In Employment Contract Negotiation, “No Haggling” Isn’t the Answer

Reddit CEO's decision not to allow salary bargaining in contract negotiation is well-intentioned but misguided

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in employment contract negotiation no haggling isn’t the answer

Back in spring 2015, Ellen Pao, the former CEO of social networking and news website Reddit, revealed in an interview with the Wall Street Journal that her company had taken a bold move in the area of contract negotiation with its efforts to create an “equal opportunity environment for everyone” at the company. Specifically, Reddit no longer negotiates salary with job candidates, preferring a “no haggling” approach to contract negotiations.

“We come up with an offer that we think is fair,” Pao explained. “If you want more equity, we’ll let you swap a little bit of cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation.”


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Pao told the Journal that Reddit’s decision was based on the fact that “Men negotiate harder than women do and sometimes women get penalized when they do negotiate.” (For more information on preparing for negotiations, see also Are You Ready to Negotiate?)

Reddit’s decision not to allow hiring managers or job candidates to negotiate salary is an admirable attempt to address a stubborn problem. Women earn only about 84% of what their male counterparts earn, according to the Pew Research Center, for numerous reasons, but in part because they are less likely to negotiate their salaries than men are (see also, Managing Expectations in Negotiation).

This reticence has been linked to women’s fear of a social backlash when dealmaking in employment contract negotiation.

In a series of experiments, Harvard Kennedy School professor Hannah Riley Bowles, Carnegie Mellon University professor Linda Babcock, and Tulane professor Lei Lai found that both male and female participants were significantly less willing to work with a female job candidate who tried to negotiate her salary than with a female candidate who did not try to negotiate. The participants considered women who asked for more to be less nice and more demanding than women who didn’t ask (for more information on hardball negotiation strategies, see also Win-Win or Hardball – Learn Top Strategies for Sports Contract Negotiations).

Pao says she has personal experience with inequality in the workplace. She fought and lost a gender discrimination lawsuit against her former employer, Silicon Valley venture capital firm Kleiner, Perkins, Caufield, and Byers. In the wake of her stepping down as CEO of Reddit, there is little sign that the company plans to change its no negotiation policy.


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Reddit’s contract negotiation policy has the best intentions, but it is a misguided one, for at least three reasons:

1. Women aren’t the problem.

Outlawing negotiation to promote pay equity risks sending the message that women aren’t good at contract negotiation and need to be protected from their own weakness.

Of course, there is no innate gender difference that would give men a natural advantage in employment contract negotiation. All of us are capable of becoming strong and confident negotiators. And we should be given opportunities to do so, including negotiating for higher pay.

Researchers have identified clear strategies that women can undertake to avoid antagonizing colleagues when they ask for more, such as linking their requests to the needs of others (such as their family or the organization).

A bigger challenge is to address deeply ingrained societal expectations that women will accept whatever they’re offered when negotiating a business contract rather than being assertive in dealmaking. These expectations are what lead us to believe, if only on a subconscious level, that women who negotiate for higher pay are unfeminine and thus unlikeable.

Managerial training, open dialogues on the issue, and clear salary benchmarks that can be negotiated are just a few remedies that organizations can implement to level the playing field between men and women. By taking such steps, they can show women that they can safely negotiate on their own behalf.

2. Negotiation isn’t a competition.

Bans on salary negotiation promote the common misconception that contract negotiation must always be a win-lose competition—the type of contest that is ill suited to stereotypically feminine traits, such as accommodation and collaboration.

In fact, even in business deals over price, such as those involving salary, negotiators typically have ample opportunities to collaborate and engage in win-win dealmaking. If a candidate asks for a higher salary, the employer should be able to propose a tradeoff that it finds satisfying—for example, agreeing to a higher salary in exchange for increased responsibilities or travel.

There’s nothing innately male or female about this kind of give and take. Rather, it capitalizes on the common human desire to find agreement and forge connections.

3. Forbidding negotiation could backfire.

Not allowing candidates and their interviewers to engage in dealmaking over salary potentially creates problems for Reddit. By assuming it’s capable of setting fair and attractive salaries for its employees, and that candidates will accept what’s offered, Reddit overlooks the complexities of the hiring process.

Candidates typically carry salary expectations based on their past jobs to their discussions with potential employers. Given that men tend to earn more than women, male candidates might be disappointed by Reddit’s offers and turn to its competitors in hope of closing the deal.

In addition, both male and female applicants alike could be frustrated by Reddit’s ban on employment contract negotiation. Many professionals (men and women) negotiate their business deals as a matter of course and may believe they can do better than Reddit’s take-it-or-leave-it offer.

And, motivated by Sheryl Sandberg’s message of empowerment in Lean In: Women, Work, and the Will to Lead and other recent rallying cries, women increasingly are taking the risk of asking for more in employment contract negotiation—and employers are starting to expect them to do so.

As norms change, Reddit risks being left behind, mired in old beliefs about gender and negotiation that men and women across industries are actively trying to change.

Related Dealmaking Article: Deal Negotiation Techniques and Closing the Deal – Negotiate Conditions to Create Value in Negotiated Agreements

Women and Negotiation: Narrowing the Gender Gap


Discover how to boost your power at the bargaining table in this FREE special report, Dealmaking: Secrets of Successful Dealmaking in Business Negotiations,
from Harvard Law School.


Comments

4 Responses to “In Employment Contract Negotiation, “No Haggling” Isn’t the Answer”

  • Typically, I discuss salary bands when bringing it up to candidates and we try to find a place on the scale where the individual’s experience, salary expectations and our desire to retain meet. When I sit on the other side, I have already done my homework and have determined what cost of living factors are in the area where the position in offered and have a clear idea on the narrow range of disposable income I will accept. If the salary on offer, doesn’t fall on that line then I go elsewhere. I am really not that interested in Perks as many are taxable anyway as “salary in kind.” A minimum amount of CEUs are required to maintain licensing each year, so that perk is a given. Standard “white collar” compensation is 20 days holiday time and the key national holidays of July 4th, Labor Day, New Year’s, Christmas, and Thanksgiving. Many firms offer the 11 Monday Holidays as well, particularly those involved in government contracts where their customers are working those days. These may provide wiggle room in negotiations for perks.

    Reply
  • Colin D.

    Finally, some genuine push back against the herd mentality on so-called gender inequality. I couldn’t agree more with the criticism of Reddit’s policy.

    Reply
  • John A.

    I am not sure if it is a cultural difference based on different country [UK in my case] or sector [local governement] but what about the concept of establishing [possibly via job evaluation] a rate for the job and paying that?

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