Making the first offer in a salary negotiation could be the right move, even if you don’t want to.
My new housecleaner looked at me with dismay. And not because of the drifts of cat fur.
We had just walked through my house and she offered a reasonable price to clean my bathrooms and floors. I happily accepted.
That’s when she’d looked at me with dismay: I had accepted her first offer.
“Having your counterpart accept your first offer almost guarantees that you’ll feel less satisfied than you would have if you and they had negotiated a different outcome — even one that made you worse off,” according to “Getting (More of) What You Want: How the Secrets of Economics and Psychology Can Help You Negotiate Anything, in Business and in Life.”
This rather dense text by Stanford business school professor Margaret A. Neale and Thomas Z. Lys, an accounting professor at the Kellogg School of Management at Northwestern University, should probably be required reading for anyone doing any negotiating in their life.
By jumping at her first offer, I signaled to my new housecleaner that she had underbid on the project. She was left with the worrying feeling that she could have negotiated for more.
Don’t let that be you when you’re negotiating that job offer, raise or promotion.
“I like the employer to make the first offer,” a coaching client told me. “I don’t want to tip my hand.”
There is no absolute rule about whether job seekers should make the first offer when negotiating a salary, but it could be in their best interest to do so because of something called anchoring.
“Much as a physical anchor creates a drag, the first offer in a negotiation anchors the starting point of the negotiation,” the authors explain in “Getting (More of) What You Want.”
“Do you want to set the anchor for your compensation negotiation at a fat, juicy number, or do you want your new company to set it in a much more modest range?” I asked my client. “If you make the first offer, you get to set that anchor.”
“But how do I know what that fat, juicy number is?” my client asked.
You do your research, I told her.
“We need to build a business case to defend that number, a case based on talking to your peers, online research, your expected compensation next year in your current role — gather whatever data points you can to build that case,” I said.
First offers, counteroffers, or requests in general are more influential when they are accompanied by an explanation or justification, according to “Getting (More of) What You Want.” Interestingly, the book says, the quality of the justification is not as important as the fact that a justification is given.
“What if they laugh at me or drop me as a candidate?” my client worried. “What if my offer’s too crazy?”
“Stepping into crazy land is something to avoid — as is making too low an offer,” the book’s authors say. “So the best first offer really is the most extreme offer that your counterparts will seriously consider.”
That’s why you do your homework and walk into final interviews very prepared with an aspirational number backed up by a reasoned justification, I replied.
Back to my housecleaner story: I feel badly that she felt dismayed by our negotiation. So I tip her outrageously. And my floors are (briefly) sparkling.