Salary Negotiations: The Best Practices

The best practice in negotiation is detailed in the Driver-Seat Concept, which draws particularly on the insights of elite negotiators (specialists in crisis negotiation).

In essence, the best practices for salary negotiations can be outlined as follows:

Step 1: Professional preparation

Every negotiation should be prepared by the person who makes the decisions (”Decision Maker“) in accordance with the TOP LADY formula. TOP LADY stands for Team – Options – Positions – Learn – Adapt – DIscuss – Your instruction.

Numbers 1 to 3 (TOP) describe the development of the mission (Mission Development).

Numbers 4 to 7 (LADY) describe mission control.

Team

Preparation always starts with Setting up a team by Decision Maker.

Preparation always starts with the Decision Maker setting up a team. In addition to the decision maker (i.e., the "boss"), the team always includes a negotiator ("Negotiator"), i.e., the person who actually conducts the negotiations and implements what the boss (Decision Maker) wants. This strict separation by the Decision Maker and Negotiator ("team strategy") is indispensable. The golden rule "The Boss Does Not Negotiate" is based on the fact that decisions made at a distance are more carefully considered than spontaneous decisions by the person who negotiates at the table (under stress).

Now you might object that you cannot implement this because, during your salary negotiation, you have a dual role: on the one hand, you are the "Decision Maker" and on the other hand, the "Negotiator".

You can help yourself by creating a ”One Man Team“(Dominick J. Misino): Always decide before and after negotiations, after consultation with a counselor, about which approach to take. The advisor (e.g. a friend) gives you incredible security, even during subsequent negotiations. To anticipate: You can always rely on this advisor during subsequent negotiations. For example, at the end of the conversation, you can say:

“Thank you very much for the very constructive discussion and your suggestions. I would like to discuss this with my advisor and would be happy to get back to you. ”

In the worst case screnario, should you not have an advisor and are forced to negotiate solely by yourself, you should at least end the conversation as follows: "Thank you very much for the very constructive discussion and your suggestions. I would like to sleep on it for a night and consider all my options. I would be happy to get back to you then."

Options

Analyze your Options regarding the upcoming negotiation and –  if possible –  actively shape these options to your advantage. For this purpose, you could, for example, commission a personnel consultant. Please also consider the constant reevaluation of your options. The facts can change constantly.

Positions

Determine your target position (what you really want to achieve) and your starting position (with this you start the negotiation) in relation to each issue (e.g., your performance or your contribution to the company's success, the counter-performances such as fixed salary, variable compensation, etc.). The starting position is an optimized target position and creates room for negotiation.

Learn

The aim here is to learn and understand which positions the partner asserts and, as a result, analyzing the conflicts. This is often only possible during the negotiation.

Adapt

The Adapt task covers adaptation to the respective situation: Which conflict strategy is currently the right one? Should the positions and/or conflict strategy be adjusted? According to the Thomas-Kilmann Conflict Mode Instrument (TKI), you have the following choices when it comes to conflict strategies: (i) Competing or (ii) Avoiding or (iii) Giving in or (iv) Collaborating or (v) Compromising.

Discuss

As a One Man Team, you should discuss your (preliminary) decision with your advisor.

Your Instruction

For a normal team, this is the moment when the decision maker instructs the negotiator to assert certain positions and apply a specific conflict strategy. With a one-man team, it is your final decision with regard to (i) specific positions and (ii) the current conflict strategy to be applied.

Step 2: Professional negotiation

Opening

Every negotiation starts with the opening. The opening consists of three elements, small talk, the agenda and the smart start.

Small Talk

Start salary negotiation with a Small Talk.

It offers you a unique opportunity (i) to establish the relationship necessary for every and any negotiation, (ii) to understand the emotional and rational world of your negotiating partner and (iii) possibly understand the positions and interests of your negotiating partner in advance of the actual negotiation.

During the course of this conversation, also try searching for commonalities. Because highlighting commonalities (sports, hobbies, holidays, etc.) has been scientifically proven to generate sympathy, which in turn creates bonding, which is the foundation of successful influence and pursuasion.

Agenda

The second part of the opening is the agenda, which names the topics that are of subject during the negotiation.

In a salary negotiation, the number one topic is always your performance, i.e. your area of responsibility or your contribution to the success of the company for which you work for or desire working for. The focus here primarily lies on the future. Always begin by talking about the added value, that you want to bring about in the future.

Then add other topics to your agenda that are not directly related to compensation, such as non-compete clauses, notice periods, vacation, etc.

The in-return, i.e., the topic of compensation or the individual aspects of compensation (base salary, variable compensation, company car, etc.) should be the last item on the agenda.

Smart Start

The third element of the opening is the Smart Start. It's about the right approach concerning the positions on the aforementioned topics. Ideally, your partner should open, but if that doesn't happen, you start with the starting positions.

Never Open Rule

As far as possible, always let your negotiation partner open the negotiation (Never Open Rule).

This applies in principle to every topic on the agenda, i.e., the scope of duties, other non-compensation-related aspects, and the topic of compensation.

This principle is based on the assumption that you generally have an information deficit and do not know which positions your partner considers appropriate from their point of view.

Especially regarding the topic of compensation, it would be frustrating to anyone, demandong something and then your boss quickly agrees with your demands, accompanied by a sigh of relief because they actually expected your demands to be significantly higher. The following opening is a good approach to use for a compensation negotiation:

“I would very much like to know how satisfied you were or are and what challenges you have planned for me in the future... ”

Now let your boss talk at length and listen without interrupting.

At some point, you will notice that the topic of compensation is "in the air" and ripe for discussion.

There are two classic alternatives here.

Alternative 1: You are bold and might transition as follows: "That all sounds very interesting, and I am really looking forward to these tasks. Do you already have a structure in mind of how you would like to compensate me for these tasks?"

Let your boss talk in detail and listen carefully. Do not interrupt. Take notes.

Alternative 2: Your negotiation partner might ask you, for example: "What are your demands regarding compensation?" Now, you should counter charmingly:

"I have no definitive demands, I only wish that you offer me a market-appropriate and fair compensation. My compensation needs to fit into your overall system, which I am not familiar with."

Let your boss talk in detail and listen carefully. Do not interrupt. Take notes.

Anchors With Starting Positions

If you are unable to make your negotiation partner open, you should begin with your long-term goals or the starting positions agreed upon with your advisor, for example: "I have thoroughly familiarized myself with the market standard. I aim to deliver excellent performance and be adequately compensated for it. How can I achieve an annual compensation of EUR .... (long-term goal) within a certain period?" This sets a so-called anchor. "Anchoring" is one of the key tools of influence. This tool, which has been extensively researched, causes your negotiation partner to initially intuitively accept this amount as a so-called "reference point". Immediately afterwards, your negotiation partner – also intuitively – starts to adjust from this reference point, categorizing it as "too high" or "too low". If your partner is a professional, they will, of course, after the intuitive adjustment, consciously, thoroughly, and critically consider which amount they deem appropriate.

Chaos Phase

After one side has opened the negotiations with its positions, the opening phase ends. At the same time, the Chaos phase begins. In this phase, things typically go a lot different than what you might have imagined them to go. However, you can be sure to remain in the driver seat at all times and keep everything under control should you decide to take the step to commiting yourself to mastering and applying the 3 core negotiation strategies of negotiation:

• The application of the team strategy ensures that as a One Man Team, you do not make hasty decisions but rather always consult your advisor first. You know: Decisions to resolve conflicts are not made at the negotiation table, but with your advisor.
• The application of the ABC strategy ensures that you manage the process professionally. You know: Conflicts are not resolved in phase A, but in phase C.
• The application of BMI Strategy ensures that you, as a negotiator, act in a professional manner, during every phase of the process. You know: Only those who have built a relationship with the partner can influence the partner.

Phase A: Open Points Analysis

Procedural component:

Set only one goal for Phase A: Asserting your starting positions and analyzing all conflicts in an Open Points list. Place a separate sheet of paper in front of you titled "Open Points". Complete this list. Refrain from looking for solutions in Phase A already.

Behavioral component:

Approach every negotiation with a professional mind set, in particular: Always treat your boss as a partner, i.e. with respect; always stay cool, do not let yourself be provoked by anything.

Apply the so-called BMI strategy (BOnding, MIssion, Influence) or the following tactics:

1. Listen to your partner without interrupting and ask open questions; summarize the contents and emotions and then remain silent. Take notes (Active Listening).
2. When you feel that you have reasonably understood your negotiation partner's perspective, communicate this clearly by saying, for example, "Ah, I understand. If I were in your position, I might see it that way too." You understand your partner, but that doesn't mean you agree with them (Tactical Empathy).
3. The goal of Active Listening and Tactical Empathy is to achieve a trust level of at least 51%. Successful bonding means that you have established a mutual relationship and your partner trusts you more than they distrust you. The former FBI Negotiator Dominick J. Misino refers to reaching this minimum goal as the "Concept 51". After that, the aim during the negotiation is to maintain the 51% trust level or to achieve an even higher level. Remember, you can build trust with your superior on a daily basis, whether through the right small talk in the elevator, your optimal work effort for your company, the necessary respect in meetings, etc.
4. Now (after building a relationship), try to understand exactly your partner's positions. Ask questions such as: “Do I understand correctly, that you...”
5. Communicate your positions. When you assert your starting positions, please use so-called "I-Statements". I-Statements are, for example, "I believe...", "in my experience..."; "I am going to be honest here, I had envisioned a somewhat different number. I would like to get into the region of "EUR...."." I-Statements are neither considered aggressive, nor are they vulnerable to attack. Your personal experiences and opinions are just that. They are your subjective viewpoints, that are impossible to debate otherwise.
6. Consciously use the weapons of influence ("weapons of influence", see Cialdini, Influence). Below are 5 typical weapons outlined as examples: Refer, for example, to the market standard (Social Proof): "As far as I am informed, a compensation of EUR ... is quite common for the activity we are discussing today. I would feel very comfortable with the market price." If you know of extremely high offers, you can also mention these to trigger the anchoring effect: "Recently, I even heard from friends that a compensation of EUR ... is being paid for my area of responsibility at .... I would very much like to move in that direction." Refer to an authority: "My advisor recommended proposing a compensation of EUR ... for the very interesting tasks. I am following this advice." Introduce the aspect of fairness, for example, by contemplating in the form of an open question whether the performance and counter-performance are fair and balanced: "I am currently wondering whether the compensation is fairly measured compared to the tasks." But be careful: Under no circumstances should you accuse your employer of "unfairness", even in the slightest. That would be akin to shooting yourself in the foot and would massively jeopardize the bonding process. The right tone and clever wording can decide whether the use of the "fairness weapon" turns out to be a success or a failed attempt. Additionally, if you also want to present rational arguments (which have nothing to do with market standards, authority, or fairness), always argue with the benefit of the company that you promote through your activity, but never with irrelevant considerations (I want to buy a house for which i need more money). A classic example for a rational argument would be: "The market standard is EUR ... p.a. Due to my additional qualifications, which I can utilize to turn a profit for you and your company, I could imagine that a premium on the market rate could also result in an appropriate compensation."
7. If everything goes to plan, you will be able to succeed with the correct use of Active Listening tactics, Tactical Empathy, and the weapons of influence in achieving success regarding your mission, i.e., your partner agrees to your demands (Behavior Change). This outcome is the aim of subsequent Phase C. In the current Phase A, the goal is first and foremost to analyse all conflicts (Open Points List).
8. Now you need a Time Out to contact your advisor (see the following section 2.2.).

Break 4 Change

This Time Out marks the start of Phase B (Break 4 Change).

In this phase, you decide – after consulting with your advisor – whether you are considering a change with respect to the starting positions and/or the conflict strategy (Competing) you have used so far.

According to the Thomas-Kilmann Conflict Mode Instrument (TKI), you have the following options regarding conflict strategy: (i) continue competing or (ii) Avoiding or (iii) Giving in or (iv) Collaborating or (v) Compromising.

Switching to "Collaborating" is usually the right decision.

Negotiate Concessions Package

Procedural Component:

If you choose Collaborating – which is usually recommended – you will now try to transform the Open Points List (analysis of all conflicts) into a package that resolves all conflicts.

For this purpose, you and your advisor will develop a package with individual "Package Positions" with regard to all open points. Based on the Open Points List, those positions that are less important to you (according to the current status) are "given away", and positions that are important to you (according to the current status) are retained as much as possible. The package is subject to the condition that it is accepted in full. Any change in a package position means that all package positions are open for negotiation.

Through so-called "give and take," you use the psychological weapon of reciprocity to find a solution that satisfies both sides.

In terms of opening, you should apply the Never Open Rule again.

Behavioral component:

In Phase C, you should also use the above tactics of the BMI strategy. Continue listening, show understanding for your partner, and use the weapons of influence.

Instead of clearly stating the starting positions, you can now suggest the package positions in a conditional form: "Could you imagine increasing the compensation to EUR ...? In exchange, I would be willing to accommodate you on the matter of 'number of home office days'."

At last, you should conclude your negotiation professionally.

Goodbye: Bid farewell professionally

1. If you have already negotiated a mutually satisfactory package (after consulting with the advisor), the next step will be to request the written document. If the text is sound, you can sign it. Should the text suggest misunderstandings, propose another round of negotiations.
2. If you haven't reached an agreement yet but are on the path to one, you should (i) document the open points, (ii) emphasize the willingness to find joint solutions, (iii) announce the coordination with your advisor, and (iv) agree on the next steps (e.g., the next conversation).
3. If you choose to conclude the negotiation, you can emphasize that it's challenging for you to envision an agreement at this point in time. This approach leaves the door open for a potential new attempt at reaching an agreement in the future, should you desire it.