How Savvy PhDs Negotiate Salary Contracts Higher
“Wow! Yikes, really? You made that much?”
This is what the hiring manager said to me when I told him how much I was making at my current job. His reaction really threw me off. I was making good money but not great money. That’s what I thought anyway. But, after hearing his reaction, I started thinking that maybe I was making great money and maybe I shouldn’t ask for any more money.
The hiring manager was with a big company that was trying to hire me. They’d flown me out for an interview and had the hiring manager talk to me several times, but they hadn’t sent me an offer yet. I figured that once the hiring manager sent me an offer, I would start negotiating. Little did I know that the negotiations had already started. After acting shocked at how much I was making, the hiring manager asked me if I was considering any other positions. I foolishly said no. Then, he started telling me about all of the great benefits I would be getting. He told me about the health care package, the 401K, and the company car. Wow, I thought, I can’t believe I’ll get all this.
The benefits seemed so great that I felt bad about asking for anything else. But, I was able to muster up just enough nerve to ask for an extra week of vacation. The manager said he didn’t think the company allowed it but he would check with human resources and get back to me if anything could be done. The next day human resources sent me a contact with a salary offer that was the same as my current salary and without the extra vacation days. I gratefully signed it.
The Ultimatum Experiment
Imagine you and someone you don’t know are part of a simple experiment. As part of the experiment, researchers give you $100 and ask you to give a proportion of the money to the other person. If the second person accepts your offer, both of you keep the portions you allocated. If the second person rejects your offer, neither of you keeps anything. The only rules of the study are you only get to make one offer and you and the other person are not aloud to negotiate prior to making your offer. The power over dividing up the money is solely in your hands and the power over keeping the money is soley in the other person’s hands. What would you offer?
If you are like most people, you’d offer $37. Decades of research show that this is what the average person offers. Research also shows that if the second person receives less than $30, he or she, on average, will reject the offer. This experiment–the ultimatum experiment–proves a few important principles. First, even though negotiating is not allowed in this experiment, a negotiation occurs. On average, the second person concedes 13 more dollars than they should. This is because the second person sees the offering party as having more leverage, even though, technically, both parties have the same leverage. The rational thing to do would be for the first person to offer $50 and the second person to accept it and for both to walk away with free cash. But this doesn’t happen. Why?
10 Tips For Negotiating A Higher Salary
Everyone is negotiating for something. Whether or not you understand how negotiating works, it is being used against you. This is especially true when you’re applying for a job, interviewing, or trying to get a promotion. The problem is that most people, especially PhDs, don’t know how to negotiate salary. There are, however, a few savvy PhDs who take the time to learn about negotiating and are happier (and richer) for it. Here are 10 tips to help you negotiate salary contracts higher:
1. Create leverage.
The above ultimatum experiment shows you that the people on the offering side of the table have a psychological advantage. These people seem to have more options than you because they are extending you an offer. And, when it comes to negotiating, options equal power. Options are levers. In hiring situations, most companies will–as far as you’ll be able to tell–interview and extend offers to several people, which makes them seem more powerful.
The only way for you to get power back is to create options for yourself. This means going after multiple job opportunities at once. The more companies you have interested in you, the more companies will be interested in you. This is often referred to as preselection, or social proof. Never go to an interview unless you have other interviews lined up. The goal is not to brag about all the other employers interested in you, the goal is to put yourself into a position of psychological power.
The other side of the table can always tell if you have options. If you’re confident in yourself because you have other options, they’ll know it. If you’re miserable and desperate because you have no other options, they’ll know it too.
2. Anchor high.
Studies out from the University of Idaho show that making a joke about earning a ridiculous amount of money influences employers to offer you a higher starting salary. In these experiments, job candidates for an administrative assistant position requested salaries of a reasonable $29,000, an unreasonable $100,000, or a ridiculous $1 million. The latter two requests were accompanied by a joking explanation. Even though the heightened salary was known to be a joke, those who requested the absurd salary were offered salaries averaging 9% higher than those who requested a reasonable amount.
Anchors work, even if they’re presented as a joke. The key here is to make a joke about the ridiculous salary prior to the employer’s initial offer, so that the joking comment can serve as an anchor for the employer’s counteroffer. Psychological anchoring involves making a decision based on your first impression and people’s minds automatically resisting any change from that impression even when new information is available.
3. Make them give you the first offer.
It may seem counterintuitive, especially given the results of the ultimatum experiment, but you should always gently pressure the other side into giving you the first offer. But, make sure you anchor really high before encouraging them to give you an offer.
There are three reasons for this: first, you don’t want to exclude yourself from consideration. Sometimes a miscellaneous manager or manager of a manager will write down a number with instructions not to consider people who ask for more than that number. This is usually done arbitrarily and doesn’t matter once you’re being considered more carefully.
Second, by coercing the other party into giving you the first offer, you put yourself in a great position to bracket your counter offer and then offer to split the difference with them (more on this later).
Third, many employers will get a bad taste in their mouths if you bring up money first. They’ll assume you’re greedy or that you care more about money than the work you’ll be doing.
4. Flinch at the first offer.
There’s a reason the hiring manager in the above story said “Wow! Yikes, really? You made that much?” He was flinching.
As silly as it sounds, flinching is a negotiation technique. It’s a strong way of putting someone who has just made you an offer on their heels. Think about it. If you ask a used car salesman how much a 2009 Mustang is and don’t flinch when he says $12,000, he has you. Why? Because you didn’t flinch. Now, he knows that 12K is within the range of what you’re considering to accept. The same is true when someone offers you a starting salary.
No matter how high (or low) the salary number is, always act shocked, bewildered, and even a little insulted. Flinch. Practice flinching. Don’t make the mistake of thinking you’re above this technique. You can either flinch, or get paid significantly less for at least a year. The choice is yours.
5. Ask for more than you expect to get.
Once you’ve anchored the other side really high and gently encouraged them to make a first offer, it’s your turn to ask. The key here is to ask for far more than you’re willing to accept. The biggest reason for is simple: you just might get it. But, there are other reasons too. First, asking for more than you expect to get allows you to increase your salary without looking greedy. It also helps you make the other side feel like they won, which is very important (more on this later).
Second, by asking for more than you’re willing to settle on, you give yourself space to make concessions. Let’s say a company offers you $80,000/year and you’re willing to accept $90,000/year, which is about 12.5% higher. Under these circumstances, you should ask for $100,000. This technique is called bracketing and it sets the other side up to split the difference with you.
People love to split the difference because it seems fair. Use this to your advantage. Bracket your counter offer to make splitting the difference easy. In terms of how much more you should ask for, or where you should bracket, follow the 20-10 rule. Ask for at least 20% more than their first offer and accept no less than 10% more.
You can further strengthen your case by researching salaries online. Find a source, any source, no matter how obscure, that backs up how much your asking for. Find the world record highest salary for the position you’re apply to use it as the reason why you’re asking for a higher salary.
6. Be exceptionally polite and show excitement.
Too many people make the mistake of thinking that all negotiations should be tense. These people are quick to get confrontational and to prove themselves and their value. The truth is getting angry and tense always weakens your negotiating position. The worst thing you can do during a salary negotiation is try to get your way by acting firm, condescending, or annoying. This will just make the other side either fight harder to get what they want or not want to work with you at all.
A better strategy is to stay overly polite. If you think you’re being too polite, you’re not being polite enough. Politeness and cordiality act as grease–like a velvet glove for the hard hitting negotiations that are going on in the background. Always be polite, especially by phone and email. You never know who else is on the call or who is being forwarded your emails. Also, show excitement. Never, at any time during a salary negotiation, decrease your enthusiasm for the job. Enthusiasm will not only keep the conversation coming back to you and the work you can do for the company (see the next point) but it will also inspire the other side do pay you more.
A recent study out of the University of California, Berkley studied the role of excitement and other emotions in making financial decisions. In the study, participants were subdivided into different laboratory markets where they spent money during a computer simulation. Prior to each simulation, participants watched short videos that were either 1) exciting and upbeat—car chase scenes; 2) emotionally neutral—segments from a historical documentary; 3) fearful—scenes from a horror movie; or 4) sad—scenes from a depressing drama.The study found that people were likely to give up more money after watching exciting videos relative to the other three conditions.
Don’t be afraid to express your excitement for a new job. Excitement doesn’t make you look needy. It makes you look engaged. If you can get the other side excited about working with you, they will spend more money to do so.
7. Keep bringing the conversation back to the work you’ll do for them.
There’s one cold hard truth that you should always keep in your mind when negotiating a salary contract: the other side doesn’t care about you. Not really anyway. Sure, they care about you enough to pull you up if you were hanging off of a cliff (probably), but they’re not going to just give you money because you need it. They don’t care that you’ve been working 18 hour days in your lab for a PI that treats you like an indentured servant. In fact, they will use this against you to offer you a lower starting salary. It’s harsh, but true.
The point is you should keep your problems out of your negotiations. Never negotiate from a position of weakness. Always bring the conversation back to your strengths, which include the work you will do for the other side. Keep circling back to how your PhD gave you the tools to learn anything quickly and how your experience will help your would-be employer fulfill their needs. Make everything you say about them, not you.
8. Secure the salary then trade concessions.
The hiring manager in the above story did a great job of distracting me with a standard benefits package. He knew I was coming from a job that provided a subpar healthcare package and no company car. So, he put a spotlight on the benefits his company offered to distract me from the salary I wanted. Don’t let this happen to you.
To most big companies, offering a benefits package is standard. This is because these companies get tax write-offs for perks like company cars and they are required to offer healthcare benefits to full-time employees anyway. On the other hand, they get nothing for giving you a bigger paycheck. As a result, they want you to focus on negotiating your benefits over negotiating for a higher salary. The best way to handle an employer who is trying to make you focus on their benefits package is to politely brush their points aside and gently encouraging them to make you an initial salary offer.
After you’ve secured your salary, start negotiating for a better benefits package. You may not be able to convince an employer to sign with a new healthcare provider just for you, but you can certainly get them to increase your signing bonus or give you an extra two weeks of vacation. For example, if you’re in graduate school or doing a postdoc and living in a small apartment with nothing more than a futon and a computer, you can negotiate for a nice signing bonus in lieu of being reimbursed for your moving expenses. The key is to never make a concession without asking for something else in return.
9. Appeal to a higher authority.
I remember the above hiring manager telling me that he didn’t think his company allowed him to give new employees an extra week of vacation and that he’d have to check with human resources. Then, he told me he’d fight to make it happen. I remember feeling grateful. I even felt grateful when I found out that human resources said it wasn’t possible. At least he tried, right?
The truth is, he was just using another negotiating trick called appealing to a higher authority to get me to settle for less. The good news is that you can use this trick too. No matter what your situation is–whether you’re married, have kids, or live alone with a plant–you can gain some leverage and buy yourself some time at any point by saying, “This looks great. Let me discuss it at home and get back to you in two days.”
The most important part of appealing to a higher authority is making creating a very vague authority figure. By saying you want to “discuss it at home,” you don’t give the other side a chance to counter with, “What do you think he or she will say?” They don’t even know who is at home. It could be a wife, husband, girlfriend, or goldfish. Saying “home” works because it’s both personal and vague at the same time.
When you come back to the negotiating table two days later, simply say, “I’m really excited about this offer but after discussing it at home, I really won’t be able to make anything below XYZ work. By appealing to a higher authority, you’ve gained new leverage and shifted any blame of prolonging the negotiation to some vague entity.
10 . Be patient and leave the other side feeling like they won.
When you’re negotiating for a new job, time is always on your side. It might not seem like it, but it is. Especially if you’ve created leverage by going into the negotiation with more than one option. As such, your goal should be to get the other side to invest in you as much as possible. Get them to send you as many emails as possible.
Encourage them to do 2, 3 or even 4 interviews with you. Ask for a tour of the office and to see all of their facilities. The more you get them invested, the more leverage you’ll have when it comes time to talk about your salary. Spending this kind of up front time also helps the other side feel like they won when they finally do get you to sign, even if they had to increase their salary offer.
Negotiating is a marathon, not a sprint. Take your time writing good emails and following up with detailed questions. Engage the other side on every level. Stay polite and enthusiastic and keep bringing the conversation back to the great work you’ll do for them. Draw out negotiations over your salary. Then draw out negotiations over your benefits. Make concessions, but make them small and always ask for something in return.
At the end of all this, the other side will be too invested in you to turn back. They’ll do whatever it takes–including paying you a higher salary–to justify the time, money, and resources they’ve already spent on you.
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