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Anchoring effects and your salary negotiations

Friday, October 14, 2011
posted by Rita Handrich

You often hear about ‘anchoring’ when it comes to making damages requests to jurors. This is not one of those posts, although it tracks with much of the damages research.  This post strikes closer to home—let’s talk about your salary and negotiating a higher income.  You’ll like what these researchers found.

Most people hate negotiating salaries. Income is so important we fear the prospects of losing the confrontation.  What if it goes wrong?  If we go too high, the employer may lose interest and we could lose our job.  If we go too low, we are stuck with a salary below what the employer may be willing to pay. There is ample research on what happens in negotiations when you lead off with an extreme initial offer (the final offer may be larger than it is if you lead off with a moderate initial offer). But there is no comparable research to tell us what to expect in salary negotiation situations when you lead with an implausible request. Until now.

New research looks at what happens when you make an overly high (i.e., implausible) salary request and how that may or may not affect the employer’s initial salary offer. Essentially, the idea is that you want to be the one providing the anchor to start the negotiation for salary. This research also includes the reality that there will be relevant anchors present as well—such as your prior salary, the salary of others in your position, and so on.

Participants in the study were given information on a job description and then asked what salary they would offer someone chosen for that job. In one condition, the participants were given information that the person’s prior salary for a similar job was $29,000. They were also told that the candidate had jokingly said they would “like $100,000, but really I am just looking for something that is fair” [high implausible anchor] or that the candidate had said they “would work for $1, but really I am just looking for something that is fair” [low implausible anchor]. A control group was only given information on the prior salary.

The participants given the high implausible anchor ($100K) thought the person should have a higher salary. So the researchers designed another study to look at what would happen if the high implausible anchor was even more extreme.

In the second study, participants were given two anchors: $100K, and $1M. They were also informed of the prior salary being $29K. The ultimate salary offer in this condition showed that the control condition (where all they knew was that the prior salary was $29K) offered significantly lower salaries than either the high anchor or the implausibly high anchor. More importantly, there was no significant difference between the salaries offered with the high anchor or the implausibly high anchor.

The participants in this research did not punish the implausibly high anchor request with a lower salary. Both the high anchor and the implausible anchor seemed to elevate the eventual salary offer above the condition where the only information given was the prior salary (the relevant anchor). The researchers say it is recommended that you provide the high anchor in a joking manner so that the employer does not take offense.

This is initial research and should not be relied upon without follow-up study as there are possibilities that the strategy could backfire on you. But it’s good food for thought if you are poised to engage in salary negotiations.

Do some research to identify salary ranges for the position and then toss out a high anchor (within the range of salary). A high anchor could bring the ultimate salary offer up.

Thorsteinson, TJ (2011). Initiating salary discussions with an extreme request: Anchoring effects on initial salary offers. Journal of Applied Social Psychology, 41 (7)

 

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One Response to “Anchoring effects and your salary negotiations”

  1. @earlmanwich Yeah. Read an article a couple years ago that brings up that exact point. http://t.co/oRdtXhjOcu

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