How to Negotiate a Job Offer
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A March 2015 National Longitudinal Survey (NLS) report by the U.S. Bureau of Labor Statistics indicates that, on average, Americans change jobs nearly a dozen throughout their careers. [1] What's more, many people are giving up altogether on the idea of "permanent" employment. According to research published by Intuit, by the year 2020, more than 40% of the American workforce will be "contingent workers"—hired on a nonpermanent basis and without full-time employment status. [2]
While negotiation skills have always been important, in today's fluid job market such expertise can very easily make the difference between career success and failure. If the NLS is right, you will negotiate a dozen or so job offers throughout your career. So let's have a look at what you should know before you approach your next bargaining table.
Preparing for Negotiation
Before you start negotiating a job offer, think about how much you want the job and why. Do you want the position because it's a step toward something better? Is the work itself fun? Does the position pay well? Is the job close to home?
Now think of all your alternatives. What are some other ways you can achieve the same objectives you expect to fulfill in this job? For instance, you might get the same benefits from another job that's within your reach. Perhaps getting another degree could give you the same results. The stronger your alternatives, the better your negotiating position; and when it comes to negotiating a job offer, the strongest alternative is a simultaneous job offer. If at least one other company wants you just as much, you'll have a powerful hand to play at the bargaining table.
Once you know what you want and you have an inventory of alternatives, you're ready to set reasonable objectives. Research how well your prospective company pays compared to similar companies. Then look beyond the pay and find out about the entire package. Some companies offer free lunch to employees. Others offer extra paid vacation. Look also for broad market statistics on salaries for the kind of job you're seeking.
Now list all the peripheral items to be negotiated. You may want to start the new job earlier or later than indicated in the job posting. If you've planned a trip to Europe, you may want to ask the potential employer to advance some paid vacation time, so you can use it within the first six months. If you live far from the prospective workplace, you might want to work from home one day a week.
Think also of some of the extra benefits you can bring to the negotiation. Maybe you're willing to work over the Christmas holidays. Perhaps you can start the job earlier than requested. If the organization's budget pays for moving expenses, but you don't need that money, you can offer some savings in that area. Keep a list of everything you can give to the potential employer. You can use that list later to try to get something in return.
Assessing Your Counterpart
Once you've inventoried your alternatives, think about the negotiator. Will you be negotiating with your prospective supervisor, with that person's boss, or with an HR director? How much authority does that person have for negotiating? While you're unlikely to get all of this information, try to find out as much as you can without making it obvious that you're fishing.
If your counterpart doesn't have final authority, you need to aim a little higher than the level at which you expect to settle the terms. Why? Because when the final authority gets involved, he or she is likely to try to negotiate you down a little more.
In any negotiation, each side has some power over the other side, and power comes in many forms. The next step is to evaluate your sources of power and the negotiator's sources of power.
Here are some examples of the kinds of power that might come into play in negotiating a job offer:
- Age. In most cultures, the older you are, the more respect you get. If your counterpart is significantly older than you, you might feel a little intimidated during your discussion.
- Credentials. University degrees, professional certifications, and previous job experience all bolster your position.
- Expertise. How well you know a subject (particularly the subject around which the position revolves) versus how well your counterpart knows the subject will play into relative power during your discussion.
- Needs. How much you want the position versus how much they want you also plays into the power differential. If you have a lot of extra needs, like the need to leave work early every day, your position may be weaker.
- Indifference. How much each side values the relationship plays into the power differential during a negotiation. You should be friendly while you're bargaining, but don't go into the discussion with an excessive need to be liked.
- Resolve. While you don't want to get into a battle of wills, resolve plays at least a subtle role in every negotiation. If you're more convinced of what you're asking for than the negotiator is of what they're offering, you have an advantage. Whereas the negotiator might express conviction through confident body language, the best way for you to show your resolve is by calmly presenting statistics that back up your statements. Remember your research on what similar companies pay and what that position is worth on the broader market.
Before you enter any negotiation, remind yourself that you deserve to be at the table as much as they do. Never go into a negotiation thinking that the other side has all the power. You want something they have; but they also want something you have. Inventory the sources of power on both sides to see what strong suits each side has.
You've evaluated the power differential, but that doesn't mean you should go into the negotiation with a combative attitude. Remember that if all goes well, you'll be establishing a long-term relationship with the negotiator, and you'll want to be on the friendliest terms possible.
Conducting the Negotiation
Now that you've done your preparation, you're ready to sit down at the table and try to reach an agreement. The first step is to try to establish a good rapport with your counterpart. One of the best ways of reaching a good outcome in any negotiation is to reach a level of trust where the two sides can freely exchange information and brainstorm ideas for a mutually beneficial agreement.
In many job negotiations, the organization making the offer will try to learn what you're currently being paid. This is their way of discovering your minimum acceptable offer. If you aren't comfortable revealing how much you're paid, explain that you aren't basing your expectations on your current salary, but give them what you think is a reasonable pay range based on your research.
If you have good credentials, you can make the case for expecting a high offer. You might say that since you graduated in the top 10% of your class, you expect a salary at the higher end of the range.
When your counterpart makes an offer, take your time to evaluate it. If you accept an offer right way—even if the offer seems high to you—you'll send a signal to the other side that they probably could have gotten you for less.
If you make a counteroffer, give the negotiator(s) time to evaluate it. If they spend more time evaluating your proposal than you think is reasonable, ask when they think they can get back to you. But don't jump the gun and follow your own counteroffer with another counteroffer. That sends a signal that you had no confidence in your first counteroffer.
Once you think the negotiator will no longer move on salary, see what other concessions you might get. This is the time to bring out your list of "extras" you might give in exchange for some of the peripheral items the potential employer might give you. If you offer to start the job earlier, maybe they can give you vacation time after just a few months. If you save them money on moving expenses, maybe they can let you work from home once or twice a week.
Final Thoughts
When you're negotiating a job offer, it's good to aim high, but don't try to squeeze everything you can out of a prospective employer. Again, remember that you hope to work for them. The last thing you want to do is set unreasonable expectations of your performance before you start the job.
If you can't reach a mutually satisfactory agreement despite all your efforts, make sure that you leave the discussion on good terms. Since both you and the negotiator are likely to change jobs around a dozen times, you may run into each other again in a different context.
References
[1] "Number of Jobs Held, Labor Market Activity, and Earnings Growth Among the Youngest Baby Boomers: Results from a Longitudinal Survey," Bureau of Labor Statistics, U.S. Department of Labor, March 31, 2015.
[2] "Intuit 2020 Report: Twenty Trends That Will Shape the Next Decade," Intuit Inc., October 2010.