Renegotiating your salary? Read this first

Renegotiating your salary? Read this first
20 June 2013

When negotiating for a salary, most of us reach for a nice, round number like AED200,000, or AED260,000 or AED830,000

But by favouring all those zeros, we may be missing an opportunity to obtain a better deal, according to a new paper from researchers at Columbia Business School. They found that using more precise numbers in an initial request -or anchor, as it is known in negotiating phraseology - generally results in a higher final agreement.

Be precise

Precision conveys the impression that the job candidate has done extensive research and deeply understands the market for their services, said Malia Mason, the lead author of the paper and a professor at Columbia who teaches a course on managerial negotiations. When people use round numbers, by contrast, they’re conveying that they have only a general sense of the market rate for their skills.

Don’t round up to the nearest zero

In one experiment, the researchers had 130 sets of people negotiate the price of a used car. When buyers suggested a round anchor, they ended up paying an average of US$ 2,963 more than their initial offer. But buyers who suggested a precise number for a first offer paid only US$ 2,256 more, on average, than that number in the end.

When it comes to negotiating salary, Mason’s research indicates that a job candidate asking for AED 430,550 might receive a counteroffer of AED 420,000, while the request for AED450,000 is more likely to yield a counteroffer of, say, AED400,000, as the hiring manager assumes the candidate has thrown out a broad ballpark estimate.

Have you renegotiated lately? Were you successful? Tell us how it went. 

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Head of Behavioral Finance
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