Three Steps to Making Smarter Counteroffers
by Michael Chaffers
In every negotiation, the time comes when the other side puts an offer on the table. At that point, the ball is in your court. Unless you want to accept that offer or walk away from the table, you have to put forth a counteroffer.
You will hear all kinds of advice for doing this, and much of that advice is not particularly useful. For example, a friend might tell you, "Always ask for 20 percent more than you will settle for. You can always retreat." A colleague might say, "Always add 10 percent to what they offer. Employers are always trying to lowball you."
While these tactics may work a few times, they have significant flaws. Not only do they lead you to throw out arbitrary figures, those figures may not be related to what you really want or need from the negotiation.
Here are some practical pieces of advice that should help you develop counteroffers to help you achieve your goals.
1. Get Prepared
Before the negotiation begins, take the time to research standard compensation for this position. Establish a reasonable range for salary, a typical benefits package, and common additional compensation (e.g., stock options, annual bonus, performance bonus). This work makes it possible for you to know the ballpark in which any satisfactory agreement has to fall.
Then, from those general points, determine the most favourable compensation package for you. You should be able to justify that package given the field in which you work (since compensation differs across industries) and your experience, expertise, and credentials.
Make sure that this package addresses the real needs you have -- you will likely have trouble asking for more later if you overlook something. This package is your counteroffer.
2. Be Firm
Most negotiators make the mistake of putting out an arbitrary position as their counteroffer, then having to retreat from it because they cannot justify it or because they face a hostile reaction. Avoid this pitfall by selecting a reasonable and appropriate counteroffer -- one based on the data you gathered in your research -- and staying there until the other side offers a persuasive reason for you to move.
By "persuasive," I mean an argument based on additional data or information that justifies a different figure or package than you had developed. For example, an employer might say, "I know that some of our competitors are offering higher salary figures. However, they are much larger than we are, and they expect you to work much longer hours for bigger clients. We offer a salary that allows you to have a reasonable work life and really have an impact on smaller companies."
An example of an unpersuasive argument would be, "Your figure is too high. We can't do that."
3. Be Wise
Keep the big picture in mind. Your goal in the negotiation is to reach an agreement that satisfies your interests, not to win a battle between positions. If your counteroffer is not moving you closer to an agreement, do not hunker down, and defend it to the death.
Instead, think of another proposal that addresses your needs and concerns and is supported by data, and put that out as another offer. Use your energy to generate solutions, not to fight battles.
Negotiation is all about exchanging ideas, possible solutions and information. Offers and counteroffers are the typical steps in this dance. When you counteroffer, do so based on rigorous preparation and thinking. If you do, you will find yourself much more effective, and much more relaxed.