When you accept a job offer, you exchange your education, experience, expertise, and effort for the salary, benefits, opportunity, and even friendships associated with the job. Ultimately each party in the negotiation must decide how much value he/she must claim to justify the exchange.

Job applicants who negotiate what they will get in exchange for the work that they do receive salaries and benefits of significantly greater value than candidates who do not. While most employers prefer that you show up on the first day happy and committed instead of disappointed and disillusioned, few will compensate you more than they need to. In fact, employers routinely will offer you less than they ultimately expect to compensate you with the expectation that you will negotiate. Of the employers we surveyed, 100 percent told us that it is acceptable for job applicants to attempt to negotiate a job offer. Of these employers 90 percent told us that their initial offer was less that they were willing to pay because they expected the applicant to negotiate. For example, when we told employers that their top applicant would

Reject an offer of $35,000

Accept an offer of $38,000, with dissatisfaction

Accept an offer of $41,000, with satisfaction

Accept an offer of $44,000, with pleasure

Accept an offer of $48,000, with great pleasure,

50 percent said that they would offer the applicant an amount that would lead the applicant to accept and be satisfied (say a salary of £/$41,000); 40 percent said they would offer the amount that would lead the applicant to accept and be happy (£/$44,000); and another 10 percent said they would offer only the amount required to produce an acceptance, even though the applicant would be dissatisfied (£/$38,000). In each case, they told us that they would ultimately pay more to get this applicant if the applicant negotiated, but that they would be delighted to get the applicant for less. Bottom line: If you want something, you had better negotiate for it.

One study found that men who negotiate receive 4.3 percent higher salaries than men who do not, while women who negotiate receive on average 2.7 percent higher salaries than women who do not. Despite the fact that few of the applicants in that study had received training in effective negotiation, those who negotiated were more successful than those who did not.

Though it is unclear why the women in the study benefited less from negotiation than did the men, many recruiters tell us that women use less assertive tactics than do men. In this book, we will explain how to use tactics that are tough when it comes to the issues, but gentle when it comes to the people involved.

A Lifetime of Benefits: The compensation package you obtain today affects your life today and tomorrow. As you may know, applicants with work experience are almost always asked for their salary history. Employers request the information for two reasons: (1) to determine how much they need to pay you, and (2) to see how you compare to others in the same market.

Good negotiators determine what issues are important to them, including: what issues they think are going to be negotiated, what issues they want to negotiate, and even what issues they may not want to negotiate. Raising an issue tells the other side that it is something you want or need to discuss. Not discussing an issue is the same as agreeing to the other side’s position on it. If you do not discuss moving expenses, it is the same as agreeing to no moving expenses! Be ready to raise all of the issues that are relevant to you. Begin by listing all of the tangible and intangible issues that can distinguish one job offer from another. Click here for a list of negotiable issues.

ISSUE CHARACTERISTICS

Every issue has two characteristics that determine how it can and should be negotiated. The first characteristic is the issue range, and the second is the issue weight.

Issue Range. At the bottom of the range is the least acceptable option (called a bottom line) and at the top of the range is the most attractive option (called a target). For example, if £/$45,000 is the lowest salary Chris will accept and he hopes to obtain £/$60,000, then his salary range is £/$45,000—£/$60,000.

Bottom Line. Carefully consider the bottom line or least acceptable option for each issue. Don’t select a bottom line unless you would reject an offer that does not match or exceed it. Inexperienced negotiators often allow trivial issues to become deal breakers because they picked a poor bottom line. The bottom line for each issue should reflect how much it would take to make a deal acceptable to you. For example, Chris selected £/$45,000 as his bottom line for salary because that figure will allow him to pay his bills, support his family, and go to work with his head held high.

You should not select a bottom line for an issue that you are willing to give up. For example, Chris did not pick a bottom line for moving-expense coverage or signing bonus because neither is a deal breaker for him. Even though he would like a high level of each, he will not reject a valuable offer just because it includes neither.

Target. At the top end of the range is your target or your best hope for that issue. Targets are derived from information like the "top" of the market (the best offers you’ve heard about). A target gives you a goal to shoot for. We find that applicants who focus on the bottom line tend to accept offers just above that bottom line. In contrast, negotiators who commit to the bottom line (are unwilling to accept offers that provide less value) but focus on the target, walk away with offers of significantly higher value.

Targets not only push you to obtain value above your bottom line but also help improve the employer’s perception of your worth. Let’s say, for example, that the market salary for the job ranges from £/$40,000 to $/$60,000. You can strategically convey your target of £/$60,000 to the recruiter by saying something like:

"I think my experience and education put me at the top of the market, which is around £/$60,000. That is the figure I am shooting for. Do you agree?"

This discussion strategically shifts the employer away from less strategic figures like the amount you are currently making, the amount he/she just offered you, or the market average. It’s better to let the employer move you down from your target than to try to move him/her up from the initial offer.

Information about what range to expect in your job market can be obtained through a number of sources. You can check with the reference desk at your local library and also get an idea in magazines and newspapers specific to your industry.

Don’t acknowledge the employer’s investment in you if you don’t really appreciate it. Don’t trumpet unique value you don’t have to offer; and don’t fake a personal connection if you can’t find one. In other words, don’t force it. If you really mean it, enlisting the other side’s help is the best way to get a negotiation exchange underway. However, if what you say isn’t true, the other side probably will find you out, and you could lose more ground than you gain. In the end, your real goal is to lower barriers and reduce defensiveness. You want to get the other side working with you, and that won’t happen if they think you aren’t sincere and credible.

Managing the Flow of Information

Once you have enlisted the employer’s help, the next step is to use that help to learn as much as you can about the employer’s issues and interests so that you can add their side of the playing field to yours. At this point, your most important goals should be:

INFORMATION-GATHERING GOALS

· To determine what the issues are for the other side

· To identify’ the employer’s underlying interests

· To understand the weight and importance that the employer attaches to the issues, as well as the employer’s degree of flexibility

DETERMINE THEIR ISSUES

When the employer makes an offer, the contents of that offer tell you what the issues are in the eyes of the employer. ‘What the offer may not tell you is which issues the employer feels strongly about—which issues the employer values, and why.

The offer also will not tell you which issues the employer sees as negotiable. This last point is particularly important. Whether an issue is important or not, it may be a policy of the company riot to negotiate it. It is important to find out where movement in the offer is possible, where movement is not possible, and why.

At this point in the discussion, it is important to focus on clarifying what you are being offered and why. It is not yet time to counter the offer or to attempt to negotiate the terms. That’s like shooting an arrow before you have a clear target. Once you shoot an arrow, you cannot take it back even if you shoot at the wrong target. There will be plenty of time to negotiate later. For now, focus on gathering information rather than on prematurely negotiating the deal.

IDENTIFY THEIR INTERESTS

Asking questions is often the best way to obtain the information you need to identify the employer’s interests. If you have done a good job enlisting the employer’s help, you will have melted some of his/her resistance to answering your questions. For issues that are important to you but have not been included in the offer, or are of lower value than you seek, two good questions to ask are "Why?" and "Why not?" If the salary seems too low, ask the employer to explain how it was arrived at—"Why this salary?" If a signing bonus is not included, you might ask, "Why was a signing bonus not included in the offer?"

Asking the "why" and "why not" questions helps you identify the real interests underlying the settlement options the employer has offered. This would be a good time to use any outside information you gathered, such as what typical starting salaries are or what signing bonuses have historically been. You might raise the question, "What are others in the company with my background typically offered?"

Keep in mind, of course, that the other side may not have the issues or interests distinction in mind. Many employers will not have consciously wrestled with what they are trying to accomplish beyond hiring you. In fact, your questions can help educate the employer about their own underlying interests. By refocusing attention on their underlying interests, you can make those interests the focus of the negotiation. The more you can focus the negotiation on what the employer is really after, the easier it is for you to identify issues and options that will satisfy both sides’ underlying interests. Understanding the employer’s underlying interests increases your flexibility for finding mutually satisfactory settlement options and, thereby, gives you a better chance to obtain the value you seek.

For example, what if the employer justifies your salary as "the same that all the new hires will receive this year"? That implies something important about the employer’s interests. It implies that the employer may be interested in equity across all new hires. That doesn’t mean that you can’t get a better salary offer. It does mean that whatever salary offer you get may need to address this interest of the employer.

DETERMINE THEIR MOST/LEAST IMPORTANT ISSUES AND FLEXIBILITY

Understanding the employer’s underlying interests is a good way to understand where movement isn’t possible or likely. It is important to remember that negotiation is not about the issues. Negotiation is about the value we obtain from those issues. If an employer can’t move on an issue, that is important to know. It means that you will have to find your value elsewhere.

Of course, understanding why the employer can’t move on an issue may give you an insight into where movement is possible or even how you can make movement possible on that "nonnegotiable" issue. It is important to understand the difference between wont and can’t. "Won’t" is usually a matter of choice. You should try to determine if there is something the employer values more that will induce him/her to change the "won’t" to "will." "Can’t" means that movement isn’t possible. Sometimes, the "why" question reveals that the person you are talking to can’t give you what you want, but someone else could! Maybe you can get that person involved in the negotiation.

Asking questions is also a good way to signal your interest in issues that are not yet on the table. Rather than saying, "I can’t consider an offer that doesn’t include moving expenses, try asking the question: "Is there some reason that moving expenses are not included in the offer?" Questions are easier to handle than demands and are less confrontational. Questions don’t say no to the offer, even when they signal that other issues or options are of interest. They simply signal your interest in an undisclosed issue and test the employer’s flexibility. The more issues you raise, the more opportunities you provide the employer to let you obtain value. In addition, the more issues you raise, the more opportunities you give yourself to find a mutually satisfactory agreement.

Taking Your Leave: Once you have enough information to understand the employer’s issues and interests, you are ready to prepare your counteroffer. Begin by thanking the employer for the offer again. Then explain that you would like some time to consider the offer. Be sure to tell the employer when he/she can expect to receive your response.

Then go home, pat yourself on the back for a job well done, and get the celebrating out of your system. Find a comfortable place to work and start planning your strategy for countering the offer. Begin by comparing what you want (your side of the playing field) to what the employer has offered. You should complete your preference sheet by adding what you have learned about the employer’s side of the playing field given the offer, your post-offer discussion, and your research.

The complete preference sheet will help you to determine all the issues in this negotiation, the likely settlement options for each issue, the value each side attaches to each issue and option, and the underlying interests that determine those values. This gives you a complete picture of the playing field for this negotiation. (It might even give you some hints about the playing field for your other negotiations!) Having done so, you can move on to applying the strategies available for expanding the pie and claiming more of its value for yourself.

You don’t obtain anything in a negotiation until the other side says, "Yes!" You can make the employer less defensive and less anxious by giving them something right now in return for their investment in you. You can give them your thanks for being considered. The first goal of any negotiation should be to enlist the assistance of the other side—to form a partnership to solve the problem, "How can we come to a mutually satisfying agreement?"

The real exchange in this negotiation is between the value you bring to the job and the value the employer offers you. Focus on the unique value you bring to get them invested in hiring you. Asking questions is often the best way to get information about what is important to them, their flexibility and underlying interests, to signal your interest in issues that are not yet on the table. Take time to consider the offer and map out your negotiation strategy before you counter the offer.

IF THE EMPLOYER NEGOTIATES ONE ISSUE AT A TIME

· Explain that what you get on one issue is less important

· than what you get on the overall package.

· Point out that there may be many combinations of the issues that would make a good package for you.

· Suggest a couple of trades that might be good for both of you.

· Consider agreeing "tentatively" on an issue if it looks good relative to your target for that issue. Do so with the understanding that you may revisit the issue later, in light of new information about the rest of the package.

Negotiating one issue at a time closes off opportunities to expand the pie and obtain more value. Only by getting multiple issues on the table can you make trades that help both sides get closer to agreement. It is particularly important to avoid negotiating one issue at a time at the beginning of a negotiation. One-issue discussions always turn into a tug-of-war—unless that one issue happens to be a compatible one! At the beginning of a negotiation, negotiating one issue at a time can set a negative tone for things that follow. This makes it much harder to use the strategies you are learning here!

TACTICS FOR EFFECTIVE COUNTEROFFERS

We suggest you use the following four-step process to deal with exploding offers.

* Lead with your target.

* Package to expand the pie.

* Justify your requests.

EXPLODING OFFERS: How TO AVOID A JOB MINE

A short fuse or "exploding offer" on a deadline sometimes accompanies an offer. This deadline can be inconvenient when you are in the midst of the interview process and waiting on other offers.

Organizations use exploding offers and other pressure tactics for two reasons; First, exploding offers increase the probability that you will accept their offer since exploding offers limit your opportunity to obtain competing offers. Second, exploding offers reduce the likelihood that the employer will lose their second-choice applicant because you waited a long time before rejecting their offer.

Applicants face a dilemma when they receive an exploding offer while waiting for a (potentially more attractive) offer from a different employer. They can accept the offer in hand, and thus forego any further search for a better alternative. Or they can pass up the offer in hand, risking the possibility that this will be their only offer. Either decision spells lost opportunity and must be avoided.

How TO DIFFUSE AN EXPLODING OFFER

· Ask the recruiter to explain the deadline.

· Ask the recruiter to postpone the deadline.

· Inform alternative organizations about your short fuse.

· Use the Farpoint Gambit

First, ask the employer to explain the reason for the short time period and specific deadline. You may be able to identify an alternative that alleviates the employer’s concerns and extends the time period. Strive to make a trade that will help both sides avoid the deadline.

Second, try to get the employer to postpone the deadline. Tell the employer that you would like to postpone the decision until you have had the opportunity to explore all of your options. Explain that this does not imply a lack of interest in their offer, only that you wish to make a careful decision that will hopefully allow you to accept their offer with certainty. Then propose a specific alternative decision date.

Third, inform your potential alternatives about your short fuse. Ask about the status of your application and determine the possibility of getting a decision from them before your impending deadline. If possible, pursue your alternatives before the deadline.

If all else fails, take the final step and use the Farpoint Gambit. The Farpoint Gambit was derived from an episode of Star Trek. The Next Generation in which Captain Picard and his crew were put on trial by a powerful alien civilization. At one point during the trial, the alien judge said, "Bailiff, if the next word out of the defendant’s mouth is anything but guilty, kill him." Picard thought for a moment and then replied, "Guilty.. . provisionally." He then went on to explain the provision, having constructively turned the table on the judge. You should do the same.

To use the Farpoint Gambit, carefully consider the offer and what it would take (if anything) to make it acceptable. If nothing would make the offer acceptable, turn it down. If you know what it would take for you to say yes right now, use the Farpoint Gambit as follows:

"I would prefer to have more time. By taking away that time, you have reduced my options. While I understand your need for doing so, it creates a real dilemma for me. I have decided to accept your offer if you can compensate me by improving the offer in the following manner. Providing you can deal with these remaining issues, / accept your offer… . provisionally."

LEAD WITH YOUR TARGETS

Once you have forestalled any exploding offers, it is time to make a counteroffer. In many negotiations, your counteroffer represents your first opportunity to suggest settlement options.

Remember that the employer’s first offer provided a chance to anchor you. Now your counteroffer provides a chance for you to anchor the employer. It makes sense to lead with your targets, the settlement option you prefer on each issue, even if you don’t think you’ll get them.

You SHOULD LEAD WITH YOUR TARGET BECAUSE:

· It lets them know what you really want.

· It allows them to see where you are making concessions.

In the give-and-take of a negotiation, the employer can’t give you what you really want if he/she doesn’t know what it is. Don’t begin your counteroffer with a compromise. Don’t begin with a settlement option below your target because it seems too far above the initial offer made by the employer. If you do this, you will have made a unilateral concession and received nothing in return. In addition, you will have guaranteed that you will not make your target.

Targets should always be high but defensible. High targets will anchor the negotiation in a favorable way to you, but only if you present a figure that you can justify. Unrealistic targets make a very poor impression on the employer and can derail the negotiation altogether.

Targets should never be made in the form of a range. A range provides both a top end and bottom figure. Ranges that truthfully represent both your target and bottom line provide the other side a dangerously low anchor (your bottom line).

AVOID THE CURSE

Because emotions can reflect transitory value, you need to manage your emotions in negotiation. When emotions represent transitory value, the passage of time can allow them to boil away, to reveal what value is really underneath. Whether you are feeling anger, joy, panic, or elation, feelings are not what negotiation should be about (unless they really are what this negotiation is about for you). Typically it is not the feelings that are the prize; it is the value you obtain from the issues that is the prize. It is not feelings you end up with. You end up with the value you negotiate on the issues. So play for time.

A good way to play for time is to ask for the current offer in writing. We suggest that you try not to accept an offer until you have seen it in writing for two reasons.

TRY NOT TO ACCEPT AN OFFER UNTIL YOU SEE IT IN WRITING

· The request will give you the time to think and check the role of your emotions before you make a decision that can determine the rest of your life.

· It is not uncommon for negotiators to agree to an offer only to discover later that they actually disagree as to the exact terms of that agreement.

A written offer provides you the opportunity to see that your perceptions and the employer’s match, and that the employer hasn’t forgotten anything you thought he/she had agreed to. If the employer says something isn’t important enough to put in writing, point out (in a friendly manner) that if it isn’t important they shouldn’t mind putting it in writing.

Extending the Time Horizon: Extending the time horizon means making concessions today for promised compensation tomorrow. This technique is a pie-expanding approach to closing that final gap between what you want and what the other side is offering, To this point in the book, we have focused on immediate, present forms of value in negotiation. However, trades that help both sides are not limited to the present. Extending the time horizon to include future benefits is another way to expand the pie.

THE "INSTALLMENT PLAN"

A simple way to extend the time horizon is to accept value "on the installment plan." When you get compensation on the installment plan, you get some now and some later. An example of accepting value on the installment plan would be agreeing to a lower salary, but with a guaranteed minimum salary increase for next year.

The installment plan is a good tactic if the employer doesn’t have any more value to give you right now. Imagine that you and your employer are still £/$3,000 apart in salary, and the negotiation has bogged down. If the employer can’t budge because there isn’t any more salary money in the budget this year, perhaps there would be enough money in the budget next year or the year after. By agreeing to the offered salary and a £/$5,000 guaranteed minimum increase above the usual merit-pay increase in years two and three, you can make it possible for the employer to give you more value.

CONTINGENT COMPENSATION

Another way to extend the time horizon is through performance-contingent compensation or "pay for performance." What often creates that final gap between what the employer is willing to offer and what the applicant wants is a difference in each side’s beliefs about the applicant’s probable performance: the value that the employer will receive in return for compensation provided. If both sides knew exactly what the applicant was worth, this would not be a problem. However, there is always some uncertainty. Employers don’t want to overpay, while applicants don’t want to undersell themselves. Furthermore, applicants are likely to be overconfident about their abilities and probable accomplishments. This means that applicants are likely to think they are worth more than employers are willing to pay.

Performance-contingent compensation is a way to bridge this gap between employer’s and applicant’s beliefs about the applicant’s probable performance. Compensation is provided at a level contingent on performance. The better the applicant performs, the more compensation he/she receives. Sales commissions, piecework pay, and performance bonuses are all examples of performance-contingent compensation.

Performance-contingent compensation can reduce the risk of uncertainty for both sides. The applicant knows that he/she will be paid commensurate with his/her performance; the employer knows that the company will pay only for performance achieved. Both sides agree that the compensation will be appropriate, even while they disagree about what the eventual performance and subsequent compensation will be.

GET IT IN WRITING

Because extended time-horizon agreements promise future compensation for future performance, they are important to get in writing. People and circumstances change in organizations. The person you negotiate with may leave the company before you ever get a chance to claim the promised future compensation. It is not uncommon, for example, for students in the midst of a company-funded M.B.A. program to find that their newly acquired company will no longer pay their tuition. It can be easy for unwritten obligations to become forgotten, so get them in writing.

"TALKING WALK AWAY"

Extending the time horizon expands the pie by including future considerations (perhaps even contingent ones) in the total value each side receives. In contrast, talking walk away is a value-claiming way to try to close that final gap between applicant and employer. Talking walk away means threatening to end the negotiation and accept an impasse.

Why would you walk away from a negotiation? You should walk away if you have an alternative that offers you more value. Getting an agreement is not always the right outcome. If the other side will not or cannot give you what you want, need, or deserve, you should walk away.

If you reach the point of walk away, it is critical to be honest with yourself and ask some important questions. Are you sure that there aren’t other issues through which you could recoup the missing value? Are you sure that your demands and expectations are realistic? Remember, you don’t want to walk away from what is actually a good deal—that’s the loser’s curse. If your answer to both questions is yes, it is appropriate to walk away (to avoid the winner’s curse).

Remember that walking away doesn’t get you what you want. Getting the other side to agree to what you want gets you what you want. Always give the other side a chance to play their final card. If something in the offer is a "deal breaker," explain this to the other side before you walk away. This gives the other side a last opportunity to make things work. Let the employer know what it would take for you to say yes and then leave it to the employer to say yes or no.

Some Conclusions on Conclusions

Keeping your attention focused on underlying interests is necessary to successfully close a deal, but it may not be sufficient. To close the final gap between employer offer and applicant aspirations may require that you extend the time horizon of the negotiation—use the promise of the future to expand the pie in the present. As a last resort, closing that gap may even require talking walk away. However, if it comes to this, always remember that talking walk away works best when it accomplishes what extending the time horizon accomplishes—getting the other side to give you what you want.