What’s really going on in a salary negotiation

You’ve probably experienced a conversation very similar to the following:

Hiring Manager (could also be a HR person): So we’ve come to the end of our general interview and answered your questions. Just out of curiosity, what is your current compensation?

You: I currently make $[your current salary].

HM: Great. And what kind of salary are you currently looking for?

You: I was thinking $[your current salary + 20%]

HM: Ok, great. Well, let me talk to the other folks who interviewed you and we’ll be in touch.

What just happened

Most people (who aren’t my clients), think that some form of the following unspoken agreement just happened:

You asked how much I make and because I’m a good and honest person, I told you. You then asked me what I wanted in salary which I also told you. My expectation is that because I disclosed my current compensation, as a good faith exchange you will offer me what I asked for.

Sound familiar? If not, and you’re reading this, my guess is that consciously or not many people think this way when approaching interviews. Why? Well, after having coached many clients over the years, I’ve come to the conclusion that this line of reasoning comes from most people approaching a job interview as they would an interaction with a friend of family member. Essentially: if I help you, you’ll help me.

What the person across the table from you is thinking

In the above scenario, the HR manager is working off of a very different mental model of what is happening.

They are following a structured set of steps that looks like this

  • Find out how much they make.
  • Find out what they want.
  • Once we know how much they make, we will offer them 5-10% more than they currently make.
  • If they accept, great!
  • If they counter with what they want, offer a little more.
  • Keep going back and forth until, most likely, we settle on a number half way between what they currently make and what they want. e.g they make $100K and they want $150K so let’s keep it under $125K if possible.

But Alex, that makes no sense! I’m a top quality performer! They should pay me what I want!

That’s an excellent point! However, there are a couple things working against you.

1. The Hiring Manager’s incentives

Let’s think about it from the hiring manager’s point of view. Which looks better to their boss:

  1. “Boss, I just hired a great engineer for what they wanted in compensation! It’s above what we pay everyone else and above market rates!”
  2. “Boss, I just hired a great engineer for less than what they wanted which also happens to be less than our average. That leaves more money in the budget to hire other candidates!”

Number 2 is a whole lot easier sell to a boss than number 1.

2. Because it works the vast majority of the time

Think about your past job switches and those of your friends. What was your/their attitude at the time?

Generally, the thought process goes something like this:

I can’t take this job anymore! I’m so frustrated. I want to have a better job and make more.

They end up at the interview, go through the above conversation, get offered 5% more than they make now and are so fed up with their old company that they say to themselves:

Well, they offered me 5% more than my old job so I’ll just take it.

Hiring managers see this all the time. Roughly 50% of the candidates they interview fall into this category. Another 25% of the time, the candidate will counter and everyone ends up at the “mid point” of the current and asked for compensation.

3. Anchoring/Bracketing

The last thing working against you is what is reffered as anchoring and bracketing.

What is anchoring? Here is an example: My guess is that there are 3 million people living in New York City. How many do you think there are?

Statistically speaking, most people will guess around 3 million even though the real number is much higher. You can pick other numbers and, again, people will guess around whatever number you first give.

Bracketing is similar. If you say to a hiring manager: “I make $X and I would be happy with $Y” you just “bracketed” the offer. The hiring manager thinks “Well, they would be happy at $Y so there is no reason to offer them more than $Y”.

So what do I do?

Here a couple quick points:

  • If you are going to switch jobs, start looking before you can’t take it anymore.
  • Don’t give out your current salary when asked and don’t deal with companies that pressure you to give it.
  • Don’t give a hard number when asked what you want.
  • If you feel you have to give a number, give a number higher than you would actually be happy with
  • Be willing to walk away if you don’t get what you want.

One thing I strongly advise not to do: lie about your current salary. Why? If you get hired at the new company and it comes to light that you were dishonest about your old salary (via background check, verifying with your old employer etc), you may be in for a lot of trouble. Your new employer will most likely see this as unethical and raise questions about your professionalism in general. I do not take on clients that have done this in the past.

These are great points but how do I that?

One of the many services I offer as a career coach is how to handle these situations to your benefit. Hiring managers are at a distinct advantage in that they go through this every day. You may only have to negotiate a salary every few years.

After years of coaching clients through the same process, I can help you through every stage of the negotiation process via mock interviews, scripts and sample emails that you can use with hiring managers and together we can maximize your future compensation.

You should check out my career coaching service.

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