There's some interesting psychology that goes into salary negotiation. Here's some new research that shows just how effective certain psychological strategies can be, and some tactics that make them less effective.
Not all of the advice on salary negotiation is worth mentioning here, if it works at all, since much of it is just regurgitated cliches that get passed along endlessly. However, there are some recent psychology studies that do provide scientific insight into how salary negotiations play out, what people do that can result in higher pay, and how those in-the-know might identify and counter those negotiation tactics. Here's five steps that you need to know:
1: Setting A High Anchor Number
When you mention a number, it effectively 'anchors' the conversation as a starting point from which all further discussions proceed. This 'anchoring' is a powerful tactic that has an immediate psychological effect that shouldn't be discounted. In a study from the Journal of Applied Social Psychology that simulated salary negotiations the researches found that when the anchor number is set high, the final agreed upon number is very likely to be higher. In this research, two studies were conducted to examine the effects of implausible anchors on initial salary offers. Participants provided a salary offer to a candidate after receiving a relevant anchor and an implausible anchor. The results of Study 1 indicated that a high implausible anchor influenced salary offers, even in the presence of the relevant anchor. Study 2 examined whether a more extreme implausible anchor would also affect salary offers. The results indicated that both the high anchor and the extremely high anchor led to higher salary offers than the control condition.
There you go. Setting the bar very high is an effective negotiation tactic. So, how can you counter that tactic.
First, don't allow the other side to anchor the negotiation by stating a number first. if you're comfortable with your position, state your number before the other party and anchor the conversation around your number.
Second, if you can't get your number out first, don't let that number go unchallenged. The very first response is to counter immediately with with a number that is correspondingly low, providing a wide range where the negotiation should effectively be anchored in the middle somewhere.
2: Be Funny
Humor's always been a useful negotiation tactic, if you use it correctly and don't make a misstep that could be taken the wrong way. "Funny" makes you likable and lowers everyones temperature.
If someone's using humor in the right way, for example they're using a joke to anchor a high salary starting number, your best bet is not to take offense, but to turn that back on them with something that's ever so slightly sarcastic. Some comebacks; "What, did I break a window?" or "I wasn't looking to hire your whole family." are not too obnoxious and if you say them with a smile, you'll get your point across.
3: Be Bold
If you avoid risk taking, you're likely to be a poor negotiator. Risk aversion is associated with less use of "competition" as a negotiating strategy.. and being competitive works. To get the best deal you have to embrace some risk since your goal is to push the negotiation right to the point at which the other side is either prepared to walk away, or if they concede to your demands that it would do more harm than good. (Creating a sense of distrust between partners for example.) Bold individuals are seen as being actually worth more, and with good reason. Boldness denotes that you're going to engage just as forcefully once you get the job and you'll be someone who gets things done.
The counter to a bold negotiation opponent is to embrace that same strategy, with the same caution. If you force concessions that cause long term resentment, you're actually losing.
4: Articulate Understanding Of Their Position
This relates a little to the point above. Demonstrate that you understand the other sides needs and goals.
Your goal is to get 'the best possible deal', and you need to know what that is. In most cases it's not actually the most money up front. In fact, it might be other things like a flexible schedule or choosing who you want on your team.
If you play too much hard-ball you'll just be demonstrating how demanding and unpleasant you are to work with. Think through what the other side is looking for and try to put them in a place where you seem reasonable. Actually articulate what the other's side is in order to lessen the need they'll have to prove that to you and push you to meet those needs.
Your counter to this is to adopt exactly the same strategy. If someone's explaining that they understand what you're trying to get to, show them the same courtesy. In effect, you're killing them with kindness.
5: Show A Willingness To Walk Away Early
Common advice on negotiating your salary is to be reasonable and flexible (see some of what's above). But what's emerging clearly from all of the research on the subject is that compromise and accommodation tend not to work. These are both strategies which place too much weight on what is best for your employer (i.e. to pay you less). If you acquiesce the result will be simple: you'll get less than you would have.
Demonstrating that you're willing to walk away works with a first date, and with negotiations. You don't want to be a fool, but you'll want to make the other person at least think that you're not in the bag quite yet.
Make sure that you don't continue this behavior though. What anyone building a team is looking for is commitment and as soon as you're nearing an agreement you'll want to assure the other side that you're completely committed and not straddling the fence. You won't be doing yourself any favors if you're giving the impression that you're going to be looking for your next gig while collecting paychecks.