Negotiating Salary - Satisfying the Needs of Company and Employee - Literature review Example

Negotiating Salary: Satisfying the Needs of Company and Employee

There are many types of business negotiations that will occur throughout the cycles of different forms of business transactions. A crucial point of negotiation within a business is the struggle between employers and employees to come to a mutually satisfying level of salary. Salary negotiation can happen at multiple points throughout the relationship between employer and employee. Initially, during the interview process the employer and employee will determine where the salary is going to begin and possibly determine what type of increases may occur throughout the time that the individual works with the company. This can be a crucial point at which establishing a relationship in terms of negotiating salary can begin.

Salary negotiation can occur through a number of different strategies. The basic five strategies of any negotiation, accommodating, collaborating, avoiding, competing, or compromising, can all be a part of salary negotiation. However, salary negotiation is best done through mostly collaboration, but with features of competitive strategies. Salary negotiation is a high importance of outcome, high importance of relationship form of negotiating and therefore must be done with the intention of satisfying both parties. However, conflict is also going to be an important part of negotiation, and understanding the types of conflict that will likely be a part of the negotiation can help to achieve the best possible outcome. Conflicts require resolution, especially when the relationship needs to be maintained. The salary negotiation should be conducted to achieve the best outcome for both parties, but if someone accommodates then either the business or the employee will be dissatisfied, or if it is avoided the same outcome will occur and neither party will be able to satisfy the needs of the other. Salary negotiation is critical, and therefore needs to be approached by both parties with the intention of coming to the best possible outcome that will achieve the goals of future performance.

Salary Negotiation

Strategies

The process of negotiation basically is defined by four different strategies which are structured according to importance of outcome and importance of relationship. According to Lewicki (2012), the importance of outcome is at a low level of strategy when using either avoiding or accommodating, but at a high level of importance of outcome when using a competitive or collaborative strategy. In terms of importance of relationship, avoiding and competitive strategies are low end, while accommodating and collaborative are a high end. An accommodating strategy is a ‘lose to win’ strategy, while a collaborative strategy is a ‘win-win’ strategy. An avoiding strategy is a ‘lose-lose’ strategy, while a competitive strategy is a ‘win at all cost, or win – lose’ strategy. There is also potential for compromise, which means that the difference is split between more than one strategy. Figure 1 is an example of how these strategies can be visually understood.

Figure 1 Visual Representation of Negotiation Strategies (Lewicki, 2012, p. 16)

The process of negotiating for a salary is already a contentious problem between employer and employee. Employer wants to keep his or her labor costs as low as possible, while an employee wants to get the highest benefit for their time. The importance of the outcome and the importance of the relationship are both at a high level. This is not a negotiation where both parties will walk away from the table and go on with the rest of their lives. They are going to continue to have a relationship and therefore must find a way in which to be satisfied with the outcome and to maintain the relationship (Lewicki, 2012).

It is likely that the compromise position between the competitive and the collaborative would be the most effective method of approaching salary negotiation. Primarily, a collaborative negotiation would be the best approach. According to Lewicki (2012) “a collaborative strategy is one in which both parties consider the relationship and outcome to be equally important” (22). Both parties will have compatible goals and will be willing to search for ways of those goals can be a gain for both sides. In contrast, the competitive strategy occurs when the parties believe that only one side is going to win and that their goals will be mutually exclusive. A collaborative approach is only possible, however, if both sides are willing to use this approach in the negotiation.

However, in order for the employee to truly establish their position as far as obtaining the salary that they desire, a bit of the competitive strategy should also be a part of the process. Lewicki (2013) states that the competitive strategy has a range which begins with a starting point, a target point, and finally an ending point or the place where the parties are willing to walk away. Bargaining occurs because each party has a different bargaining range. The point of overlap is usually where the bargain takes place. Both the employer and the employee are going to have starting point where they believe they want to establish what they would feel is ideal. As well, both will have a walkaway point where the salary is unacceptable. The starting point for the employer and employee are likely going to be at opposite ends of the spectrum. The goal is to find the overlap point, but to achieve this overlap a collaborative approach is most likely going to preserve the relationship. This is why a compromise is the best way to approach these negotiations because both parties will have a range, but they also do not want to alienate one another in the process.

BATNA

An important aspect of the shaper salary is understanding the BATNA, or the Best alternative to a Negotiated Agreement. If initiations are failing, but it is important to understand that there is a walkaway alternative. When understanding exactly what the BATNA is, a better position of power can be obtained regarding the negotiation. This is a point of leverage so that the option to walk away and push the other side toward a better agreement so that option is not leveraged. If an employer has no one else to hire for the position, then this gives employee a good position from which to define their BATNA regarding the negotiation. However, if there are many employees out there that could be put into place, then the negotiating power of the BATNA is greatly reduced (Baicker, 2008).

Power in negotiation is based on convincing an employer that there are other options available to the employee who is negotiating. However, this power is based on whether or not employee has established a certain amount of value, whether or not this is the initial negotiation for accepting a job and salary. Making sure that the employer has a perception of value is critical in convincing them that there are also other options. Becoming irreplaceable, or presenting oneself is irreplaceable is one of the best ways in which to create a position from which salary negotiation takes place (Dawson, 2006). However, Dawson (2006) brings up the point that this may not necessarily be the best approach in all cultures. In American cultures, creating the position of perceived indispensability and nonchalance in the sense that it would be easy to walk away is considered a point of pride. However, in other cultures this may be a point of insult and therefore it is essential to learn about the practices in a culture before beginning a negotiation. If negotiating in a foreign country with a foreign firm, it is essential to understand what is going to actually impress them and motivate them to higher salary, otherwise an individual could actually talk themselves out of a job.

Conflict and Ethics

Recognizing that there are different types of conflict can be an important part of negotiating to an advantage. According to Robbins, Judge, Millett and Boyle (2012), conflict can be broken down into an interactionist view, a functional view, a dysfunctional view, task conflict, relationship conflict, and process conflict. An interactionist view of conflict holds the idea that conflict is a positive force and must be a part of a negotiation in order for there to be a substantially positive outcome. In the terms of a functional conflict, the conflict will support the goals of the overall group because it will fit into the functionality of the organization. In other words, a raise will improve performance, therefore it performs a functional purpose. Dysfunctional conflict hinders performance, therefore if conflict during negotiation becomes dysfunctional because it is not productive, then it is not going to serve the greater good in coming to a resolution. Task conflict comes into the conversation where the goals of performance are concerned. Relationship conflict is based on the idea of the way in which interpersonal relationships within an organization can have an effect on negotiation. Finally, process conflict is an understanding of how conflict takes place and the processes through which it is accomplished and resolved.

Conflict also must be accompanied by ethics. Bonner (2014) talks about the way in which President Bill Clinton spent a great time practicing the way in which he would approach negotiation so that whoever he was up against during the process would likely have no surprises and therefore never gain the upper hand or advantage. At the same time, it is also important to make sure that the conversation stays within ethical frameworks so the pressure points are legitimate and no sign of the negotiation ever feels like they are being coerced in a way that is outside of ethical consideration. This is where preparation is extremely important so that every pressure point that is going to be used during negotiation is legitimate and is not coming from an emotional space.

Conclusion

Salary negotiation is not something that most people do every day.Even individuals who work in human resources typically are not engaged in a negotiation when they offer a job because most people will just accept the salary or wage offer. This means that most people are not getting the advantage of discussing their value and showing that from the onset that they can contribute at a high level of performance and believe in their capabilities. Salary negotiation is a process that requires a strategy and preparation. However, without developing a negotiation strategy, both parties are likely to be dissatisfied with the outcome.

Choosing a strategy means looking at the opportunities and options that will best satisfy both the relationship and the outcome. The strategy of collaboration is crucial to maintaining the relationship, but it is also important to understand that this is a competition between the employer and employee to find a middle ground that will satisfy both of them. Going in with a specific range is critical for the employee so that they have a point where they can start the negotiation and know the point where they would be dissatisfied, which is considered their walkaway point. The employer probably has a far better idea of the range that they can use for their negotiating side. Therefore, using a compromising strategy provides an opportunity to maintain a relationship, while also through competitive ranges of salaries provide an opportunity for both sides to be satisfied with the outcome by finding middle ground.