Compensation Negotiation Tips for Salary Bargaining

Looking for compensation negotiation tips? New research on the power of “anchors” shows how you might use humor in your next hiring negotiation to bump up your salary.

By — on / Salary Negotiations

compensation negotiation tips

Job candidates are often eager for compensation negotiation tips, and with good reason: they tend to be at a bargaining disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion can strongly influence the final outcome—and the wage or wage range cited by employers is likely to anchor talks in the organization’s favor.

Similarly, 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 sabotage your salary expectations. (Notably, 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.)

To counter a low anchor from the hiring organization, a job candidate might try to introduce a high anchor. 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 researched whether a job candidate could get a higher salary by mentioning an outrageously high number in a joking way. The results lead to several useful compensation negotiation tips.

Anchoring High

In one experiment, Thorsteinson asked 206 college students to imagine that they had decided to hire a particular candidate for an administrative assistant position and had asked her what salary she wanted. Some were told she responded, “Would like $100,000, but really I am just looking for something that is fair.” Others were told 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 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.

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 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.

How to Bargain Salary: Compensation Negotiation Tips

The results of Thorsteinson’s experiment lead to the follow compensation negotiation tips:

  1. Think twice before making an outrageous offer. The study results don’t necessarily mean you should jokingly ask for the moon in a salary discussion. An outrageous offer risks offending (or simply perplexing) your counterpart and leading him to believe there’s no way you’ll come to agreement. And in negotiations that have been formal and sober, your little joke could backfire—so proceed with caution.
  2. Consider pairing a high anchor with a more reasonable offer. The success of implausibly high anchors in Thorsteinson’s experiments do suggest this might be an interesting tactic to try in certain settings, perhaps when paired with a more reasonable offer.
  3. Determine what’s reasonable. To determine what that reasonable offer should be, start by assessing 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.
  4. Construct your offer. 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.

What other salary negotiation tips would you add to our list?

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