What is anchoring in salary negotiations? In salary negotiations, the anchoring effect describes the fact that the first offer made, no matter how extreme, tends to pull subsequent offers in its direction. Because the employer tends to make the first offer, they often gain the upper hand in salary negotiations.
Key Insights
- The Core Concept: While employers often have the upper hand in hiring negotiations, candidates can work to shape the offer according to their salary expectations.
- The Strategy: Before you negotiate, research what you deserve and what the hiring organization is likely to offer. Then prepare to strategically anchor the conversation.
- The Obstacle: A warning from a recruiter that the salary is “nonnegotiable.” Keep the recruiter’s incentives in mind, and advocate for your worth anyway.
Table of Contents
You Want How Much?
Setting Realistic Salary Expectations
When Salary Is “Nonnegotiable”
How Can You Shape Salary Negotiations to Your Advantage?
How to Counter Common Negotiation Roadblocks
FAQs About Salary Expectations
In salary negotiations, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion tends to strongly influence salary expectations and the negotiation that follows. Unfortunately for candidates, the first figure mentioned in a negotiation often is not in their favor. It might be their last salary, which they believe was too low. Or it could be an advertised wage range that anchors talks in the organization’s favor. However, research on salary expectations and negotiations does offer strategies to help job candidates secure a better offer.
The takeaway: In salary negotiations, job candidates need to plan to try to counteract the anchoring effect.
You Want How Much?
To counter a low salary anchor, a job candidate might try to introduce a high anchor. But how high, and how? University of Idaho Professor Todd J. Thorsteinson conducted two experiments to determine whether a job candidate could get a higher salary by mentioning an outrageously high number in a joking way.
In the first experiment on salary expectations, Thorsteinson asked 206 college students to imagine that they had decided to hire a particular candidate for an administrative assistant position and were about to initiate a salary negotiation with her. (The candidate was always described as a woman to offer a strict test of the theory, as research led by Harvard Kennedy School Professor Hannah Riley Bowles has found that people judge women who negotiate salary more harshly than men who do so.)
Next, participants were asked to imagine that they asked the candidate what salary she wanted. Either before or after hearing her response, participants were told what she earned at her last job. The participants offered her about $5,000 more if she jokingly asked for an implausibly high salary ($100,000) than if she jokingly asked for an implausibly low salary ($1) before asking for a “fair” salary.
In a second experiment, Thorsteinson added a condition in which the candidate jokingly asked for $1 million before saying she just wanted a fair salary. Participants offered her more when she aimed outrageously high, about the same amount they offered her following a $100,000 request.
The takeaway: The results confirm the power of the anchoring effect in salary negotiations, as it held even when unrealistic requests were delivered in a joking way.
Setting Realistic Salary Expectations
Does this research suggest you should jokingly ask for an outlandish salary in your next job negotiation? Not necessarily. In formal negotiations, your little joke could easily fall flat, perplexing or even offending your counterpart.
Still, the success of implausibly high anchors in the experiments suggests this might be an interesting tactic to try in certain settings—perhaps when accompanying the jokey anchor with a more reasonable offer.
Before we negotiate price, negotiation experts typically advise us to assess the zone of possible agreement (ZOPA)—that is, whether there is an overlap between your reservation point (the point at which you are indifferent between walking away or taking the deal) and the other party’s reservation point. In other words, in your salary negotiation, is there at least one number on which you and the hiring company can agree?
You can figure this out by researching your industry and assessing your own qualifications. For example, the administrative assistant might conclude that $39,000 to $46,000 is the general salary range for people with her experience. She might also decide she would not accept less than $41,000 (her reservation point) and estimate that the employer would not agree to more than $46,000. Thus, she estimates the ZOPA to be from $41,000 to $46,000. Then she could make a request a little above the ZOPA, such as $48,000, and hope to settle for about $46,000.
Then she might say, “I’d like $1 million, of course, but based on my experience and industry standards, I think $48,000 would be appropriate.”
The takeaway: When mentioned alongside more appropriate salary expectations, an outrageously high figure mentioned in jest might serve as an effective anchor.
When Salary Is “Nonnegotiable”
Our salary expectations can be hard to square with nonnegotiable job offers.
For Forbes, Erica Gellerman shared the case of an HR professional who was earning $80,000 at a job she loved. A recruiter approached her about a job that sounded intriguing but was listed with an unpromising salary range, $75,000 to $82,000. However, the candidate went ahead with the interviews, got along well with company personnel, and was excited to hear about the company’s tuition benefits.
As the time for salary negotiations approached, the recruiter repeatedly coached the candidate not to try to negotiate because she was already earning at the top of the company’s pay range. Due to her own experience in HR, the candidate recognized that the recruiter had a hidden motivation to please her client (the company) by keeping the salary low. The candidate also sensed that the company was eager to hire her.
She did some research and determined that $82,000 to $87,000 was a more appropriate range than $75,000 to $82,000, given the position and her experience. She said as much at her final interview. After some consideration, the company offered her $85,000 with the possibility of a significant year-end bonus. “I was thrilled and accepted,” the woman told Gellerman.
The takeaway: Recruiters have hidden financial and other interests that may clash with your own salary expectations. Do some research to arrive at your own conclusions about whether your salary expectations are appropriate.
How Can You Shape Salary Negotiations to Your Advantage?
The following strategies can help you counteract the anchoring effect:
- Do thorough research. The best way to avoid being anchored is to do your own research before negotiating. Knowledge that supports your salary expectations can help you avoid making unnecessary concessions.
- Try a jokey anchor. When asked to state your desired salary, consider accompanying a realistic number (or range) with a jokey high number that might serve as an anchor.
- Consider conflicts of interest. Recruiters and other interviewers frequently have personal incentives to try to convince you that there’s no wiggle room on salary. Often, it pays to try to negotiate anyway.
How to Counter Common Negotiation Roadblocks
| The Roadblock | The Psychological Trap | Your Counterstrategy |
| “What are your salary expectations?” | If you give a low number or your previous salary, you will anchor against yourself. | Try pairing a jokey anchor (“I’d love $1 million, but . . . ”) with a well-researched, realistic range. |
| “This salary is nonnegotiable.” | You assume the employer has no wiggle room and simply accept or reject the offer. | Recognize the recruiter’s hidden motives. Present market data that proves your value warrants higher pay. |
| “You’re already at the top of our pay range.” | You feel guilty asking for more and accept the baseline offer. | Ask for an amount slightly above your target, and negotiate for nonsalary perks like tuition or bonuses. |
FAQs About Salary Expectations
What is the anchoring effect in a salary negotiation?
The anchoring effect is a psychological phenomenon where the first number introduced into a negotiation—the “anchor”—strongly influences all subsequent offers. Expect employers to try to pull the final salary offer toward their initial number.
How can I avoid being anchored and stick by my salary expectations?
The best defense is thorough preparation. Research industry standards, and determine your target salary before you negotiate. Armed with objective data, you can confidently resist low initial offers and drop your own strategic anchor.
What is the ZOPA?
The ZOPA is the overlapping area between your reservation point (the absolute lowest salary you will accept) and the employer’s reservation point (the absolute highest amount they are willing to pay).
