Using anchor points during salary negotiations

This article was initially posted on the CMI Management Blog

Back in August I posted up some tips on how to successfully negotiate your salary.  Number 2 on the list was to make the first move by naming your expected salary.  The belief behind this is that it sets a psychological anchor point that then draws further negotiations towards it.

So far so good.  New research suggests that when setting your initial anchor point it pays to go high, even if it's outlandishly high.

The researchers asked participants to view an application that included two anchors.  One was the applicants previous salary ($29,000), whilst the other was an unusual request of either $1 or $100,000 said in a joking manner so as not to appear arrogant and so on.

Interestingly, participants that asked for $100,000, even in jest, were awarded higher salaries than both those that gave the $1 anchor and those that merely had a realistic anchor point.

To further test things, they asked participants to record their perceptions of each applicant when making their recommendations.  To add spice to things they added another extreme anchor of $1 million.

Now where it gets interesting is that participants did not find these extreme anchor points implausible and it was just as influential as the $100,000 figure in rewarding applicants with a high salary.

So even radically inappropriate anchors can sway recruitment decisions. It's worth noting too that the unusual anchors had their effect despite being presented alongside realistic ones, as some studies have suggested that in such situations we may simply defer to the more plausible. That wasn't the case here.

There are risks to naming a salary first, such as underselling yourself or pricking the sensibilities of the hirer. So using a joke to introduce an anchoring value may be a safer bet. Organisations may of course respond: using clearly defined pay ranges and clear criteria to shape a fair financial offer for a desired candidate. Both parties should take seriously the power of framing the financial borders of a negotiation.

 

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