Negotiating your starting salary at a new job is important, especially if you aren’t satisfied with the initial offer. With that being said, it might surprise you to know that multiple studies have found a negotiating tactic that sways job-seekers away from making counter-offers that are far from the initial offer. This negotiating tactic doesn’t have to do with the amount offered, but rather with the number.
A Precise Offer Serves as a Negotiating Tactic
According to Todd Thorsteinson, “Past research has demonstrated that precise first offers (e.g., $4,983) serve as an anchor in negotiations and reduce counteroffers relative to round first offers (e.g., $5,000)” (Thorsteinson, 203). This means that someone who is offered $49,987 is less likely to negotiate as high as someone who is offered $50,000 dollars. For example, someone who is offered $49,987 might ask for 53,000 dollars, whereas someone who is offered $50,000 dollars might negotiate for 55,000 dollars.
Todd Thorsteinson conducted three different studies to determine if certain conditions would “reduce or eliminate the effects of precise offers in negotiations” (203). Thorsteinson set out to determine whether or not the knowledge of the negotiating tactic would reduce its effect on counteroffers. Oddly enough, the precision tactic was still effective even when participants were aware that precision could be used as a negotiating tactic (209). The results showed that “Precise offers elicited smaller counteroffers than round offers in all three studies, and this effect persisted even when participants were aware of precision as a negotiating tactic” (203).
On the plus side, two out of the three studies found that “participants were more likely to negotiate when they were aware of precision as a tactic and were presented with a precise offer” (212). However, the participants negotiating from a starting precise offer asked for less money in their counteroffer than those negotiating from a starting round offer (212). All three studies found that participants who were offered $39,982 (precise offer) negotiated a lower amount than those who were offered $40,000 (round offer) (203-213).
Study 1
The first study had a total sample size of 292 participants (205). Everyone in the sample size was recruited from Amazon’s Mechanical Turk (205). The participants were all put into a hypothetical situation and separated into one of three categories: round offer, precise offers, and precise offer with knowledge (205). Those in the round offer were put into a hypothetical situation where the interviewer offered them $40,000 (205).
Participants in the precise group were put into the same hypothetical situation except they were offered $39,982 (205). The last group was offered $39,982 and the participants were informed about the precise negotiating tactic (205-206). Everyone in the study was asked if they would negotiate for a higher salary (205). Those who stated that they would negotiate for a higher salary provided the counteroffer they would provide (205).
Study 1 Results
The results in the first study found that participants who were offered $39,982 were more likely to negotiate than those who were offered $40,000 (206). Participants with a precise offer, as well as the “knowledge of precision as a negotiating tactic” were more likely to negotiate (206). 57% of participants in the precise group with knowledge negotiated, whereas 40% of participants in the precise group negotiated (206).
Overall, the participants in the round group had larger counteroffers than those in the precise group, even though the precise group negotiated more often (206). Those in the round group negotiated a standard deviation of 3,504 dollars more than the starting offer (206). On average, participants in the precise group negotiated 3,079 dollars more than the original offer (206). Lastly, the precise group with knowledge negotiated an average standard deviation of 3,460 dollars more than the starting offer (206). It’s astonishing that on average, participants in the round group negotiated a higher standard deviation away from their original starting salary.
Study 2
Study number two was mainly the same as the first study in regard to the procedure. One main difference was that the participants in the precise group with knowledge were given more clarity about the precise negotiating tactic. The sample size consisted of 147 psychology participants who were students at a university in the Northwest region (207). The participants in the round group were offered $40,000 and those in the precise group were offered $39,982 (207).
Study 2 Results
The results in the second study varied only slightly from the results in the first. Unlike the first study, precision didn’t lead to a greater decision to negotiate (208). However, similar to the first study, those who were offered a round offer were more likely to present larger counteroffers (208). The participants in the precise group both with and without knowledge gave smaller counteroffers in comparison to those in the round offer group (208).
In the round offer group participants, on average, asked for 5,967 dollars over the standard deviation (209). Those who had a precise offer without knowledge of a negotiating tactic asked for 5,507 dollars over the original offer (209). The participants who were given knowledge to make them suspicious of the negotiating tactic made a counter offer of 5,408 dollars over the starting offer (209). Lastly, those who were given knowledge to make them certain that the precise negotiating tactic was being used on them asked for a standard deviation of 4,311 dollars (209). The fact that the participants who made the smallest counteroffers were the ones who were certain a negotiating tactic was being used on them is extremely surprising. You would think that those who were certain that a negotiating tactic was being used would be able to diffuse its effect by purposefully asking for more money.
Study 3
The third study consisted of a sample size of 221 participants (209). These participants were recruited from Amazon’s Mechanical Turk (209). This study differed in that the participants were given more information about their hypothetical situation (209-210). Participants were told that they had a bachelor’s degree and two years of experience in human resources (210). The participants were also informed that their current job pays them $49,000 (210). Depending on the group, precise of round, participants were offered either $49,982 or $50,000 (210).
Study 3 Results
The results in the last study showed that participants in the precise group with knowledge were more likely to negotiate than those in the round offer group (211). When the participants in the precise group didn’t have knowledge of the negotiating tactic, they were not more likely to negotiate (211). This study, along with the other two found that the type of offer (round vs. precise) had a significant effect on counteroffers (211). The participants in the precise group had smaller counteroffers than those in the round group (211). Participants in the round group had a standard deviation of 3,379 dollars over the starting offer (211). Those in the precise group asked for on average 3,147 dollars over the original salary offer (211).
As a whole, it was very shocking to find that knowledge of a negotiating tactic being used didn’t lower its effects. Those who were given a precise offer consistently asked for less money in their counteroffer than those who were given a whole offer (212). This shows how effective this tactic is at lowering counteroffers. On the bright side, those who were aware of the negotiating tactic were at the very least more likely to negotiate.
Don’t Settle for Less. Negotiate for More.
At the end of the day, negotiating can be a precarious challenge. After reading this study it has become apparent at how important it is to know how much money you would like to make before you are even given an offer. If you would like to make 55,000 dollars a year and the interviewer offers $49,987, don’t lower your expectations. Negotiate for $55,000, don’t negotiate under 55,000 dollars just because a negotiating tactic was used on you. It might also prove helpful to calculate how much more money you are actually asking for. If someone offers $49,987 and you want $55,000 dollars, you are only asking for 5,013 additional dollars. This is only 13 dollars more than if the interviewer were to offer you 50,000 dollars.
Negotiating for a higher salary isn’t easy, but it’s worth it. If you are offered a round salary number like 40,000 dollars or 50,000 dollars, don’t forget to negotiate. In two out of the three studies, those who were offered a round number were less likely to negotiate than those in the precise group with knowledge. To those who are offered a precise salary number, be bold when you make a counteroffer, especially if the original offer doesn’t meet your salary requirement. If the interviewer offering you a salary was audacious enough to low-ball you, then you can be audacious enough to counteroffer an amount that is suitable. Don’t let the numbers fool you: negotiate for a higher salary.
Works Cited
Thorsteinson, Todd. Knowledge of Precise Offers as a Negotiating Tactic Does Not Reduce Its Effect on Counteroffers. 15 Dec. 2020, pp. 203–214, 10.1002/jts5.86.