How to negotiate your job offer without losing your integrity — Part 1
If you’re like me and the words “negotiate your job offer” makes your belly squirm, read on.
When I graduated from university, I was desperate to get a job. I signed the first offer I had in hand. It was a great offer — six times the money I was making as a poor grad student. I remember being embarrassed about what I thought to be an insanely large sum of money. Clearly I’m not worth this much, I thought. Clearly I got lucky due to a divine intervention. Quick! I should sign this offer before they realize they’ve made a mistake!
A few months into my first job, I found out that my peers who had similar educational qualifications and who joined roughly at the same time made a bit more money than I did. It made no sense to me. Why would someone earn more if they did the same work as me? I shoved those thoughts aside. My middle class upbringing had taught me not to be greedy. I should be content with what I get. I should trust the system.
A few years into my career, I saw my salary rise quite dramatically. I thought to myself, see I was right to trust the system — all I need to do is to put in the hard work and the rewards will follow. I was so convinced that I started advising new college grads to not worry about negotiating their job offers. Don’t worry about the salary you get, I said. Pick a job that aligns with your career goals and passions.
I then heard about my friends with similar backgrounds and similar levels of experience making way more than I did at other companies. It was upsetting to learn that initially. But then I told myself, Why should I be greedy for more money when I have everything going right in my career? I thought asking for more money was being selfish, greedy, and immoral, especially when I was having great career growth.
A few years later, I realized that my peers in my company who were hired from outside made more than I did for the same role. Wait a second, I thought. These folks also have things going right in their careers and they got a better deal from a compensation perspective. It didn’t fit my thesis around there being a tradeoff between career growth and compensation.
Why are some people paid more for the same work they do, for the same impact they achieve?
After speaking with friends and family who were less naive than I was, I realized the answer to that question boils down to a few simple truths:
- The world is unfair. There is plenty of research that proves that people belonging to certain demographics are paid less than others for no fault of their own. While a lot of companies are trying to fix this, it’s going to take the tech industry years before we get to equitable pay.
- The people who ask for more money get more money. Imagine two high performing employees — employee A who never talks to their manager about their compensation, and employee B who frequently asks their manager about their compensation. Even the best of managers are human. They are susceptible to halo effects and recency biases — Employee A never complains about their compensation so therefore they must be happy. I remember Employee B bringing this up in my meeting yesterday, so let me act on it.
- Profit-making enterprises operate in a capitalistic market. The price of your labor is set by the market. But if you are not aware of what your market worth is, you are susceptible to get paid less than what you’re worth. In a capitalistic system, it is the job of any profit-making enterprise to optimize their profits. Profits can be optimized by increasing revenue and decreasing costs. So if a company had the option to pay someone $1000 or $900 for the same amount of output, they would probably choose the latter. However, if the fair market price for that labor was $1000, they wouldn’t be able to convince anyone to work for $900. Unless if you did not know that the price of your labor was $1000 and are happy to work for $900.
There’s a simple analogy here. Imagine I go to a farmers market to buy a sack of potatoes. There are multiple vendors selling the exact same sack but at slightly different prices. If I know that the quality and quantity of the produce is identical, why would I not purchase the sack from the vendor who is offering me the lowest price?
Let’s say maybe I have a preference towards a specific vendor. Maybe I like them. Maybe their social values are similar to mine. But they’re offering me a higher price than the market value for those potatoes. What would my response be? I’d probably try to understand why they’re selling them at this price. I’d try to negotiate with them to get the price down to the market value.
I had a eureka moment right then — negotiating your job offer is not very different from bargaining to secure the best price for those sack of potatoes. When you’re negotiating, you’re not being greedy. You’re merely trying to assess whether you can get the deal that gets you the closet to your fair market value.
If you’re still feeling nervous about negotiating your job offer, tell yourself this:
- Negotiating your job offer does not make you greedy. You are simply trying to get the price that the market determines to be your fair price of labor.
- If you don’t negotiate your job offer, you not only lose out in the short term but also lose out in the long term. In most companies, equal performance results in equitable percentage increases in compensation (there are obviously exceptions to this, but set percentage increases are a common pattern). So if you start off with a lower pay, your percentage increases will have a lower yield than if you started off with a higher pay.
- Besides, why would you want to lose out in an environment where everyone stands to gain? By asking for more money, you are not depriving someone else of that money. At the end of the day, the money is coming from the company’s budget, and not from any single person’s pocket.
In the next blog post, I’ll talk about how you can determine your market worth. This will help you figure out where you stand, and what companies are willing to pay you. In subsequent posts, I’ll share some practical tips and techniques to negotiate your job offer in a way that’s consistent with your values. Stay tuned!