November
2005 - Negotiating salaries
Can you recall your last successful
job interview? How did you fare when it came to
the pay and benefits? Did you negotiate or did
you accept the salary that was placed on the table?
According to the authors of a
new book, more than half of us never bother to
discuss the pay when we are offered a job, even
if it is less than we expected. Why is this? Are
we afraid of sounding greedy or of upsetting the
feelings of our new employer?
Robin Pinkley and Gregory Northcraft,
two US business academics, say that too often
when we receive a job offer we either accept the
terms and conditions that are put before us or
we negotiate clumsily without considering the
options.
Their book, Get Paid What You're
Worth*, suggests that when faced with a discussion
on the terms attached to a job offer most of us
feel inhibited by a whole list of fears relating
to worries about causing a loss of face on either
side or even losing the offer. It is as if we
imagine ourselves as Oliver Twist in the orphanage
asking for more.
None of these fears is justified,
they say. In fact, the vast majority of headhunters
and professional recruiters canvassed in their
research said that the most impressive job candidate
is one who can negotiate in a professional manner,
not one who accepts the offer as soon as it has
been made.
In the kind of jobs that normally
enjoy annual percentage pay rises, the level of
your starting salary is important because this
could be the base for increments for years to
come.
The book quotes a 1991 study
in the Journal of Applied Psychology: Determinants
and Consequences of Salary Negotiations by male
and female MBA graduates. This study found that
men who negotiated received 4.3 per cent higher
salaries than men who did not. For women the difference
was 2.7 per cent.
Mr Pinkley and Mr Northcraft
believe the less successful negotiating results
among women may reflect less assertive approaches.
This could help to explain the stubbornly large
gender pay gap in the UK, although it has narrowed
recently to about 16 per cent in the government's
annual survey of hours and earnings.
The percentage differences may
look small but if you look at the compounding
effect on a base salary of Pounds 50,000, say,
over a 50-year career with eight changes of job,
the results are staggering. Men who negotiate
(assuming the 4.3 per cent improvement in the
study findings above) will get Pounds 1.7m more
over the course of their careers than those who
do not. Women who negotiate would get just over
Pounds 1m more than those who do not.
On these figures, a failure to
negotiate doesn't make sense. So how should we
go about it? I recall a past experience that resembled
an H M Bateman cartoon when the manager who had
offered me a job was aghast that I should question
the salary.
When he got over his surprise
he made a few hasty calculations on the back of
a piece of paper that led to a substantially better
offer. But suppose he had held firm? What then?
The authors make the point that this is unlikely,
particularly if the recruiter has decided a candidate
is right for the job.
Nine out of 10 of the recruiters
canvassed by the authors said their initial offer
to a candidate was less than they were prepared
to pay and every one of them said they would expect
a candidate to negotiate. That level of agreement
looks a little on the high side for the European
market and would depend, surely, on the size of
the job. Negotiations in headhunting an FTSE 100
board director, for example, would be long and
detailed.
Would we expect first-time recruits
to be haggling? I would still not envisage a sophisticated
level of negotiation in a European graduate recruitment
exercise. But perhaps things are changing.
The American authors argue that
everyone should negotiate, even if the offer appears
non-negotiable. There was unanimous agreement
with this among a panel of 12 recruitment and
human resources experts assembled to give advice
in the book.
The book recognised that people
returning to their jobs after gaining an MBA may
experience particular problems when trying to
exploit the benefits of their business education.
One adviser argued that to get any benefit from
an MBA it would be best to change jobs because
existing employers would be less likely to view
the graduate in a new light.
Another issue, commonly experienced
among MBA graduates, is dealing with requests
to see a previous salary figure that might be
well beneath current expectations. All the experts
agree that previous job salaries should be irrelevant
but most agree that recruiters sometimes want
to take them in to account.
I am sure that most of us have
heard an employer ask: "What were you earning
in your last job?" The only possible reason
for doing this is to make some kind of judgment
about ability or experience that could be way
off the mark. The way to counter this is to have
a good knowledge of the pay levels in the area
in which you are working. Two good questions to
ask, they say, are: "why?" and "why
not?" So you might ask: "Why this salary?"
or "Why is there no resettlement package?"
As the authors point out, recruitment
involves a transaction: "It is easy to lose
sight of the fact that the real exchange is the
exchange between what you bring to the job and
what the company gives you in return." For
this reason, they argue, it is important to stress
the value that you can bring to the job, particularly
anything you consider unique.
Each party, they note, will have
a figure in their head. They gave recruiters a
list of figures and included the response of a
top candidate alongside each figure. The responses
ranged from rejection of the lowest figure, satisfaction
at the middle figure to "great pleasure"
at the highest figure. About half the recruiters
said they would offer the amount that led to a
satisfied response, 40 per cent said they would
offer a higher amount that would make the candidate
happy, and 10 per cent would offer the amount
that would secure a candidate who was, nevertheless,
dissatisfied with the sum. But all of them said
they would have paid more to get the candidate.
The evidence seems to support
their argument that if you want something, you
had better negotiate for it. But recognise that
it takes practice. A relative of mine once began
to haggle over a vase in an Arab souk and somehow
ended up paying more than the asking price.
Get Paid What You're Worth, The Expert Negotiators'
Guide to Salary and Compensation, by Robin L.Pinkley
and Gregory B. Northcraft, is published by St
Martin's Press. Price $23.95
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