Craig Wilson
Craig Wilson
Associate Director: In-house

Articles From the Team

“Anchoring” – use this technique to get a better deal during your salary negotiations!

Quartz magazine recently published an article which focused on studies by Columbia University and the University of Idaho. The premise of the article is that most people start their salary negotiations wrong, by opening the bidding with a single number rather than a range. Instead, you should suggest an ambitious range with a high “floor” number, which can manage expectations and set you up for an attractive counter offer.

So what exactly does that mean? Well, quite simply it relates to a tried and tested technique based on cognitive bias, a technique called “Anchoring”. The anchor effect says that people have a tendency to rely too heavily on the first piece of information they were presented with (the “anchor”) when making decisions and subsequent judgements.

So, although people can generally appraise an offer based on multiple pieces of information, studies have shown that most individuals tend to unconsciously focus on only one aspect and often its the first or most recent piece of information presented to them. In this way, a deliberately high starting point can strongly affect the range of possible counteroffers.

It is why a $50 sweater will look more reasonable when displayed next to $150 shirts, or the initial price offered for a used car sets the standard for the rest of the negotiations – i.e. so that prices lower than the initial price seem more reasonable, even if they are still higher than what the car is really worth.

To show that anchoring can work during salary negotiations, the article evidences a University of Idaho lab study where they tested the use of anchoring the conversation by launching with an outrageously high number, principally by way of a jokey statement. Something like, “Well, what I’d like is $1 million”.

The study by University of Idaho tested this premise on 200 students, all asked to act as though they were managers making a job offer to a pre-approved candidate, and to type an proposed salary offer into a computer in response to various candidates. Each of the case managers were given the candidate’s past salary, $29,000, and has to base their offer on this and the candidate responses.

Some test candidates used the jokey anchoring technique by saying “I’d like to make $100,000, but really I’m just looking for something that’s fair”. The second subset of test candidates took the opposite approach and quipped, “I’d work for $1, but really I’m just looking for something fair”.

The results, published in the Journal of Applied Social Psychology in 2011, and recently revisited by the Association for Psychological Science blog, proved that even implausibly high anchors coloured the managers’ decisions. If a candidate had asked for $100,000, he or she was offered an average of $35,383, compared to $32,463 in the control group. The $1 joke had little effect, presumably because the students were reluctant to offer someone less than they had made at their old job.

The Quartz article and highlighted university studies make for interesting reading and in my opinion, the technique of anchoring is definitely worth a try. It’s been tried and tested by sales people for years and if done in the right way should have zero negative impact on your negotiations. Far from it, evidence suggests a gain by using the technique.

The original article can be found here: http://qz.com/850460/cracking-this-joke-could-get-you-a-better-deal-in-salary-negotiations/. Further information on Anchoring can be found here: https://en.wikipedia.org/wiki/Anchoring.

For more information contact Craig Wilson at BCL Legal.

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