can be forwarded onto anyone, so be careful what you type. Always include small talk in your email and explain why you are making your requests. Seems more human. Sprinkle in human meetings as well as email.
10. Overall Positioning Theme
Overall positioning theme. Write a short statement that sums up your underlying purpose in this negotiation.
A central theme will help you stay on message and really drives your point home to your opposition. A consistent message is very effect. Example is when the Teamsters were negotiating with UPS. Their slogan was “part time America won’t work.”
Okay, so that is the preparation stage of bargaining. You will get to test your assumptions about what is important to the other side, what norms and standards they use, what type of negotiator you are going against in the next stage, and how much leverage you have in the information exchange. You can continually update your bargaining plan as you get more information.
You can only learn by doing. Not from reading a book. It’s a good idea to rehearse a few times the things you plan on saying. Most people feel anxious about negotiating. Rehearsing ahead of time can help calm your nerves. You can experiment with strategies, run through talking about the issues, and explore different ways of saying what you mean. Find a friend or colleague you trust, brief him or her thoroughly about the situation, and role-play the negotiation multiple times. Talk through your narratives for why you deserve the increase. How will you respond to the employer’s objections?
3. Information Exchange
During the Information exchange portion of bargaining you can:
- Develop rapport
- Surface underlying interests, issues, and perceptions (probe first, then disclose)
- Signal expectations and leverage
This is your opportunity to uncover the truth about the other side’s bargaining style, their goals and expectations, which standards and norms they respect, their interests, and leverage. It is also a time to signal what your expectations are, and how much leverage you have. And finally it is a time to develop relationships.
Information exchange can take seconds or months. Body language is key, how they react to things you say/propose. This is the most over-looked part of the negotiation process. Pay attention to it for competitive advantage.
Westerners are task-oriented, and like to cut this stage very short and “get down to business”. Relationship-oriented cultures take a lot more time in this phase. You would be wise to spend more time on this phase so you can really understand the other side and develop a better relationship.
1. Develop Rapport
This crucial to reaching a good deal. Negotiations are about people. Their goals, needs and interests. Your ability to form relationships and develop trust is key. Trust is how deals get done. How to do?
- Gain access and credibility through relationship networks. Have a friend put in a good word for you.
- Build working relationships across the table with small steps, such as gifts, favors, disclosures, or concessions.
- Follow the rule of reciprocity:
- be reliable and trustworthy
- be fair to those who are fair to you
- when other parties treat you unfairly, let them know about it (breeds exploitation, then collapse of relationship).
- Avoid being taken advantage of in the rapport building stage by trusting too quickly, letting others make you feel guilty, and mixing big business with personal friendships.
Always check in on how your relationship is with the other party each time to bargain. Relationships are key to successful negotiations so make a point to check in each time.
The purpose of establishing rapport opens a channel of communication – they will actually listen to your message now that they look at you as an individual. Show you think of them as an individual, so they will think of you the same way. “People don’t care about what you have to say until they know how much you care”.
2. Surface Interests, Issues, and Perceptions
Who are they? Why are they here? What is important to them? What are they prepared to negotiate? What is their view of this situation? Do they have authority to close? The higher the stakes, the more care you should take to finding answers to these questions. Focus on asking questions and listening, not delivering your message. Skilled negotiators receive information. Probe first, disclose later. Test for understanding. Summarize information. Knowing what the other side wants is power. 50% of the time negotiators don’t really know what the other side wants because of bluffing. Take it slowly.
Avoid Giving Salary History or Expectations
The first thing most people ask is if they should disclose their current salary and/or how to avoid doing so. Yes, you should try and avoid revealing your current salary as it goes against the “probe first, disclose later” mantra.
So try and avoid telling them how much you are currently making and how much you would like to make unless they have offered you a job. Say something like:
- “I’d prefer to discuss salary after I learn more about the responsibilities of the job and we can determine if I am a strong fit for your organization”
- “I would wish to be compensated in line with the skills and abilities I have to offer your organization”
- “What range did you have in mind?”
Of course companies want to know if they can afford you before investing time and resources into the interviewing process and hiring you, so you will most likely need to give salary ranges of what you are making now and what you would like to make. Keep it broad as possible and reiterate that you want to see if you are a good fit for the position before discussing price.
This is Salary Negotiation expert Jack Chapman’s #1 rule: “Don’t discuss salary until you have been offered the job” and he explains why in his book, “Negotiating Your Salary: How to Make $1000 a Minute.” This rule is based on the sales principle of discussing value first, and price second.
When a customer (the employer) makes a large purchase (hiring you), they go through three stages: “budget”, “fudgeit”, and “judgit”. In the budget stage they unemotionally stick to their prescribed budget and hire a candidate that fits in that range. In the fudgeit stage, they are willing to fudge their budget a little bit (move things around) in order to hire the right candidate. And in the judgeit stage they are willing to break their budget entirely and hire someone they cannot afford, because they know that they only way they can afford them is by hiring them (they know the new employee will make or save them $x, thus giving them a positive return on investment).
The goal is to avoid getting hired at the budget stage, and to move the employer along through the fudgeit and judgeit stages.
This is done by discussing value first, and price second. If you talk price upfront, you will either be hired within their budgeted range or be screened out for requesting too much. Avoid discussing salary until after you have been offered a job, you have the opportunity to get the employer to become emotionally invested in hiring you to the point where they are willing to fudge, or break, the budget to hire you.
Remember the Gucci family’s slogan: “Quality is remembered long after the price is forgotten.” You are a unique, high-quality product that will bring continued value to your employer. There is no fixed price for your services. So when selling yourself, discuss value first and price second.
3. Signal Expectations and Leverage
If you have bad news, set their expectations early, and deliver it clearly, and credibly. You only have as much leverage as the other side gives you credit for, so you have to signal it.
Signaling when you have a weak hand: emphasize the uncertainty that always attends the future and/or talk about your comfort with the status quo. Appeal to the other side’s desire to minimize future risk by closing a deal now. Saves the other side time for having to look for a business partner. You can try and bluff your way out of a weak position, but you may end up with no deal. Experienced negotiators will see through this. Unless you are experienced gamesman, leave the bluffing to others. If all else fails, appeal to the other parties sympathy. Ask what the other negotiator what they would do in your situation. “What would it take for you to say yes?” You may discover you have more leverage than you thought.
Signaling when you have a strong hand: you can show that you have a strong hand and will insist on a good deal, or show you hand and show that you will be fair in order to establish future relationships and goodwill.
Information exchange ends when one side makes a concrete, plausible opening offer that requires a response. Then you are in explicit bargaining.
To review, the purpose of the information exchange is to:
- Establish rapport
- Obtain information on interests, issues, and perceptions. Probe first, then disclose.
- Signal regarding your expectations and leverage.
4. Explicit Bargaining
There is no one size fits all strategy.
1. Opening Bids
Should I be the first to open (give first offer on price, power, or control)?
How much information do you have? Do you know the market value of what you are buying or selling? If you do, then you gain an important advantage by opening: anchoring. You are able to fixing the zone of realistic expectations of all future offers in the negotiation. Humans are heavily influenced by the first number then see, then make adjustments off it. If the first number is high, you will end up around there, if it is low, you will end up around there. If you don’t have great market value numbers, then let the other party open.
Should I open optimistically or reasonably?
In a relationship – start reasonable. In a transaction – start optimistically, especially if you have leverage (scientifically proven to yield higher outcomes). Optimistic offer: the highest or lowest number for which there is a supporting standard or argument enabling you to make a presentable case. Doesn’t have to be your best argument, just a presentable one. Can you make the argument with a straight face? Then go for it. In South America, Asia, and Africa, any opening other than an optimistic one is a serious mistake.
Optimistic offers take advantage of the contrast principle and the norm of reciprocity. Makes your final offer look reasonable (contrast) and every time you come down a bit, the other side feels the need to come down a bit as well (reciprocity).
Don’t do optimistic offers in these situations:
- You have no leverage and the other side knows it.
- When the other side won’t bargain (fixed price situations).
- When it’s more than just a transaction (relationships or maybe balanced concerns).
2. Concession Strategies
What concession strategy works best?
Even if you start with a reasonable offer, leave wiggle room in your offers so you can make some concessions to make the other side feel like they got a good deal and there is some reciprocity going on.
Best concession strategy according to research: start high, then gradually concede to the moderate point. People make more money and feel more satisfaction. Others: start high, refuse to move, start moderately, refuse to move. Don’t work as well. Concessions is the language of cooperation. Shows the other party their interests are valid and you are willing to make sacrifices for a deal.
Balanced Concerns: interest based problem solving approach. Have high expectations and move slowly. Work on least important issues first. All trades should be reciprocal. Aggressive, hardball moves are not a good idea. Might not have to concede at all if you are able to come up with a creative solution that meets both parties needs.
Relationships: best concession strategy is accommodation. Give them what they want with interest. Make the other party feel appreciated. Really hard for competitive people. They treat everything as a game and don’t understand how to accommodate. If that is you, get help from some with better people skills. If you are negotiating with someone like that, accommodate if stakes are low, end relationship if stakes are high.
Transactions: firm concession strategy works best (classic haggling) – start optimistically, make a series of progressively smaller concessions as you hone in on your expectation level. Signals to the other side you are getting close to your resistance point. That resistant point your be your expectation level, not your bottom line. The other side can think it’s your bottom line. Cooperative people aren’t good at this, but need to learn to play the game in competitive situations. Do not make big moves early. It can confuse the other party when all of a sudden you start only making small moves. It also sends the message that you really want this deal, which destroys your leverage. Start slowly. It also sends the message that the issues you conceded were not important to you, so the other side won’t give you any credit for that concession. You won’t get anything in return for that concession. “What we obtain too cheaply, we esteem too lightly”.
Distributed bargaining (haggling) – negotiating each issue one by one, separate from the whole. More likely to lead to impasse.
Integrative bargaining – bargaining the package as a whole. Make big moves on your little issues, and big moves on your little issues. But never give up anything without demonstrating that it is meaningful to you, or you lose the value of that concession. Maintains flexibility as you are not locked into anything unless you reach an agreement on the entire package.
Tacit Coordination: Just accommodate or try and solve the problem in a genuine helpful way.
Good guy, bad guy routine. Takes advantage of the contrast principle. One is really horrible, so the good guy doesn’t look so bad. What to do? Name the tactic publicly at the table and demand clarification on the issue of authority. Who has the power to make a deal? I can’t negotiate with people who lack the authority to close.
Positive moods are contagious and stimulate greater cooperation and creativity. If you enter your negotiation feeling great, your upbeat mood can help prime a positive problem-solving atmosphere. Choose what works for you: exercise, listening to music, getting a good night’s sleep, meditating, talking with friends, wearing a new outfit. Think about what makes you feel calm and confident and try to do that just before you negotiate.
“Anxiety hampers our negotiating ability. It hinders ability to think on our feet, and narrows our creativity. To be good, you must learn to be yourself at the bargaining table. If you don’t feel comfortable using certain tricks or strategies, they won’t work. While you’re thinking about your tactics, the other side is giving out vital clues and information that you are missing. You don’t need to be tricky. But you need to be alert. The best negotiators play it straight, ask a lot of questions, listen carefully, and concentrate on what they and the other party are trying to accomplish. It’s not rocket science. But it’s not intuition either. “ – Richard Snell
The vast majority of the time the employer will make the opening bid. We want to avoid discussing price until we know they employer wants to buy, and when they indicate they want to hire you, they will almost always give an starting offer.
Never accept the initial offer. Flinch with shock and surprise when you hear it. For maximum effect, repeat their offer, “$50,000”, and be silent for 7-8 seconds. Then make your counter-offer.
“Silence is the ultimate weapon of power.” – Charles de Gaulle. Silence can be very uncomfortable, which you can use to your advantage. Instead of immediately responding to your employer’s offer, take a moment of silence to think about it. The silence may cause them to be nervous and improve their offer without your saying anything.
Employers never start with their best offer and give themselves wiggle room to negotiate.
How you say it, is almost as important as what you say. Be confident. Don’t use self-defeating language that is easy to say no to:
- “I don’t know if you’d consider…”
- “I hate to ask for this…”
- “I don’t know if there’s room in this for the budget, but…”
Pay attention to how you ask. People often push back when a woman takes an approach that seems too aggressive. Women are much more successful at getting what they want when they adopt a cooperative, problem-solving, positive manner rather than a competitive, winner-take-all, this-is-war attitude. Frame the interaction as a discussion rather than a demand.
Companies expect you to negotiate. They build in 5-10% of wiggle room in their offer.
Negotiate in person, if possible. (90% of communication is non-verbal)
When you hear their first offer or range, repeat the figure or top of the range, and then be quiet (for 10-20 seconds). Counter their offer with your researched response:
If their offer was too high: “Well, that’s a very fair, actually a wonderful offer. Let’s get the benefits clear and I think we can make a deal.” Make sure you understand why their offer was so high. Are you missing something?
If their offer was too low: “$45,000. [pause] I appreciate your offer, ______. I’d love to work here. And I’m sure you want to pay me a compensation that is fair and will keep me committed and productive. From my research I estimate that positions like this for someone with my qualifications are paying in the range of $50,000 to $55,000. What can you do in that range?” Show him your research. Stick to your researched worth and keep talking to find a mutual win. Negotiate for other benefits. If you can’t get something you want, tell them you still excited about the opportunity and that you both will want to think about it and talk again the next day.
If their offer was just right (unlikely): “Your figure matches my research exactly. I think that’s a perfect starting point. Since I expect to learn fast, work hard, and become very productive for you, I’d like to discuss setting up a salary review in six months.”
Start high with your counter proposal. Henry Kissinger said “effectiveness at the bargaining table depends on your ability to overstate your initial demands.” Both sides need to feel like they won.
Don’t accept their first counterproposal. Come down incrementally. Ask “what will you give in exchange for this?” (Trade for some of your other priorities.)
Show you understand the employers’ side of things and be empathetic.
Have a narrative to always fall back on.
If they are unwilling to budge, your final fallback position is to have them clearly outline what you have to do for a raise in the future. (time table + deliverables + raise amount) Suggest that during your first week on the job you and the employer will come up with a specific set of objectives that will be the basis for a future raise.
Scarcity: loss aversion is more powerful than what we might gain. People often manufacture scarcity to get a deal closed (time – deadlines, or other buyers). Walkouts are the scarcity effect.
Overcommitment to the bargaining process (loss aversion): we don’t want to spend a ton of time on a something that ends in failure. Once you’ve invested a lot of time in something, you will do anything to close the deal… string out a negotiation so that the other side become committed to its success.
Most of our negotiations don’t rely on the two tactics above. Those are high stakes transactional ploys.
Relationships: just accommodate to close the deal.
Balanced concerns: split the difference to close the deal. But don’t split the difference if one side started off with an overly aggressive offer or if more time could yield a more creative result.
Commitment: include a risk of loss if they parties don’t live up to the deal.
Get your commitment down in writing.
5. Influence Triggers
Principle: When we are given a gift (trigger), we have a strong desire to reciprocate (automatic reaction). We feel indebted to the other person and are uneasy until we pay them back. The desire to reciprocate is so strong that is doesn’t matter if we like the giver or not. Businesses take advantage of this automatic reaction by offering free samples and gifts in order to trigger our response of reciprocation (and buy their products). Another example of this principle is the girl who keeps going out with the guy she doesn’t really like, because he keeps buying her expensive dinners/presents.
Application: To trigger your employer’s’ desire to reciprocate, you first need to give them a gift. This can be the gift of emotional payments (flattery, empathizing, stroking egos) or concessions. If you overstate your their initial demands, you can give the gift of a concession later, and they will feel compelled to reciprocate. “Effectiveness at the bargaining table depends on your ability to overstate your initial demands.” – Henry Kissinger.
When asking for a raise, the possible gifts you can give are much greater, as there are opportunities to do favors for people you work with every day.
Commitment and Consistency
Principle: We all have an instinctual desire to be consistent in our speech, actions, and values. When we are faced with a decision, our default response is to behave consistently with how we have acted in the past. We prefer to behave consistently because (1) it is positively associated with logic, rationality, and strength and (2) it is a decision making shortcut. It’s easier to act the way we always have, rather than take time to analyze the situation and choose the best response. Salesmen take advantage of this principle by getting people to admit to something (they like vacations and traveling) in order to get them to buy something (timeshares).
Application: To apply this principle during salary negotiations, you want to trigger your employer’s desire for consistency by getting them to verbalize that they are (1) an equitable employer who believes in fairly compensating their employees, and (2) why you are the candidate they want.
Ask the hiring manger which of your attributes and experiences were the most important in their decision to offer you the position. Ask what their compensation philosophy is (they will say something about being equitable, paying the market rates, rewarding top talent, etc.). Then use the exact words from their answers to put them in a corner – they just explained why you are their candidate of choice and that they fairly compensate their employees – so it would be inconsistent of them to pay you less than what you’re worth.
Principle: We often use other people’s behavior to guide our own. If we see a crowd gathering at a football stadium or see everyone using an iPhone (triggers), we naturally assume that both products must be worthwhile (automatic reaction). It is easier to rely on the judgment of others that something is worth doing or purchasing – rather than doing the research ourselves.
This herd mentality can be used against us, and is why bartenders will put a few dollars in their jars to show that it is normal to give tips, why businesses feature testimonials in their advertising, and why evangelical preachers will seed the audience with actors to get the crowd rolling. They know most people will follow the crowd’s momentum. It is both socially acceptable and easier than doing your own decision making.
Application: During salary negotiations, you can take advantage of this principle by presenting compelling research that their peers are paying market-rate salaries. If you can show what other employers in the industry are paying, it will be natural for your employer to follow along and pay you a comparable wage.
Principle: When someone we like asks us to do something (trigger), we are more likely to comply (automatic reaction).
Application: You can improve your chances of success at salary negotiation by increasing your likability. Some factors that influence likability are:
- Similarity: we tend to like people who are similar to us. Mirror the body language of the person you are negotiating with. Find things you both like and talk about them.
- Contact: the more frequent contact we have with someone, the more we like them (unless they are really horrible). Always try to negotiate in person, not via email or the phone. Each in person meeting builds rapport and increases likability.
- Physical Appearance: people think that good looking people are more kind, honest, intelligent, and persuasive – and therefore are more liked. Present your most physically attractive self during negotiations: dress well, get a nice haircut, smile, have good posture, and exercise regularly.
- Compliments: we like people who flatter us, so give honest compliments to your negotiating counterpart.
- Cooperation: we prefer people who work with us, not against us. Communicate to your employer that you are on the same team and have the same goals: eliminating problems, increasing revenues, and decreasing costs.
Principle: When an authority figure asks us to do something (trigger), we usually comply (automatic response). We tend to obey authority figures because we assume they have superior information and experience. It is a decision making shortcut we use to avoid re-inventing the wheel. For example, an experiment was conducted in which a man was dressed first normally and then as a security guard. In both instances he asked people to pick up litter around a park. When dressed normally 40% of the people obeyed him, as compared with 90% when he was dressed as a security guard.
Application: In order to trigger your employer’s automatic compliance response to authority, you need to take on the mantle of authority. You can do this by using the symbols of authority: title, appearance, and demeanor. Use the most prestigious title applicable to your situation. Dress like an authority in your industry (three-piece suit?). Mimic the body language of authorities in your field. Even if you don’t consider yourself an authority, taking on its mantle will give you added leverage in negotiations. Keep in mind that 90% of people obeyed they guy who looked like a security guard – but wasn’t.
Principle: If an item is scarce (trigger), we assume it is valuable (automatic reaction). We have a greater desire for censored information than for non-censored (we assume it is more valuable). We also believe censored information is more true. Businesses routinely manufacture scarcity with “limited time offers” and shortened production runs.
Application: You can trigger your employer’s reaction to scarcity (dramatically increasing their desire for you) by convincing them that you alone are uniquely qualified to solve their problems. Being able to do this hinges on how well you researched their situation: how long they have been trying to fill the position, why they have had trouble filling it, why previous people left, what problems need to be solved, etc.
You can also manufacture scarcity by having competing offers. When you combine competition and scarcity, their desire for you will increase even more.