Question

salary negotiationWe’re told that whoever mentions a number first in a salary negotiation loses. When employers also demand to know our current salary, that just makes matters worse. So what are we supposed to do in a job interview when this comes up? How do we know how much to ask for and when to do it?

Nick’s Reply

This question came up in a Zoom workshop I did today for about 50 job seekers in a professional group in New Jersey. It triggered a wild discussion. It was great! And I think it’s worth having our own discussion about this important topic here.

I’ll start!

The silly salary negotiation myth

The myth that “whoever says a number first in a salary negotiation loses” has become penny-ante advice served by self-anointed negotiation experts and career coaches who feel safe telling you “it’s best not to say or do anything!”

That’s bunk. Researchers in behavioral economics give us clear guidance from their work on the anchor effect. To wit:

“A well-known cognitive bias in negotiation, anchoring is the tendency to give too much weight to the first number put on the table and then inadequately adjust from that starting point…”

What this essentially tells us is that whoever puts the first number out there can effectively control the final number agreed upon. That Harvard Law School reference isn’t much fun to read. If you’re serious about negotiating, please study William Poundstone’s excellent (and very readable) Priceless: The Myth of Fair Value (and How to Take Advantage of It).

Then read Predictably Irrational by the brilliant behavioral economist Dan Ariely. Don’t fall victim to old wives’ (or husbands’) tales about who goes first. Who wins is who knows what they want and takes control of the negotiation immediately.

Why salary is called compensation

In the rush to negotiate the best deal possible, job hunters every day forget what they’re negotiating for. You’re not negotiating money. You’re negotiating the price of freedom to do the job without distraction.

The money and benefits a company bestows on you in exchange for your services should completely free you from worry about the demands of your personal life so that you can devote your time to, and focus your energy on, the work the employer needs you to do.

Literally speaking, a good job offer should “relieve, equalize or neutralize… pressure or stress” associated with any aspect of your life that might distract you from the job. That’s what compensation means.

It matters that you’re earning what you’re worth and that you’re earning all you can. But, a good job offer starts with a company taking care of your needs so you can take care of its needs. It ensures that the employer has a healthy worker. That’s the foundation of a good deal. And that’s why it’s called compensation. (A living wage is fundamental to commerce. It’s why I take the position that a healthy national minimum wage is so important.)

How to decide how much you want

So, how much salary, or pay, or compensation do you tell an employer you want?

Once we understand the anchor effect, we want to make our stated desired salary as high as possible — without jeopardizing a job offer altogether, if we can help it. We want to make our number the anchor for negotiating.

It’s important to have an idea of how much money you’re worth when considering a particular job. But, it’s also important to know how much you want. This is a very personal decision.

Few things are more painful than accepting an offer only to realize that you were wrong about what you really wanted. I have a simple method to help a job candidate understand what they want with regard to pay.

Consider the specific job at hand and ask yourself three questions, so that you’ll have three ascending figures to work with:

  1. What is the least amount of money I would accept to take this job?
  2. What kind of an offer would put a smile on my face and make me happy to take the job?
  3. How much money would make me jump up and down with glee, and make me want to start work tomorrow? (Caution: this last figure must be reasonable.)

Don’t take the job unless you can negotiate the offer to somewhere between (2) and (3). If an offer isn’t going to at least make you happy (2), it’s not worth accepting. If it doesn’t come close to making you jump with glee (3), the job probably won’t, either.

Express this number as a range so you’ll have wiggle room. You might even note to the employer that if you learn during your interviews that the actual job turns out to be materially more involved or demanding than what they expressed, then your range may change, too.

Finally, ask them whether that’s in their range, and whether they want to proceed with serious discussions about working together —- that is, a complete job interview. It’s actually best to point out that since you’ve disclosed what you want, you’d like to know what their salary range is for the job. But most employers won’t tell you.

Who wears the negotiating pants?

Employers could save themselves a lot of time and trouble by setting a realistic anchor when they post a job. They should post the salary range with it! Why is it a secret anyway? In my experience, most of them are surprisingly naïve. They believe they really might get a bargain because they’re such good negotiators! They’d do better to invest time with candidates that know the salary range in advance. That’s right: A smart employer will set the anchor point first!

Now for the put-on-your-big-boy-or-girl-pants. Two things.

First, if you’re afraid that naming a salary range will put you at risk of getting a lower offer than the employer is willing to pay, let me put your mind at ease. It is highly unlikely that the employer will hear your range and smirk to themselves, “Wow! What a fool! We were going to offer double that! We’ll save a ton!”

It doesn’t happen. At worst you might leave a few dollars on the table. Chump change compared to the salary. If  you want to wear the pants in a negotiation, take control of the terms immediately.

Second, the far greater risk is letting them set the anchor. That is, you state no range at all and then the employer makes a low offer after you have invested hours and hours talking with them. Now you’re forced to negotiate from a lower number.

Salary Negotiation: Know what you want and say it

If you don’t establish that anchor before the interviews start, don’t be surprised when the employer sets the anchor with the job offer. Oh, you can negotiate. But unless you are a truly stellar candidate, the final offer is not likely to be much higher.

Know what you want. Don’t be afraid to set the anchor. And be ready to hitch up your pants and walk away if the offer is not what you want — or more.

How do you negotiate compensation? At what point do you make clear what you want? What makes you walk away from an interview or a job offer? Has anyone ever told you it’s crass or unprofessional to bring money up “too soon?” Has an employer ever told you that “your concern about money reveals that you care more about money than about the job and our company?”

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23 Comments
  1. First?

    I never give a range. Seriously, if I offer X to Y, do you really think an employer – knowing you’d be OK with X – will offer Y? I give a baseline number that is, at a minimum, meeting your “2” criterion.

    Now interestingly, and to my astonishment, my last FT actually came back with an offer that was well above that number. But that’s the sole exception in my career.

    Look, “someone” has to mention a number first. Do you want it to be you, understanding what your needs and worth are, or the employer, whose number then sets the table?

    One more thing: Your ability to negotiate depends strongly on your ability to walk away. Yes you can dicker over a thousand or two, but to be able to push back in any substantive way you have to have leverage on that. If you’re one of 20 people in the queue with no specific and unique-to-you skills (you may think you’re a special snowflake, but odds are you’re not) then your ability to press hard is limited.

    • As I’ve mentioned a few times already, if you want to learn some excellent negotiation skills, one of the most important being, “No Deal is Better than a Bad Deal”, please read “Never Split the Difference: Negotiating As If Your Life Depended On It,” by Chris Voss.

      He explains the underlying philosophy of why different negotiation processes work and where they work, and provides examples and tools. One of which is called the “Negotiation One Sheet.” Take a look at it, via your favorite search engine.

      Much of what Voss writes is exactly in step with what Nick has been trying to teach us over the years, namely, if you don’t know what you want and how the other party can provide it, why are you even pursuing the relationship? And, just as Nick reminds us that it is our job to show how we will do the job for the benefit of the company, Voss teaches that it is our job to show the other party how much *they* will benefit by giving us what we want.

      The entire interview process should be viewed from the concept of anchoring. We need to anchor in the hiring manager’s mind that her company will be at a loss if they don’t hire us right away.

  2. I think preparation is key here.
    This past January I started a new job. Leading up to that I interviewed for at least 6 different possible employers. When the HR person contacted me to schedule an interview, I asked about the pay band. I almost always got a salary range for the position I was to interview for. If it was not sufficient, I opted out of the hiring pool.
    A candidate should have a basic knowledge of what a position is worth AND what they are worth in that particular circumstance. That will buttress the candidate’s position and should make it easy to set a final salary.
    It comes down to:
    Don’t be afraid to ask what the job pays (at appropriate times). If they low ball or play games, then walk.

    • Being able to walk assumes you have the capability to do so.

      So, if you don’t… take what you can get, squeeze / leverage them for training, be looking for a new job from Day One. And when you leave, tell them why.

      The days of loyalty to an employer are over.

  3. A couple things…

    First, we will never be in a stronger position than when they extend and offer.

    Second, salary is only one aspect of compensation. No shortage of the stories where a generous salary is dangled, but the other benefits are &^%!.

    Oh, and everything in writing. Everything.

    • @Gregory: First – Yup! Second – Yup! And, oh – EVERYTHING in writing!

  4. “Has an employer ever told you that ‘your concern about money reveals that you care more about money than about the job and our company?'”

    I don’t know, but part of me would really like to flip the script if someone threw that line at me: “Is your company so fixated on money that you’d rather save a few bucks and hire second-rate talent?”

    That would no doubt put an end to the interview right then and there, but in that case that would be a Good Thing.

    • @Askeladd: I included that question in the column because I’ve encountered it myself. It’s absurd, isn’t it?

      My response to that would be, “What would your VP of Sales do with a sales rep who said something like that to a prospective customer? That is, your concern about money reveals you care more about money than our product and our company.”

      I never cease to be astonished at how employers and HR suggest that money should not be discussed up front! They’ve brainwashed job seekers to the point that even recruiters, career coaches and others in the employment biz repeat that nonsense as if it were legit!

    • As if employees go to work to be nice to the company? Sure, better with an interesting job than a boring one, better to feel you have stake in something rather than just a place to get paycheck – but in the end, it is a professional exchange of money for producing result.

    • Askeladd, BTW, your nickname and avatar might indicate you also are Norwegian?

      • I was born in the US but all my grandparents were from Norway. I’ve been there several times, including a year at a folkehøgskole. I drew Fiskergubben because my grandparents used to have that picture, and my tremenninger have a fishing boat ;)

  5. Coming from the employer side, I’m always shaking my head at two things:

    1) Not addressing compensation very early in a conversation (before interview!) to make sure everyone’s in the same ballpark. Yes, that means employers ought to be communicating a salary range. Why are you wasting everyone’s time if you are $30K apart? Also, having this information early can influence how hiring happens. I want X experience, I thought that would cost $Y, but I now know it’s $Z. Either I need to adjust my expectations (e.g., job posting) or alter my offer.

    2) Undercutting a great prospective employee by offering $5K less than they requested. It’s as if this is an adversarial situation and someone “won” by getting a new employee for less than they wanted. Rather than coming in with enthusiasm and bringing far more than $100/week extra value, they come in slightly discouraged and watching for the next shoe to drop on how you will disappoint them.

    Makes no sense to me as someone who wants to hire great people and have them kicking into high gear from the start.

    • @Annette: My compliments for handling job offers and negotiations as if the outcome will affect the success of your business and your employees. Managers should clip your post and hang it in their offices where they can see it every day.

      You know that I advise job seekers never to disclose their current salary (or history). But I also preach that they should be prepared to state what they want, just as employers should state a range for the job. If I had a choice, I’d prefer that the employer quote the salary range for the job, and that the job candidate merely acknowledge whether “we’re both in the same ballpark.” Disclosing even a desired range makes it harder for the applicant to negotiate. Meanwhile, the salary range on the job is pretty well fixed. The point, of course, is to establish in advance that both parties are in the same range.

      I also agree with your (2). I’ve seen companies lose great candidates just to prove they’re tough guys — over a few thousand bucks!

  6. Nick,I was a little surprised to read your definition of compensation. My definition is that it is the whole package with health insurance, 401K maybe with matching, paid time off, etc. Perhaps the column size is insufficient for discussion of all aspects?

    Whatever the case, your standard advice of thoroughly researching the employer will pay off big time. For example, given the choice, I would not choose to work where only catastrophic health insurance is offered.

    • @Kathy: You’re right, of course. There are many components of compensation including those you listed. And all of them are negotiable. In fact, if you can’t get the money you want, the job may be worth taking anyway if you can get other kinds of compensation.

      In this column, I was trying to keep the focus narrow because the message is how to ask for money. But your point is well-taken and a good reminder to everyone.

      Usually I have another article I can refer to when a question like yours comes up. To my surprise, it seems I’ve never done one here on the website about “other kinds of compensation.” I just added it to my to-do list!

  7. Your comments suggest to me you are living in an ideal world. People who have been downsized, people who are over 40, people who have health concerns may not be able to go between #2 and #3. People who need to ask for a more flexible schedule due to child care issues also may not be able to do that.

    In some circumstances, settling for #1 may be the best decision. Yes maybe you won’t like your job but maybe, you have accepted that. Some will continue to look for a better job and/or get more training.
    Some may be willing to give their new job a chance and see what happens.

  8. Negotiating is a skill. I want something you need something. I need something you want something. I want something you want something. I need something you need something. When you negotiate in the market car repair, shoes, painting the exterior of your home(which I recently did.), home appliances, etc. The better you get at it. I will always recommend to start to negotiate with things low in price and away from personnel connection and also be fair to yourself and the other person in regards to price/time/location. If you over paid or it wasn’t the time or place don’t beat yourself up on this. Account for all you have learned. Write your experiences up. Take a step back. Could you have approached negotiation better or was just a waste of time. Write what was said and how you felt.

  9. Painted the exterior of my house recently and my quote ranged from $3800k to $8k for 2200 heated sqft home. Some quotes very little detailed others with some and others with me writing the proposal paint job via text. If could show my housing paint pictures I would. Since the lowest bid was $3800.00 and the painter wanted $600 up front and we both agreed that would be fine after the crew finished prepping the house and if we both feel comfortable then I would give him the money. It all worked out and I even tipped the 3 crew members and the owner. Making it $4k. One base coat and one top coat. Plus the one top coat for the trim of the house. Higher quality paint (SH-Duration-Exterior). By the way I selected him and he was a painter that I had to write the proposal up for via text. So the point is negotiating is a skill. Two parties meet and come to the table or ground to hash out if they can make a hiring arrangement.

  10. There’s some good points in here, but quite a few that I’ll disagree with.

    The point about “those who name first loses” is mostly correct, but I and others I know have been snatched by it. A previous employer asked me what I would like to make, I named a figure, they approved. Later on, talking with some coworkers, I learned that most there were making 5-10k/yr more than I was — and I was at a higher skill level than most of them. That was a case of the employer realizing they could undercut me and get away with it. At another one, I had my boss hear my number at the interview, offer me 5k more, then offer me another 5k more, because he saw the value I would bring. Granted, both are anecdotal and only a few examples out of thousands or millions, but it can show that revealing your cards too early can be a bad plan depending upon the mood.

    Historically, whenever I’m dealing with a third-party recruiter, I ask what the listed range for the position is. This tells me two big things:
    1) What kind of employer it is, for starters. I had one try to approach me for an expert level position that wanted a lot of skillsets…for 75k/yr. They wanted prime rib at hamburger prices. If they’re going to be that cheap there, I can only imagine what else they’re going to cheap out on. It tells me early on if I need to bail or if there’s unspoken details about the role.
    2) If there’s even a position. If the recruiter doesn’t want to tell me the range, and insists that they need to know what I made or what I want, it tells me that they’re trying to use me to find market data rather than do the research themselves.

    Anyone who says that a range isn’t going to be had, you’re full of it. Everyone knows you adjust based upon the experience that someone brings. Someone who’s perfectly qualified for the role and can easily start at full speed is going to get more than someone who’s partially qualified and will need some training to get moving.

    • @Darron: I’m a little confused because you end the first part of you post by saying:

      “Granted, both are anecdotal and only a few examples out of thousands or millions, but it can show that revealing your cards too early can be a bad plan depending upon the mood.

      In both cases, you stated a number first. In one case you got less than you learned you were probably worth. In the other case, you did the exact same thing and got more than you asked for. So it seems that there’s no correlation between stating what you want and the outcome. Am I missing something? (Of course, the other factor here is the integrity of the employer, but that’s another issue because you didn’t know that at the start.)

      I agree with the rest of your post. You have to draw a line!

      • Both were examples of how it can go either way. I’ve heard lots of cases of revealing that number first can be damaging. It either says that you’re worth less than you actually are (and that can give a number of impressions, such as being bad with figures, being less experienced/skilled than you actually are, etc.) or that you can be undercut. I was trying to temper that with an example of how it can go right so it’s not a complete negative as that’s untruthful.

  11. Rather than wasting my valuable PTO time, or raising suspicions, as I’m currently employed, during the initial telephone or email contact, unless the employer divulges the salary range, I cut to the chase and ask what said salary range is quickly. Most employers will come back with the “what salary are you looking for”? I’ll reply “again, I’m looking for your salary range”. If they fail to give me this info, I say goodbye and hang up, or I don’t answer their email again. Still yet, some employers are evasive and “him-haw around” when one inquires about wages, or they get triggered, and subsequently end all talks.
    The worse toxic employers I’ve had have offered low ball wages.
    My litmus test today first looks at compensation, and if it’s substandard and uncompetitive, that tells me all I need to Know/

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