Make the First Offer in a Negotiation(inc.com)
inc.com
Make the First Offer in a Negotiation
http://www.inc.com/drake-baer/why-you-should-always-make-first-offer-in-negotiation.html?cid=sf01001
13 comments
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> I think the reason "Let them make the first offer" is such common advice is because most people, when faced with the prospect of choosing a number, usually go too low, perhaps out of discomfort with appearing arrogant or for fear of losing an offer entirely. The former's probably the bigger concern for engineers, given how notoriously bad at appropriately valuing their own skills they are. The latter is rare in tech, but is occasionally a legitimate concern for other fields with worse job markets.
I don't think it's really unique to tech. The information asymmetry you describe below is more than enough reason for this to apply to nearly any prospect in any field, and it applies doubly in situations where the pay is generally low to begin with (eg. shiftwork).
Only the most exceptionally informed prospects will be able to make an opening offer that won't stand a good chance of getting them shafted.
I don't think it's really unique to tech. The information asymmetry you describe below is more than enough reason for this to apply to nearly any prospect in any field, and it applies doubly in situations where the pay is generally low to begin with (eg. shiftwork).
Only the most exceptionally informed prospects will be able to make an opening offer that won't stand a good chance of getting them shafted.
I'd agree with it being an "advanced technique" in the sense there's a skill to getting the figure right, but I'd actually argue that when it's optimal, it's because it doesn't require much actual negotiation skill to pull off e.g. in the common situation of knowing they won't pay much of a premium over a well-established market price, you may as well start off with a bigger premium
More negotiation skill is required to credibly threaten to walk away or justify your worth after they've opened by lowballing you.
If you do have reasonable negotiation skills and enough insight into the other party's assessment of your value to avoid underestimating how much they think you're worth, you can probably hint you know the size of that value and anchor their offer to it without making the commitment of an actual offer anyway.
More negotiation skill is required to credibly threaten to walk away or justify your worth after they've opened by lowballing you.
If you do have reasonable negotiation skills and enough insight into the other party's assessment of your value to avoid underestimating how much they think you're worth, you can probably hint you know the size of that value and anchor their offer to it without making the commitment of an actual offer anyway.
based on what I read here about making the first offer, I'd agree
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It's pretty hard to evaluate how much you're worth and how much you would be to a company and job you know little about. You can ask questions and get the gist of the business, but until you're in and truly know how the system and company runs, it's very hard.
Nazareth College revoked a job offer when a candidate tried negotiating: http://www.slate.com/articles/life/education/2014/03/nazaret...
4 of the 5 things she requested were things that would result in her doing less teaching. That's a pretty big red flag when the job she was offered was primarily focused on teaching.
If a software developer tried to negotiate that no more than 50% of their time would be spent developing software, they would probably also get some offers rescinded.
If a software developer tried to negotiate that no more than 50% of their time would be spent developing software, they would probably also get some offers rescinded.
Well, not worth it working with these kind of bosses in the first place.
That's an interesting article, and an excellent response from the college. You can't negotiate a cultural fit, and her list of "requests" likely flagged her as a potential problematic professor (excuse the alliteration). Probably worked out best for both parties involved.
A book I read about negotiation some years ago included the principle "shock 'em with your first offer." In other words, make the first offer (which you should be the one bringing up) so favorable to you in its terms that you nudge the other party into budging from their position closer to yours. It's worth a try.
If you are going to attempt to use this tactic, the most important thing to consider is that your offer must be within the range of reasonableness. "Shock 'em with your first offer" is a good sound-bite, but make sure not to actually shock them. If the number that you propose is outside the range of reasonableness, an experienced negotiator will "wipe it off the table" and re-anchor.
For example, if you are negotiating your salary for a first-time software engineering gig and open with $500k, the other side is likely to say something like, "There is absolutely no way we can do that. We would like to offer you $75k." If you're offer gets wiped off the table, your anchor has absolutely no power in the negotiation.
So go high (or low, if you're on the other side of the table), but don't be too extreme.
For example, if you are negotiating your salary for a first-time software engineering gig and open with $500k, the other side is likely to say something like, "There is absolutely no way we can do that. We would like to offer you $75k." If you're offer gets wiped off the table, your anchor has absolutely no power in the negotiation.
So go high (or low, if you're on the other side of the table), but don't be too extreme.
There's also the potential that the offer gets pulled because they realize you're not a good fit based on the large salary range discrepancy. If I'm hiring for someone at $50K and they're asking for $150K, I know that there's a good chance the employee will end up being unhappy financially and looking for another job anyway if we compromise closer to $75K.
You never know for sure, but I believe this happened to me. I had a follow up call with HR about why they weren't continuing with me despite what felt like a good "getting to know you" introduction interview.
The gist of the answer was "we feel that you are in range of [some job level/position] but only the very senior people in that department are paid in the range you mentioned as your requirement."
So they decided not to spend any more time with me because of the mismatch of salary and their perception of my experience level so far.
The gist of the answer was "we feel that you are in range of [some job level/position] but only the very senior people in that department are paid in the range you mentioned as your requirement."
So they decided not to spend any more time with me because of the mismatch of salary and their perception of my experience level so far.
Also known as anchoring[1] which is exactly what the article is about
[1] http://en.wikipedia.org/wiki/Anchoring
[1] http://en.wikipedia.org/wiki/Anchoring
It works for me in dating. Most guys when they talk to a girl will ask for her number so much so that most women are auto-programmed to play hard to get about giving out their number.
So I tried something and it works a lot better: I ask them for a concrete date/time we can meet again for a date. I give zero importance to their number. Qualitatively, I think most girls are "shocked" and not used to someone telling them their phone number is completely irrelevant.
So I tried something and it works a lot better: I ask them for a concrete date/time we can meet again for a date. I give zero importance to their number. Qualitatively, I think most girls are "shocked" and not used to someone telling them their phone number is completely irrelevant.
Shock me with up to 20 percent over what you believe i expect to pay. Not any more.
therefore if you're an engineer and the typical job is 100 thousand, ask me for 120 if you want to play this game. It is unlikely this would shut down the conversation though it may send up a warning flag.
Anything over that and I don't see a point to continue the conversation. I wonder if you are clueless about your value or if you are a diva who will cause too many headaches later. You can't take it back either.
therefore if you're an engineer and the typical job is 100 thousand, ask me for 120 if you want to play this game. It is unlikely this would shut down the conversation though it may send up a warning flag.
Anything over that and I don't see a point to continue the conversation. I wonder if you are clueless about your value or if you are a diva who will cause too many headaches later. You can't take it back either.
Bargaining 101
Interesting perspective. The biggest negotiation point for most people is the job offer, and the usual advice for that is to, as an applicant, never give them a number first. Perhaps the more important points are:
1. Never give them any of your previous salaries, as this may anchor you to a much lower price than they are willing to pay for your talents
2. Never negotiate salary before they have conditionally agreed that they want to hire you, as this is when their perceived value of you is the highest. If you start negotiating before this point, their value of you will be lower, and you'll have to either refuse to go down and have to break off the whole thing, or anchor yourself to a lower number than your talents are really worth.
On top of that, giving them a number first is usually not to your advantage, as you probably have less information about what the market is really like and what they are really willing to pay for you, but this is a weaker point than the above two. It could go the other way in some situations, especially if you have some sort of rare, special skill or connection above and beyond the typical salaried employee.
1. Never give them any of your previous salaries, as this may anchor you to a much lower price than they are willing to pay for your talents
2. Never negotiate salary before they have conditionally agreed that they want to hire you, as this is when their perceived value of you is the highest. If you start negotiating before this point, their value of you will be lower, and you'll have to either refuse to go down and have to break off the whole thing, or anchor yourself to a lower number than your talents are really worth.
On top of that, giving them a number first is usually not to your advantage, as you probably have less information about what the market is really like and what they are really willing to pay for you, but this is a weaker point than the above two. It could go the other way in some situations, especially if you have some sort of rare, special skill or connection above and beyond the typical salaried employee.
Job seekers who throw out ridiculous numbers as a starting point lose credibility and find themselves backpedalling to try and regain that credibility farther into negotiations (if negotiations even continue). In my career I've seen candidates do this enough that it bears mentioning when we are about to enter negotiations, particularly with younger candidates who haven't held many jobs.
The anchoring concept is somewhat skewed when you are asked to provide current comp info. Most of my clients (recruiter) require me to provide prior info. The current comp info provides an anchor right away, and any accompanying information with the current comp will be the true anchor. So saying "Candidate is currently earning 120 and will entertain offers above 135." The client now knows where the bidding starts, so any offer below that won't be considered.
The anchoring concept is somewhat skewed when you are asked to provide current comp info. Most of my clients (recruiter) require me to provide prior info. The current comp info provides an anchor right away, and any accompanying information with the current comp will be the true anchor. So saying "Candidate is currently earning 120 and will entertain offers above 135." The client now knows where the bidding starts, so any offer below that won't be considered.
I was looking at changing companies many years ago, from a large company to a small company. With the large company, I had lots of benefits that I would lose by going to the small company. Regardless, the small company was attractive. I also had the advantage I didn't need to change jobs.
When the vp of the company asked what I wanted, I gave him a figure that got his attention. He remarked it was beyond what they could do. I responded that the amount I was asking essentially covered the benefits they didn't give. When they finally made an offer, it was almost exactly what I requested.
When the vp of the company asked what I wanted, I gave him a figure that got his attention. He remarked it was beyond what they could do. I responded that the amount I was asking essentially covered the benefits they didn't give. When they finally made an offer, it was almost exactly what I requested.
Except if the person you're negotiating with is willing to pay more than your initial offer. then they would happily pay you less than what they expected to
Wall Street has an expression: "Bears make money; Bulls make money; Pigs get slaughtered." Its OK to leave a little money on the table.
If I'm willing, even happy to take the job as described for 100k, that I might have pushed him up to 125k is probably not relevant. Other factors in the job will be more important by that point.
If I'm willing, even happy to take the job as described for 100k, that I might have pushed him up to 125k is probably not relevant. Other factors in the job will be more important by that point.
Sure, a successful negotiation almost invariably results in a situation where they'd have been willing to offer even more if they needed to, and you'd have been quite willing to accept less.
But rushing to be first put an offer on the table that is lower than the offer they were about to make you is almost[1] invariably stupid. And at the risk of stating the obvious, most contract negotiation isn't like employment in that pretty much all the party paying the fee is offering is the cash.
[1]the exception being where there's a good chance that appearing to be "fair" or "cheap" will help you get a better offer in future, or prevent you from being gazumped at the last minute.
But rushing to be first put an offer on the table that is lower than the offer they were about to make you is almost[1] invariably stupid. And at the risk of stating the obvious, most contract negotiation isn't like employment in that pretty much all the party paying the fee is offering is the cash.
[1]the exception being where there's a good chance that appearing to be "fair" or "cheap" will help you get a better offer in future, or prevent you from being gazumped at the last minute.
Where is that exception that appearing "fair" or "cheap" helps you? If there's another candidate equally qualified and liked by the company, they company will hire the cheaper one - but as a candidate, you shouldn't bank on this situation happening. If you were hired as a "cheap" employee, when a new position or opportunity comes up, you would have to negotiate yourself up to your fair-market value and then some in order to get that better offer. Better to start high and work higher than come-from-behind with a low price anchoring your value.
Well ... kind of.
"'My own research suggests that first offers should be quite aggressive but not absurdly so', Galinsky says."
Make the first offer, but only if you're pretty sure you know at least as much as the other side about what's reasonable. If you're not in the right ballpark, an absurd offer gives the other side the right to sandbag, knowing that you don't really understand the playing field.
"'My own research suggests that first offers should be quite aggressive but not absurdly so', Galinsky says."
Make the first offer, but only if you're pretty sure you know at least as much as the other side about what's reasonable. If you're not in the right ballpark, an absurd offer gives the other side the right to sandbag, knowing that you don't really understand the playing field.
If you are buying or selling, understanding the market price for what you've got will let you know if you're making the right deal or not.
Job offer negotiations sort of suck in this regard because you often don't know the market price, and if you set your number too low in your head, you're pretty much stuck starting off lower than you should and that can impact your entire career.
You might think you're doing good negotiating, but the guy next to you might be making 10-25k more a year just because they started at a higher number. It's weird but true.
Same applies to buying or selling just about anything. Have as much data going in as you can about what is normal, fair, etc. and compare that to what you want.
Job offer negotiations sort of suck in this regard because you often don't know the market price, and if you set your number too low in your head, you're pretty much stuck starting off lower than you should and that can impact your entire career.
You might think you're doing good negotiating, but the guy next to you might be making 10-25k more a year just because they started at a higher number. It's weird but true.
Same applies to buying or selling just about anything. Have as much data going in as you can about what is normal, fair, etc. and compare that to what you want.
Happy to see someone support this approach. I think both approaches have their valid context. If you know a lot about the negotiated value then making the first offer is great because you can anchor the bargaining. But if you don't know then it's better to wait for another offer and get yourself anchored, because your own assumptions might be way off the scale and of course if you know less about the topic than your negotiation partner then of course you need to pay a little extra at some point anyway.
If you are unable to make the first offer because the other party is quicker:
- Smile, even laugh, and state your counter anchor clearly
- Never mention or repeat the other's anchor
I would only want to start with an opening price if I was fairly certain what the offer range would be. Without that info you may just hard-bargain yourself a lower salary. If you ask for something that is totally out of line with the expected range then you do risk an employer writing you off as too expensive. In my experience though, if an employer wants you and you ask for too much - they'll usually at least tell you what their upper limit is and give you a chance to consider it.
"A good negotiation is one where both parties walk away equally unhappy" - I can't find who first said this but if you know please attribute appropriately!
I know both Woody Allen and Larry David have used that line. I doubt either of them were the original, but still it's a good line!
I think the reason "Let them make the first offer" is such common advice is because most people, when faced with the prospect of choosing a number, usually go too low, perhaps out of discomfort with appearing arrogant or for fear of losing an offer entirely. The former's probably the bigger concern for engineers, given how notoriously bad at appropriately valuing their own skills they are. The latter is rare in tech, but is occasionally a legitimate concern for other fields with worse job markets.
Also, generally speaking the hiring party is at a strong advantage by virtue of both information (They know how much they're paying other people, and how much they've offered to people who've turned them down) and practice (They've carried out salary negotiations dozens of times before, while the potential employee has probably done it at most a handful of times.).
Given that, it's probably safer to let the other party open the field, and hopefully negotiate up from there.