Negotiations
Giuseppe (Joe) Labianca, Ph.D.
Gatton Endowed Associate Professor of Management
Gatton College of Business and Economics
University of Kentucky
UK Alumni Association’s Third Thursday
November, 18, 2010
Negotiation Experience
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Former fellow at the Center for Research on
Conflict and Negotiation (CRCN) at Penn State
University
Examples of my research and consulting
projects on negotiations:
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Page 2
Political negotiations in legislatures
Interdepartmental negotiations in organizations
Community negotiations between interest groups
Entrepreneurial negotiations
Today’s Schedule
6:00 – 6:45
6:45 – 7:15
7:15 – 8:00
3
Lecture/discussion on negotiating
salaries
Q&A on negotiations
Salary Negotiation role-playing
exercise
The Negotiating Equation
Negotiating
Negotiating Negotiating
=
x
Performance Ability
Motivation
How will you know if the negotiation was
successful?
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Unless you know the true reasons for entering
into the negotiation, you won’t get good
performance – be honest with yourself
“I want a raise”
Why?
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“I don’t feel valued as much as other people in my
department” vs.
“I haven’t had a market adjustment in 10 years and
my children are going to college soon…I need the
money”
The Negotiating Equation
Negotiating
Negotiating Negotiating
=
x
Performance Ability
Motivation
Negotiating Ability
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There are many tips for improving your
negotiating ability
First and foremost tip:

Believe in the value of what you are selling
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Emphasize the positive aspects
Don’t dwell on the negative aspects
You need to sell the other party on that value, and show
them the unique aspects of what you are selling
Easy for people to remember when you are looking for a
job, but the same applies when you are seeking an
internal adjustment
Negotiating Ability
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It’s difficult to negotiate effectively without
data
Talk to a wide variety of people when trying
to gauge your value
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go online!
don’t just ask the people with whom you are most
comfortable!
don’t fall into the homophily trap (particularly
important for women)!
Winning tactics
1.
2.
What is your best alternative to negotiating
this agreement (BATNA)?
What is your reservation point?
•
3.
The point above or below which you will
exercise that alternative
What is your target point?
•
Note: This should NOT be the same as your
reservation point. Be OPTIMISTIC.
Candidate’s reservation price
x
$75K
$80K
CANDIDATE
$100K
x
Bargaining zone
RECRUITER
$90K
Recruiter’s reservation price
4. Your goal is to claim as much of the
value in the bargaining zone (shaded
area)
5. Try to ascertain other party’s reservation
price
6. Open aggressively with highest
defensible offer
•
•
Anchors other party
Try to influence other party’s reservation
price (increase the bargaining zone)
Most negotiations end at the midpoint
(usually on most typical quantitative
negotiating issue, such as salary)
7.
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Therefore, when giving concessions on that
point, try to get concessions that are more
valuable to you on other issues (e.g., bonuses,
equipment, travel expenses, research
resources, tuition reimbursement)
8.
Employ a funnel pattern to your
concessions to signal your target point
140
138
136
134
More likely to lead to an
agreement being signed,
even if final agreement is
more expensive
140
138
137
136.5
The Negotiating Equation
Negotiating
Negotiating Negotiating
=
x
Performance Ability
Motivation
Negotiating Motivation
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Develop alternatives that you are willing to
exercise if the negotiation doesn’t go well
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Go out on the market
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Forces you to keep current on your skills
Keeps employers from taking you for granted
Can be used as negotiating leverage
Don’t underestimate the power of leaving and returning at a
later time
Also consider the internal market within large companies,
though this will be less lucrative than the external market
Negotiating Motivation
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Use the market to your advantage
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Negotiating on the way into a position?
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Generate multiple offers to create negotiating leverage
How do I generate offers?
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Two techniques you might not have considered
(besides sending out your resume and speaking
with friends and their acquaintances):
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Use headhunters
Use informational interviews
Use headhunters
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Use headhunters (professional search firms)
to help you search for jobs
They are paid for by hiring companies, so
there is no cost to you
If you know companies you’d like to work for,
ask HR who they use for searches
Use informational interviews
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Contact alumni/friends who are doing what
you’d like to do
Schedule 20-minute informational interviews
or external coffee chats to understand:
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What they do
How they got that job
Before leaving, ask for two more contacts to
call on
Negotiating Motivation
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Don’t devalue wages…
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While it’s healthy to take a broad view of your
interests in a negotiation (e.g., vacation time,
good schedule, good work environment)…
…don’t assume that you have to trade those
interests off for wages and bonuses
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Present wages form the platform for all future wages,
and giving up on them has a huge cumulative effect over
your career
Try to get it all first
Negotiating Motivation
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But don’t get hung up entirely on wages…
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Naïve negotiators focus too much (and sometimes
exclusively) on wages to the detriment of other
issues that can provide more value
Negotiation Motivation
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A quick deal is not necessarily a good deal
If you are getting tired of negotiating, take a
break…
…don’t just sign
What if the other party says “no?”
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Ask “why?”
Listen carefully
Try to understand their underlying interests,
not just their position
Explain your underlying interests
Seek creative solutions that satisfy their
underlying interests while still satisfying yours
Proactively develop skills
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Involve your managers in helping you to develop your
skills and to gain experience
Let them know that you’re interested in getting to higher
positions and work with them to develop a plan for how
you will reach those higher positions (e.g., special
assignments)
Be proactive! Many managers are not used to
developing subordinates, so you might have to push
them, as well as seek out mentors from outside your
department or firm
Further your education
Salary negotiation
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Because your future relationship with this
person/organization is important, you can’t
approach the negotiation with a scorchedearth strategy
But you still need to ask for what you need
Extremely important that you approach with
the right tone
Work on tone and presentation
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Practice first.
Presentation is important:
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Tone of voice is very important.
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Reiterate how much you like the job.
Describe your concerns.
Negotiate most important issues first.
Ask them to help.
Get everything you want on the table.
Avoid commitment words:
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Always, “must have”, “deal breaker”, never,
“won’t consider.”
After you reach agreement
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Always get the offer you are accepting and
any revisions in writing.
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This is without regard to whether it’s an internal
offer or an external one.
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Question and Answer Session
Salary Negotiation
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Read your role
Think about the least/most you’re willing to
pay/receive; think about what you’d like to
pay/receive
Get an understanding of the other issues
involved
Think about how you want to talk about these
issues in this negotiation
Pair up with someone you don’t know
Negotiate for no longer than 20 minutes
Conclusion
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Develop alternatives – don’t be afraid to
exercise those alternatives
Get data, and seek it from diverse sources
Don’t be afraid to negotiate – everything is
negotiable, even if people tell you it is not
Don’t give away value needlessly
Don’t start conceding right off the bat – try to
satisfy ALL of your interests first
Thank you!
Negotiating a job offer
from a new employer
“O.K.”
O.K. are the two most expensive letters in job
negotiations
Those two letters could cost you:
• A $3,000 computer for home use
• A $7,000 bump in salary
• A $4,000 bonus
• An $8,000 relocation allowance
• An extra $2,000 in your retirement account
• A reduced rate mortgage
“O.K.”
• “O.K.” is what most people say in response to a salary
offer
• They mean, “I accept what you’ve just offered. Thank
you.”
• A simple “hmmm” can improve your outcomes
Negotiating Process Overview
• Receive a preliminary offer. Congratulations!
• Be excited, and let them know you’ll consider it
carefully. Get it in writing.
• Prepare for negotiating.
• Negotiate using an integrative (win-win) strategy.
• Only accept offers with which you’ll be happy in the
long run.
At What Point Do You Negotiate?
• Never begin a negotiation until you have a firm
written offer. Some firms may ask about your bottom
line number, expectations, etc. before offering you
the job – dodge and deflect. Write “negotiable” if they
ask for a salary range on an application.
Pre-offer phase
Dodging and Deflecting
They may ask for a number either before an offer is
made or once they have told you they are offering
you a position (on-the-spot). If you deflect once,
over half the time, they’ll ask you again. Keep
dodging and deflecting!
Pre-offer phase
Sample Dodging and Deflecting Statements
• “Compensation is important to me, but could we
hold that discussion until I know more about the
position and you know more about my skills and
experience.”
• “I am more interested in finding the right opportunity.
This job really interests me and I know I can do it. I
am sure you will be fair and that the money will take
care of itself.”
Pre-offer phase
Responding to the On-the-Spot Verbal Offer
• Ask for time to fully consider the offer. Never
accept or negotiate on the spot. Asking for the
offer in writing can buy you time.
Offer phase
Should You Negotiate?
• Yes. All offers are (in part) negotiable.
• This is the only time where you have the upper hand.
The company has made a commitment to you. They
want you and do not have you! You have more power
than you think.
Offer phase
Evaluating Your Offer Fully
• Focus on the total package – don’t get locked in only
on salary or monetary compensation
Offer phase
Evaluating Your Offer Fully
• Most important part of negotiation is often position:
• Responsibilities/job content, location, staff, resources,
expected hours, advancement potential, direct boss.
• Monetary compensation
• Base salary, sign-on bonus, year-end bonus, equity/ stock
options, profit sharing, company match.
• Benefits
• Vacation, medical, retirement, incentive savings plans, day
care, spousal assistance, relocation services, tuition
reimbursement.
Offer phase
Prepare Thoroughly for Negotiation
Think through these issues:
 What do you want?
 Prioritize your wish list and assign weights.
 Be ready to compromise and be creative.
 What is your ideal opening offer? What is
your bottom line? How will you frame your
requests?
Offer phase
Go Through Your Planning Document
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Consider how will you respond if the answer
to your request is “no”?
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Have a backup position in the event whatever
component you are negotiating is not negotiable.
[Remember to ask “why” (in a nice manner)].
Offer phase
Research Reasonable Targets
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Job Assessment
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Determine the value of the job in the market.
Factor in industry differences.
Self Assessment
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Know how your skills, experience, and academic
credentials fit the job.
Be confident of your value and your ability to
communicate your value.
Offer phase
Once Negotiations Begin
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Practice first.
Presentation is important:
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Tone of voice is very important.


Reiterate how much you like the job.
Describe your concerns.
Negotiate most important issues first.
Ask them to help.
Get everything you want on the table.
Avoid commitment words:

Always, “must have”, “deal breaker”, never,
“won’t consider.”
Negotiation phase
Responding to a Verbal Lowball Offer
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Be silent. Do not respond too quickly if you are
not satisfied.
Indicates you are either carefully considering the
offer, or that you are not happy with the offer and
expect more.
After a pause, respond with enthusiasm and
interest for the job and the organization,
regardless of how you feel about the package.
“I am excited about the opportunity, but a little
concerned with the salary.” Keep it short.
Ask them to send it to you in writing, and tell
them you’ll review it.
Negotiation phase
Study the offer details
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Make sure you understand the details
Examples:
What controls the performance bonus and
historically how much has it paid out? Based on
your efforts or the company performance or both?
What does the profit sharing program look like as
well as company match?
What is the vesting period?
Negotiation phase
If the package isn’t enough
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If company won’t budge and you want the job,
you might try to ask for an accelerated review (6
months vs. 1 year) linked to a salary increase.
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Don’t say “no.” Leave a window of opportunity
(“It’s just very difficult for me to accept an offer at
that level. I’m very sorry.”) This gives the
employer an opportunity to come back with
something better.
If the offer still falls short, phone the manager
and relay your decision to pursue other
opportunities.
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Resolution phase
Accepting/declining an offer
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Always get the offer you are accepting and
any revisions in writing.
Send thank you notes to key players in your
job search process, even the companies you
decline.
Managing the process of turning down an
offer is just as important as accepting an
offer. Focus on the positives: The job you
accepted was more closely related to your
needs versus how their position was not.
Resolution phase
Takeaways
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Build a solid base of data through selfassessment and market research
Convince prospective employer of your value
Negotiating is an acceptable, reasonable and
often necessary step in the job search process –
don’t shy away from it
Negotiate using a collaborative style
Negotiation isn’t just about base salary - there
are many financial and non-financial terms of
employment you may want to negotiate