I didn’t even think about asking for more,” she told her friend who had recently negotiated a higher salary when offered a job. “I will definitely ask next time.”
Fortunately for her, she’s a rising college senior and will almost certainly have the opportunity soon to negotiate a salary at her first real job.
Had this conversation not occurred when it did, though, this one major mistake could have led her to lose out on hundreds of thousands of dollars over the course of her career.
In fact, a 2014 article in Business Insider found that not negotiating your first salary in a low-wage job could lead to half a million dollars in lost lifetime earnings. And the losses add up in high-wage positions!
Bottom line: Our first salary often sets the baseline financial component for all our future salaries – thus having a disproportionately exponential impact on our career earnings.
So what specifically did she do wrong and what other mistakes do many others make in salary negotiations? Here are my top five (three here and the rest in my next column).
1. Not recognizing this as a negotiation
I made this mistake almost 40 years ago. I was so happy to get a paid staff job on this political campaign that I just said yes. And I was thrilled! $1,000 a month.
Unfortunately, this job didn’t last long as my candidate lost. But I learned a valuable lesson: This is a negotiation!
And as a negotiation, you should develop a Strategic Negotiation Plan based on the experts’ proven research and recognize that this often includes the give-and-take moves typical in many negotiations.
Plus, this is one area where gender differences rear their ugly heads. As described in the book Women Don’t Ask: Negotiation and the Gender Divide, women disproportionately do not view job offers as a negotiation and thus get less (a study by the authors found that men were eight times more likely to negotiate their starting salary and benefits than women). For more on this, see my column “Women Experience Greater Gender Bias in Negotiations.”
The solution for everyone? Research what job offer environments include back-and-forth moves. Find out where you can and should negotiate.
2. Focusing too much on the money
Remember Tom Cruise as a sports agent in the movie Jerry Maguire standing on his desk shouting into his phone “Show me the money”? Of course, money matters in salary negotiations, often a lot.
But there’s also great value in non-financial elements like job titles, flexible work-from-home schedules, health benefits, end-of-year bonuses, retirement matches, staff support, and the list goes on.
These often get short shrift in salary negotiations. Don’t make this mistake. A better job title or more staff support or extra days working from home or one extra vacation week might make your life a lot more fulfilling than a slightly bigger salary bump.
New York Knicks’ superstar Jalen Brunson reportedly left $112 million on the table so his team could have the financial flexibility to surround him with championship-caliber players. It paid off!
3. Underestimating your leverage
Most people naturally focus on their own alternative/Plan B when offered a job. What are you going to do if you don’t accept it? This can be pretty bad, as unemployment might be staring you in the face or even a worse job with another company at a lower salary.
This constitutes a critical element of leverage. But it’s not the only element of leverage.
Equally crucial is your counterpart’s Plan B – who they might hire instead of you. Leverage is relative. And remember, they offered you the job, meaning their Plan B candidates are NOT as desirable for them as you.
The common mistake? Focusing too much on your Plan B and not stepping into their shoes and appreciating that your potential employer’s Plan B may be suboptimal.
The solution? Evaluate leverage from both sides’ perspectives and find out – if you can – who else is on deck for your potential employer. You can then more accurately assess your true leverage and implement a more effective negotiation strategy.
Latz’s Lesson: We all make negotiation mistakes, especially when offered a job. But you can avoid the most common ones. If you don’t, it can cost you hundreds of thousands.
* Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He can be reached at 480.951.3222 or Marty@LatzNegotiation.com.