Should salary negotiations be a laughing matter?

Thanks to the anchoring effect, joking about how much you’d like to earn could win you more money in your next job, according to new research.

By on / Business Negotiations

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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 the final outcome. Unfortunately for candidates, the first figure mentioned in a negotiation often is not in their favor.

For example, when opening salary negotiations, it’s common for hiring managers to ask recruits to reveal what they earned at their most recent job. Because you’re typically looking to improve substantially on your last salary, naming this figure is likely to introduce a low anchor that could drag negotiations downward. (Some U.S. states and cities, including Massachusetts, California, Oregon, and New York City, have made it illegal for employers to ask about a candidate’s past salary because doing so tends to disadvantage women, who earn lower salaries on average than men and would continue to do so if their next salary was based heavily on their past salary.) Similarly, the wage or wage range that employers often include in job listings anchors talks in the organization’s favor, especially because it can give the impression that there is not much wiggle room when it comes to salary.

To counter a low anchor from the hiring organization, a job candidate might try to introduce a high anchor. But how high, and how? In his book Judgment in Managerial Decision Making (Wiley, 6th edition, 2006), Harvard Business School professor Max H. Bazerman writes, “Any anchor that creeps into the discussion is likely to have an inappropriate effect on the eventual offer, even if the anchor is ‘ignored’ as being ridiculous.”

To test the limits of this theory, 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.

You want how much?

In the first experiment, 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 the woman. (The candidate was always described as a woman to offer a strict test of the
theory, as research by Harvard Kennedy School professor Hannah Riley Bowles and her colleagues 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. Some were told that she responded, “Would like $100,000, but really I am just looking for something that is fair.” Others were told that she responded, “Would work for $1, but really I am just looking for something that is fair.” Either before or after hearing one of those responses, participants were told that the woman had earned $29,000 at her last job. Participants in a control condition were told the woman’s prior salary but did not read a salary request from her. Finally, all participants were asked what salary they would offer the candidate.

The results showed that, whether the participants found out the candidate’s prior salary before or after hearing her response, they offered her about $5,000 more if she asked for an implausibly high salary ($100,000) than if she asked for an implausibly low salary ($1) and offered her about $3,000 more than if they did not hear any salary request from her.

In case the college students were uninformed and thought that $100,000 was a plausible “ask” for an administrative assistant, 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. Once again, participants offered her more when she aimed outrageously high, about the same amount they offered her following a joking $100,000 request.

Choosing a more realistic number

The results confirm the power of the anchoring effect in salary negotiations: It held even when unrealistic requests were delivered in a joking way. Does this research suggest you should jokingly ask for an outlandish salary in your next job negotiation? Not necessarily. An outrageous offer risks offending (or simply perplexing) your counterpart and leading him to believe that there’s no way you’ll come to agreement. And in negotiations that have been formal and sober, it might not be wise to try to loosen things up just as you start talking salary. If your little joke falls flat, it could backfire.

Still, the success of implausibly high anchors in Thorsteinson’s experiments— despite not being tested on actual hiring managers—suggests this might be an interesting tactic to try in certain settings, perhaps when paired with a more reasonable offer. And what would that reasonable offer be?

Before we negotiate price, Bazerman and other negotiation experts typically advise us to first 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 the context of a 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, talking to others in your position, and assessing your own qualifications. For example, the administrative assistant might conclude that $29,000 to $36,000 is the general salary range for people with her experience. She might also decide that she would not accept less than $31,000 (her reservation point) and estimate that the employer would not agree to more than $36,000. Thus, she estimates the ZOPA to be from $31,000 to $36,000. Then she could make a request a little above the ZOPA, such as $38,000, and aim to settle for about $36,000.

If you’re up for trying out some humor (and the employer seems receptive), you might say, “I’d like $1 million, of course, but based on my experience and industry standards, I think $38,000 would be appropriate.” The fact that the $1 million figure is clearly not serious could defuse any potential blowback while still serving as an effective anchor alongside a more appropriate one.

When salary is “nonnegotiable”

When a third-party recruiter tells you that the salary of a job you’re up for is nonnegotiable, should you take that assertion at face value? Perhaps not.

Last November, on the Forbes blog The Salary Chronicles, Erica Gellerman presented the case of an HR professional who was approached by a recruiter about a job that sounded intriguing but was listed with an unpromising salary range, $75,000 to $82,000, when the candidate was already earning $80,000 at a job she loved. However, the candidate went ahead with the interviews, got along well with company personnel, and was excited to hear about the company’s generous tuition-reimbursement package, as she’d been wanting to go to graduate school but couldn’t currently afford it.

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) that would lead her to advise taking whatever salary the company offered. The candidate also sensed that the company was eager to get her on board.

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 with the organization. After some consideration, the company ended up offering her $85,000 with the possibility of a year-end bonus equivalent to 10% of her salary. “I was thrilled and accepted,” the woman told Gellerman.

The lesson? Recruiters have hidden financial and other interests that may clash with your own interest in negotiating for a higher salary and other benefits. Rather than taking a recruiter’s advice at face value, do some research to arrive at your own conclusions about whether negotiating is appropriate.

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