How to Negotiate Your Salary? Learn From Trump - Always Give Out Your Number First
If you look at great negotiators like Donald Trump, in negotiations, he always gives out the first number or sets out the terms first to control negotiation proceedings. We will later dive deeper into how he handles the trade war with China.
Returning back to today’s topic, more than 50% of candidates are afraid of negotiations as reported by salary.com. This is simply unacceptable since negotiations are big parts of our lives.
To help you better negotiate your salary, you must understand the psychological concept of anchoring. This means that negotiation proceedings are often anchored, i.e. determined by the initial set of terms laid out. This is why you should always give out the first number in salary negotiations.
Let’s look at the US-China trade war to understand the importance of anchoring. If you recall, at the beginning of the trade war with China, Trump made the initial move by slapping tariffs on $50 Billion dollars of Chinese goods, and saying if China retaliates, he will slap tariffs on another $450 Billion dollars of Chinese goods. He followed through on his commitment of slapping additional tariffs after China retaliated, which forced China to the negotiation table. Although he anchored the tariff figure to $450 Billion, he actually only slapped tariffs on a further $200 billion dollars’ worth of goods first, which was sufficient to gain power in his negotiations with China. The reason is because the initial anchor is high enough to deter China from being overly aggressive in negotiations, which gave Trump leverage.
Let’s move on to our 2nd case study about the use of anchoring in negotiations. In the Sino-British negotiations regarding the Hong Kong handover in 1997, China totally dominated negotiations with the British by setting an extreme anchor – they said they would not grant democracy to Hong Kong under any circumstance. This created an impression for the Brits that they would never be able to give Hong Kong full democracy, i.e. giving citizens a vote each to elect their own leader. The Brits had to finally settle with granting Hong Kong an extremely limited democracy, which included giving voters the power to only elect 50% of its MPs. Others were selected by small groups, including the head of the government. Upon reflection, due to this extreme anchor, the Brits were taken aback by the power seemingly imposed upon by the Chinese. This caused the Brits to become cautious about their demands, giving the Chinese a lot of space to make its own demands. The lesson from this is that setting extreme anchors can immediately give you the upper hand in negotiations, and will limit what your opponent demands.
The implication of the above examples on salary negotiations is that you should always give out the first offer so as to set an anchor for subsequent negotiations on your terms. Even if the employer doesn’t accept your initial offer, the counter offer it gives will be consciously or subconsciously affected by your initial anchor. This is how you can get favorable employment terms most of the times. However, if you allow the employer to set out its own terms first, you are handing the employer the tactical negotiation initiative, which can put you in a weak spot where you are afraid to demand what you have set out to ask for, especially if the employer has set an extreme anchor.
So what’s the perfect timing to enter into salary negotiations? In actual fact, the moment you step into the interview, you are already showcasing your worth to the employer, which will determine your bargaining power in salary negotiations. Similarly, the employer is essentially selling their worth to you as well, which is why I always tell my clients to treat every interview as a negotiation. Don’t be naïve and think that negotiations commence only when the word “commence” comes out. However, before the interviews, you should have already researched the likely salary range for the position you have applied for. If you don’t do sufficient research, you will likely give out too high a number, or too low a number, both of which can cost you your job offer since the employer may think you are not being serious.
More importantly, you should never initiate salary negotiations until your employer has raised this out, since raising this out too early may create an impression that you are money hungry. Committing this rookie mistake has costed the job offers of countless potential hires. Once the employer has raised out the subject of negotiations, you must remember to put out the first offer and explain adequately why you believe you deserve such an offer. Don’t be afraid to put out your first offer, especially when you are asked to, since you must remind yourself that you could be leaving huge sums of money on the table by letting your employer set an unfavorable anchor. You should also practice your pitch about why you deserve what you have demanded, so that you can negotiate confidently.
In terms of what exact salary figure you should lay out, you should give out a number instead of a range, since giving a range will only invite your employer to accept the lowest figure you have given. This number should also be close to the upper end of the salary range of the position you have applied for, so that you are giving sufficient space for the employer to potentially make counter-offers. Do not think you are showing humility, or that you can increase your chances of getting a job by giving a figure close to the lower end, since employers will simply accept your offer and you will have no way to bargain back. Also, think about this – if an employer turns down your offer simply because your offer is higher than what other candidates have given, it might be sign that you are not valued by the employer anyway, so always give out a salary closer to the upper end.
So how did I negotiate my first salary offer? I tried to leverage other job offers to negotiate for myself favorable terms. After graduation, I applied for a job at a top recruitment firm and researched what the typical salary range is for recruitment graduates. The problem I faced is that I was still only at the interview stage at other recruitment companies, so I had no offers at hand. So how did I create leverage? I used the excuse that I was in the final interview stages in other companies and they indicated that the likely salary is x to y, which was all true. I then leveraged that range and said that I am happy with salary z, which I made sure was at the high end of the likely salary range. Since the employer knew I was interviewing at other companies as well and wanted to hire me, they had to accept my offer, which I found out was at the highest end of the possible salary range when I spoke with my colleagues.
Here, notice that I employed a tactic called BATNA, which stands for Best Alternative to a Negotiated Agreement. This means what my best alternative is if my current negotiations fail. Having a great BATNA, or in salary negotiation terms, having other job offers at hand, is key to secure a great salary offer. If you paid attention to how I negotiated my salary, you will notice that BATNAs can be created – even though I did not have a job offer, I simply let the employer know that I was interviewing at other places which were likely to give me an offer. Creating a great BATNA, or better, having one, is key to salary negotiations, since employers that would want to hire you would need to consider if you have other potential offers at hand. If you can create a BATNA, truthfully of course, or better, have another actual job offer at hand, you will gain leverage to negotiate with your employer for favorable terms. That is why you must remember this – never let your employer know that you are not interviewing at other companies, or that you don’t have any job offers at hand, since the employer will likely use this against you to offer you a worse term. This is also why you should never apply for a single job, but apply for multiple jobs so that leverage can be gained in salary negotiations.
So to conclude, you must remember two important principles in salary negotiations. Number one, set an initial anchor so that you can control subsequent negotiation proceedings. Number two, use your BATNA as leverage, or create one as leverage, to make sure that your employer knows you have job offers at other firms. This will force your employer to give you better terms.
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