Salary negotiation in a win-win situation

Salary Negotiation – Employee Perspective focused on Inhibitors

Background

Here is a young employee who holds MBA qualifications, working as an Assistant Junior Manager, Marketing Division in a manufactures company. His performance was very outstanding during the first two years and especially in the handling of a crisis of his company, so he was promoted and confirmed to be a real leader in his unit (his current position).

He has asked for a raise but failed, because he is so young and the boss still wanted to observe his performance. Now three years have passed, he gets a salary of 30,000HKD every month but has not received an equal salary treatment as the same level managers yet, although he had small increase every year.

According to the new policy of the company this year, employees above the supervision level will not get bonus on the payroll. This policy makes the salary gap between him and other managers bigger (5000 HKD more/M), so he decided to negotiate with his boss for a big raise.

1. Both Sides Concerns

Employee: My performance deserves a bigger pay raise and it is unfair…

Empoloyer: (Mentally) For the sake of the company benefit, it is always the best situation to keep low cost and make employees have high productivity at the same time! (But actually he will say) For the concern of work experience and your age, it is reasonable of the salary gap. Young people should focus on the long term development and skills practice but not the money…

Outcome: The boss wins again? Another win-lose situation? Can we reach a win-win outcome?

2. Negotiation Result in Last Class

As an employee, I received the following result: 1. No bonus but bigger monthly salary increase: 1500HKD. 2. I signed a contract with my company: New project for testing my ability and the implementing time is three months. If I did very well and made the company earn money, I will be paid the same amount of the salary as other managers and even gets additional project bonus.

The inhibitors during the negotiation from employee perspective

Based on our employee and employer negotiation exercise, our team have truly enjoyed the journey and learned some negotiation skills which would lead to a win-win situation.

In our opinion, we think there are three key steps to achieve a win-win negotiation. First step is to unbundle the issues, we all don’t want to talk about one issue that couldn’t be solved time after time. The only way to solve that dilemma is to unbundle it and try to make it easier, explicit and smaller that is more adaptable for us to make it done. Second step is moving parts. After we unfasten the big and insoluble issue to many small fragments, the next step is to separate it from the former shape It just likes a jigsaw that we move and combine many small parts into a desirable big one. That’s also the third step, to rebundle it to a new shape that we are expecting to. The key concept for negotiation is to expand the pie.

In this salary negotiation case, to achieve a win-win salary negotiation, besides the higher direction of three steps, we must to consider that both parts are benefited in the negotiation, that means the employee and employer are satisfied with the final agreement. Also we need to make sure the other non-direct stakeholders, such as the other employees, won’t be harmed because what we did. In the employee perspective, the following paragraphs would discuss what tactics that did not work well.

1. False conflict

In this case, as an employee, before I enter my boss’s office, I always assume that my request (to ask for big money) is completely incompatible with my boss’s interests. And it’s also what I think during the last three years as a manager. Under this illusion, I defined the talk could be a hard negotiation and what I ask would completely make a direct war with my boss. Because the only thing I want is to get the big money, and surely that means this action should be a cost for my company and a profit for myself. To make both parties satisfied under the money transfer, I think it’s totally incompatible. And I forecast the result are only two situations, whether I win that I could get the big money, or my boss persuaded me that I can get none of a cent. So with this mind, during the negotiation, I didn’t think anything more, I just want to protect my position and request thinking that could be the only way for me to achieve my goal. Otherwise I would be totally defeated. However, actually in the reality, the interests between the employee and employer are not wholly incompatible, there are also some space for negotiation to achieve a win-win outcome.

2. Fixed-Pie Perception

The fixed-pie perception also inhibits us to make the negotiation work well. Because when the employee thinks about the salary negotiation in the whole image, he only takes it as an immobile one and the two parties can only negotiation on that pie. Whenever you get more, that easily means I lose the equal one to satisfy the other part. And it totally likes add and minus in the same equation. In the salary negotiation, the employee takes the salary issues as a single pie and what he wants is directly opposed to what the boss thinks. They can only slice the pie of big money, whether get more or not. But in reality, the pie isn’t that small that even the employee didn’t think about it before. Let’s jump out the fixed-pie to see other issues which may relate to the negotiation. Why the employee wants a negotiation, is it only because the 5000 HKD? Probably no. When analyzing the employee’ motivation, we could clearly see that he is quite proactive and works well in the company, and he wants to use this negotiation to make his performance more accordant with his pay. He still hopes he could get a better career development, such as promotion in the future. As we firstly assume this is a State-owned Enterprise that means it’s hard to get into this company and you need to cherish this opportunity because most of the performance evaluation is based on the working experience in the same company. How long you stay at the company and whether you are loyal or not play a quite role in deciding the salary rise. For that kind of company, stability is the first important thing and it promotes less turnover, so the company doesn’t want to lose a qualified manager because of the salary negotiation too. After analyzing the two parts interests, we could find that the pie isn’t that small to only the 5000 HKD, we can still expand the pie to a much bigger one when considering other factors or important issues. So if you only focus on the fixed-pie, you may miss something or even lose some more important one than you initially consider to.

3. Focusing on the Long-Term Relationship

As I mentioned in the above about the fixed-pie, we can find a lot of other issues to expand the pie, such as the employee’s career development and the company’s turnover rate and long-term development. Although this would contribute to the negotiation, focusing too much on the long-term issues will definitely influence you to stick to your bargain target. In this case, when employee thinks too much about his long-term career and consider the company’s nature, he may be afraid to have a face-to-face direct negotiation with his boss. Sometimes you have to keep your relationship with boss, co-workers, and many other stakeholders that would probably benefit your own development. So when considering that, the hesitation aroused and the employee could imagine if he got what he wants in the negotiation, the 5000HKD dollar, will that result disgruntle his boss and destroy his good image in his boss’s mind. And he may lose some close-benefit because of the good relationship with his boss and that may totally damage his further promotion in the future. If the employee failed in the negotiation and was convinced to what his boss said, does it mean that he is really unqualified to get that big money, and this could set up a greedy and unstable image of himself in his boss’s mind. If this image become rootless, the State-owned Enterprise normally doesn’t like people who are always thinking a lot of other things that unrelated to their accountability, then the result could be easily seen that in any type of ranking or election of welfare or something else, that kind of person won’t be taken into consideration. Those long-term effect may be too serious that inhibit the employee to take an active action to start the salary negotiation, because he can’t afford to lose that much when facing the long-term relationship is disrupting.

But sometimes, when company purely thinks about cutting employees’ salary, the result is “you get what you pay for”.

4. Respond immediately

Although we encourage speaking frankly and sincerely, it doesn’t mean that employee should respondimmediately to any replies of the boss, especially when the employee is unsatisfied with the offer of the boss. Try to take some time to think things over and also give the space and time for the boss to think if his offer is appropriate. Some employees will give his or her boss a minimum amount of the salary raise at the beginning of the negotiation and wait for the response. That is not a wise way, since it reveals to the boss your bottom line too early and it will easily make the boss control the whole negotiation and it is possible for you to give way in the end.

5. Bring personal needs into the discussion

When negotiating your pay raise with your boss, you should try to focus on the questions and statement you have prepared. Some employees like using the family needs and living cost to persuade the boss. But they don’t realize that the discussion is unhelpful to their original goals. We suggest that employees do not discuss the monetary needs for your family or living. Actually, this kind of statement is irrelevant to the core of the negotiation. Keeping stating this kind of things will only bring you further from your goals and makes your boss tired of the conversation without anysympathy of you. Other statement that is similar with what we have mentioned above is like keeping saying that the efforts and contributions he or she has made to the company. In fact, any additional reasons that you may take as a support can be a barrier for you to reach your negotiating goals and at least it is a waste of time.

6. Tell lies

To be honest is very important. You will be caught sooner or later if you tell lies, which will damage the good image you have built in the company and finally put you in a passive position. Never pretend to be smart and assume nobody knows. For example, you ask for a pay raise butoffer a fake proofto support you, saying that it is from certain authoritativeresource, it will be a very dangerous situation, since your boss may check it the other day or during the negotiation. Then, the negotiation will not only fail but also make you lose the job, which leads to a lose-lose situation.

But, the completely honesty should also be avoided.For example, you don’t need to answer every question that your boss raises, unless the answer will be good for you. So you need a rehearsal before the real negotiation and think carefully about the things that can be said and the things that can’t be said.

The facilitators during the negotiation from employee perspective

There are plenty of strategies that do not work. In order to achieve win-win salary negotiation, our team made many interviews and found that the following strategies would have a significant and effective influence to create win-win negotiations.

1. Perspective-Taking

Negotiators, especially employees, should convert their positions to reduce the possible antagonistic effect. Employees can’t think only about themselves, and ignore the company and potential competitors who are considering about the position. We have two tips for employees to promote the success rate of salary negotiation. First, for employees angling for higher wages, they need to choose the best time to ask. The best time is when your leaders are satisfied with you performance and you leave an excellent impression to your managers. For instant, the time might be after you have completed a spectacularly successful program, or been appreciated for your outstanding performance. Second, employees should switchtheir angle of view from salary raises to higher compensation. Because of financial limited, employers may not be able to improve one person’s salary and neglect the other employees’ thought. Commission rates will be a viable option to increase the whole level of salary.

2. Inquiry about Interests and Priorities

It’s very important for employees to know employers’ underlying needs and judge the relative important aspect of the problems to employers. Once the negotiation is made, inquiry the employer why you were hired for this position at first. You must listen carefully and focus your salary negotiation on the company’s underlying interests. For example, you can ask your employer that “What are our company’s expectations for my department or my position?” Then you should reassure him you have the capabilities and skills to meet the enterprise’s need and create more value. The interviewer may serious thoughts about giving you a higher salary or suitable alternatives. Meanwhile, understanding the priorities is vitally important for achieving the win-win negotiation. Because the employee can pointedly express his relative capabilities to fulfill the company’s needs.

3. Provide Your Interests and Priorities

If negotiators don’t tell the other your interests and priorities, the communication will have no substantive progress. Just imagine, if you don’t speak out your information neither do the employers, both of you will never know the real demand of one another. The important problem is not whether to ask information, but what information to ask. If you share your true heart’s desire, the employer will often share his expectation of you as well. Even though plenty of employees my express their thoughts during a communication, their employers may not enough for them to understand your really thoughts. This dilemma comes from the illusion of transparency. The illusion of transparency happens when employees more believe their managers already know his willing to raise salary than they actually are. Therefore, employees should give their managers a clear and immediate message, for example “I hope you can consider about increasing my salary.”, or “I hope to get bonus through hard work.”

4. Unbundle the Issues

One reason why negotiations often fail is because employees and employers often focus on negotiating a single issue, for example whether you deserve increase your salary or not. If employees only pay attention on one issue, such as the growth rate of salary, they just segment a big cake simply. In order to avoid the disadvantages of a single issue, skilled employees tend to add different issues, unbundled issues and create new issues. Win-win agreements requires at least two issues and lease options. I have two advices for employees to design their issues. First, you can ask your managers “how do you determine salary offers for a higher salary?”Second, you may ask the employer how often and on what standards I will be considered and given salary raises. This issue will help you to know the potential needs for a higher salary and decide if you can afford the corresponding responsibility.

5. Package Deals

In most situations, negotiators tend to communicate issues separately. However, this approach will undermine the efficiency of salary negotiation. Because if you negotiate each issue separately, it’s quite hard to make trade-offs between problems. Meanwhile, sometimes the negotiation space is narrow and trade-offs are quite important to realize a mutual and valuable solution. Employee should compare and integrate different issues, then trying to achieve a win-win agreement and trade-off situations. Single-issue offers will lead the negotiation into compromise agreements and usually are not the best methods for win-win negotiation. Therefore, employees should have a sense of global consciousness about issues and perform an integration analysis.

6. Multiple offers of Equivalent Value Simultaneously

When negotiating with rigorous or evenuncooperative employers, it quite easy to lead disappointed and frustrated results because of the ineffective information you provide to them. According to Neale’s research, he found that the best way to solve this problem is making multiple offers of equivalent value simultaneously. Employees can provide at least two, preferably more, advices of equal value to employers. For example, you can respond to the employers by designing there different choices. First, can you give me a 10% pay rise after I successfully completed a profitable project? Second, can I get appropriate bonus as reward for my performance? Third, can I have a promotion opportunity to fulfill my demand for salary rise and make a contribution for the company?

Strategy	Performance & Possible Questions
Perspective-Taking	·Choose the best time to ask · Switch their angle of view from salary raises to higher compensation
Inquiry about Interests and Priorities	Q: What are our company’s expectations for my department or my position?
Provide Your Interests and Priorities	·I hope you can consider about increasing my salary. ·I hope to get bonus though hard work.
Unbundle the Issues	Q: How do you determine salary offers for a higher salary? Q: How often and on what standards I will be considered and given salary raises?
Package Deals	Q: Have a sense of global consciousness about issues and perform an integration analysis.
Multiple offers of Equivalent Value Simultaneously	Q: Can you give me a 10% pay rise after I successfully completed a profitable project? Q: Can I get appropriate bonus as reward for my performance? Q: Can I have a promotion opportunity to fulfill my demand for salary rise and make a contribution for the company?

Differences in the pay negotiation

A win-win negotiation between employer and employee would not be tough actually.If we can capitalize on the differences between them, and provide them the different benefits which they acquired, a happy negotiation outcome will exist.

In this case, it seems that the employer and employee are all focusing on the money. The employer would consider the cost saving problem while the employee would pay attention to his payment compared with others. However, what is the fact?

1. Should their valuation be the same?

Negotiators have different strengths of preference for each issue (Thompson, 2009). In this salary negotiation, not only one issue – money is appeared. Let’s have a look in a research (Glendon,Tweedie and Behrend, 2001).As employees, 30% of them were focusing on the comparability. This issue was the second important one for them, excluding the living cost which was the same as employers focused. The employees did obviously care about the equity. In our case, the employee was asking for a pay raise, because he did not get the same level of payment compared to other supervisors, nor the bonus which he should deserve compared to other employees. His valuation is based on the comparability. On the other hand, 31% of the employers were focusing on the productivity. They paid attention to increased production and cost saving more than employees did in this research. In our case, the employer also had the same valuation. He did care about the whole productivityfirstly. Therefore, we can figure out here that, the strengths of preference are different between employer and employee in our case: employer focuses on the productivity while employee focuses on his equity.

2. Should their expectations be the same?

As Thompson mentioned, negotiators own different forecasts and beliefs of their negotiation targets. Besides, different valuation would also have an effect on the expectations. In our case, employer knew that the productivity was more important for him. He could compromise in other issues if the productivity could be guaranteed by the employee’s superior performance. From the employee’s perspective, he wanted to get a pay raise because he thought that he should deserve it comparing with his colleagues. He knew that his age and experience were his weaknesses, but the capability of handling the unit and the same responsibility as other supervisors showed his value for the company. He may compromise in the pay raise if he can be encouraged and motivated by other issues like non-cash benefits. Hence, the expectations are shown differently by the employer and employees.

3. Should their risk attitudes be the same?

As we learned, negotiators may agree on the probability of future events but feel extremely differently about taking risks (Thompson, 2009).To some extent, their risk attitudes and behaviors would influence the negotiation process (Avenhaus and Sjöstedt, 2009). In our case, employer should be more like a risk-seeker. He wanted to make more profits in the unknown market, and he was looking forward to the employee’s superior performance in the marketing division to achieve his target. So he would like to agree on a contingent contract. On the contrary, the employee should be more risk-averse. He was not sure about the changing market and the strategies of the company in the future. So he would make more consideration during the negotiation process.

4. Should their time preferences be the same?

Negotiators would like to begin the bargain in a suitable moment. Without doubts, right time for them can gain more benefits during the negotiation process. In our case, the employer postponed the salary negotiation for several times during the employee’s career growth. For the employee, those bargaining tries were not at the right time actually. However, after three years being the unit head, he should gain more bargaining chips. So, this time should be the appropriate moment for him.

5. Should their capabilities be the same?

Capabilities and skills should be the negotiators’ resources, or bargaining chips. In our case, the employer had excellent negotiating skills. He had been successfully maneuvered the conversations around and the employee became thankful each time. However, the employee was growing during these years. He gained more working experiences. He had the capability to well handle and manage a unit. Since these two negotiators owned different capabilities to support themselves in the negotiation process, the win-win negotiation should be based on their valuation again.

What is the win-win negotiation outcome?

Valuation would be the basic element in the win-win negotiation. Negotiators would compromise on other issues if their valuation was not attacked. Therefore, the win-win negotiation outcome was as below:

1. Increasing 5% of the employee’s salary. Since the employee would care about the comparability, a pay raise could encourage him and show the importance of his talent. In this way, he will be motivated and work hard to increase production which is important for the employer.

2. Giving a new marketing project to the employee and promising a bonus of well performance. The new project would be win-win in the future. The employee can show his capability and achieve his value in the challenge. If he did well in this project, the company could make benefits through the new marketing shares and increase the productivity. The employer can gain what he wanted. Meanwhile, the employee can also gain what he want in the negotiation. That should be a win-win situation.

What we learned from negotiation

References

Chapman, Jack. Negotiating Salary: How to make $1000 a Minute, 3rd ed. Berkeley: Ten Speed Press, 1996.

Glendon. A. Ian, Tweedie.D.P.,& Behrend Hilde: Pay negotiations and incomes policy: a comparison of views of managers and trade union lay negotiators.Industrial Relations Journal.1975, Vol. 6 Issue 3

Reifkind, B. (2010). Top 5 Salary Negotiation Tips. Long-Term Living, 59(2), 36. Retrieved from ProQuest. Retrieved from

Rudolf Avenhaus, Gunnar. Sjöstedt (2009).Negotiated Risks. Berlin. Springer-Verlag Berlin Heidelberg Press

Thompson, L. (2009). Win-Win Negotiation: Expanding the Pie. The Mind and Heart of Negotiator, Pearson Prentice Hall.

  

“Who’s Making What in Marketing/Sales” Abbott, Lancer & Associates Online. Internet 13 Sept. 1998.

http://search.proquest.com.ezproxy.cityu.edu.hk/docview/747189158/13BEEEEF8532FF795B5/1?accountid=10134.