How to Negotiate a Job Offer

How to Negotiate a Job Offer

Below is what you need to do to negotiate a job offer.

Seek to Understand All Positions and Interests: The What and the Why

Two prominent chefs are hard-pressed for time and are fighting over the last orange left in the kitchen. They both need it to finalize their recipes for the president’s dinner. After minutes of haggling they reach a compromise and split the orange in half and rush to finish their dishes.

One chef squeezes the juice from his half orange and pours it into the special sauce he is making, but the juice wasn’t enough for his recipe. The other grates the peel from the other half of the orange and stirs the scrapings into the batter for his cake, but he too didn’t have enough peels for his cake.

The irony is that one chef only needed the peels and the other only needed the juice. The obvious mistake both chefs made was they focused on each other’s position (the what) and not each other’s interests (the why). Both chefs would have been better off if they had peeled the orange and taken the parts they needed.

The above story illustrates the importance of seeking to understand one’s own positions and interests as well as that of the other party.

 

Gather Relevant Information: Knowledge is Power

It is imperative to learn as much as possible about the person or company you are negotiating with. Understand their motivations, limitations, positions, interests and priorities. Search Google, social media and other publicly available sources of information as part of your research. Within reason, reach out to people close to the negotiating party and learn as much as you can. Information gathering is not limited to learning about the counter party. It is equally important to understand your own motivations, positions, interests and priorities before beginning any negotiation.

Some information to gather before entering a negotiation includes:

  • Who are the competitors to the company?
  • What is the typical salary range for similar jobs?
  • How much are people in similar roles making at the company?
  • How well is the company doing?
  • Who is the hiring manager?
  • How many people are applying for the same position?
  • Is there flexibility for negotiating a salary? If not can bonuses or other perks such as vacation or work from home be negotiated?

 

Understand the Constraints

The very nature of a negotiation implies the existence of constraints. It is absolutely important to establish for yourself the minimum you would accept in a negotiation. It is equally important to understand what the other party is willing to offer or accept.  This is called the reservation point.  It is the point beyond which a party will not go. We will use the purchase of a house to illustrate this point.

Reservation Point 300x78 - How to Negotiate a Job Offer

The reservation points in a real estate transaction for a seller is the minimum price at which they would sell a house. For the buyer it is the maximum amount of money they are willing to pay for the house. The bargaining range is the distance between the two reservation points. It is also called the Zone of Possible Agreement.

Another potentially limiting factor in a negotiation is whether or not one is negotiating from a position of strength. Usually the person with the most time, money or options has greater leverage and may not have the incentive to compromise. For example, if you are desperate for a job you will probably not have much leverage when it comes to a salary negotiation. To counteract this, make sure you find alternatives in preparation for the real possibility that you may have to walk away. Also make sure that you understand what you bring to the table and your own constraints. I recommend creating an inventory of your best qualities and constraints so that you do not sell yourself short or ask for a pie in the sky.

 

Build Relationships

A recurring theme we observe in our everyday experiences is that good relationships are a fundamental requirement for a successful life. People will walk through fire to make things happen for you if they trust and like you. The deeper the relationship, the greater the probability of success in almost any endeavor, including negotiations.

We advise to play the long game when it comes to negotiations. As much as possible, take time to cultivate relationships with the other party. Pay into a charity or support a cause they cherish, help them organize a volunteer event, or comment on their blog posts.

 

Optimal Salary Negotiation Tactics

A question we get asked a lot is, “What are the best tactics to use during a salary negotiation?” We invite you to come along for the ride to discover some key negotiation tactics. This chapter is based in part on insightful studies on negotiations at MIT. For a more in-depth look at this and other topics please visit MIT Negotiation Basics.

Step 1:

Write down your interests and reservation points (the minimum salary and conditions you are willing to accept).  Things could change so revisit these points as you gather more information or your situation changes.

For example, if you are seeking a salary of $130,000 and are absolutely determined not to accept a salary less than $100,000, a life situation or circumstance could force your hand one way or the other.  On a positive note, you could come up with a business idea and decide that you are no longer available on the job market and will go make millions for yourself; on the other hand, a medical emergency could cause you to accept a lower salary than your preferred minimum.

I strongly suggest doing a pre-mortem and imagining what could go wrong or what your options are if you don’t get the job. Always think about a Plan B in advance.

Step 2:

Research the interests and reservation point of the employer. The reservation point for the employer is the maximum they are willing or able to pay. A good starting point is to use online resources such as Glassdoor.com, Payscale.com or Salary.com to find out the range of salaries offered for similar positions and locations. In some cases, an employer cannot offer a salary beyond the range posted. In all cases, remember that the salary is not the only thing you can negotiate. Complete your research on vacation, bonuses and other benefits and keep these in mind.

Step 3:

Ask for an amount as close to the reservation point of the employer as possible (preferably a range with one amount is two percent lower than the employer’s maximum and 10% higher than it). This is especially true if you have all the relevant qualifications for the job and leverage.  For maximum leverage, I recommend having more than one job offer at hand and starting your job search before you need actually need to. It’s no fun having to find a job while struggling to pay the rent and other bills.

Knowing who the company’s competitors are or what the market pays for the position is critical. However, it is important not to get hung up on the salary alone. In some cases, it is possible to negotiate items like longer vacations, student loan assistance, scheduling and more.

Step 4:

Seek a settlement as close to the reservation point of the employer as possible. However, be willing to move your own reservation point if circumstances dictate that. For instance, the salary may be less than what you want but the job itself may open the door to much greater opportunities.

Step 5:

Seek a win-win situation by doing your best to ensure both you and the employer are satisfied with the outcome. This may not happen right away, so try to keep your employer’s interests and constraints in mind.

Step 6:

In a perfect world, you would get everything you ask for and happily go on with your life. Unfortunately, reality requires some give and take in negotiations. See the big picture and be willing to compromise within reason. In cases where a compromise cannot be reached, be willing and ready to walk away.

Keep in mind the incredibly powerful lyrics from Kenny Rogers famous song the gambler:

“You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run”

 

Mahama Nyankamawu

Author, Career 3.0

 

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