Counterfactual Thinking in Workplace Negotiations
We’re in the process of buying a new home. We have our Zillow auto-alerts set up which means that 1-2x each day I get an email about a house that’s Coming Soon.
First, I look at the price tag. Next, I look at the pictures and read the description. If I’m interested, my mind correlates the two and comes up with a rough intuitive sense of “value”. What would be a price I’d be excited to pay? What would I be willing to pay? We’ve made some offers – none have been accepted so far.
(Fun side note: you learn Zillow-speak really quickly. For example, “charming” usually means old and possibly falling apart. “Cozy” means small. “Quaint” means old AND small. And if the kitchen isn’t one the first pictures of the bunch then it’s not a great kitchen. The caveat here is that this only applies to houses under a certain threshold. I assume that once you reach a certain price point (higher than mine) those adjectives actually are positives and the kitchen is certainly excellent.)
What I’ve found fascinating is that sometimes the news that our offer was declined brings a feeling of immense relief! But why? Shouldn’t I just be frustrated? I want every home we bid on – that’s why we bid!
In a 2003 study explored this peculiar phenomenon. Authors Galinsky and Seiden found that people often feel dissatisfied when their first offer is accepted without negotiation. Their paper, titled "The Dissatisfaction of Having Your First Offer Accepted: The Role of Counterfactual Thinking in Negotiations," delves into the psychology behind this dissatisfaction.
Their research reveals that this feeling stems from counterfactual thinking – the mental exercise of imagining alternative "what if" scenarios where a better deal might have been possible. In the context of negotiations, when an initial offer is accepted without any pushback, it can trigger thoughts like, "Could I have asked for more?" or "Did I undervalue my worth?" We can’t help but imagine future regret.
The study involved several experiments demonstrating that negotiators whose first offers were immediately accepted tended to feel less satisfied with the outcome compared to those whose initial offers were met with resistance or negotiation. Interestingly, this dissatisfaction persisted even when the results of the negotiation were objectively favorable to the negotiator. That means parties were more satisfied getting a worse deal simply because it took a bit of back-and-forth to get there! Wild!
So how might we apply this to the world of work? Most directly, we can apply it to salary negotiations. Awareness of this psychological phenomenon should help us adopt more effective strategies when negotiating job offers and salaries, ultimately leading to more satisfying outcomes for both parties involved. Here are some recommendations for both those making and those receiving offers:
For those making offers:
DO:
Start by offering a realistic salary range, but leave some wiggle room for negotiation. It's better to make an initial offer that's fair but not your absolute maximum, so both parties can feel satisfied with the final outcome.
Emphasize the value of the entire package – benefits, work-life balance, growth opportunities, etc. – instead of focusing solely on the salary.
DON'T:
Lowball your offer to the point where it's insulting. While this does allow more room for them to be “satisfied” after some negotiation, it may irreparably sour the entire process. You want to negotiate, but you also want to be respectful and professional.
Assume that the candidate will accept the first offer without question. Be prepared to discuss and negotiate.
For those receiving offers:
DO:
Take the time to evaluate the offer and its components. Consider the entire package, not just the salary.
Be prepared to negotiate. It's normal to discuss the terms of an offer, and doing so may help you feel more satisfied with the final agreement.
DON'T:
Accept the first offer if your gut tells you that you’re not perfectly satisfied. Wondering "what if?” is a terrible way to start a mutual relationship.
Move the goalposts. Don’t suddenly find new terms to argue over; it signals that there is something more troubling about taking the job. If you have multiple things you want to negotiate, that’s great! Just bring them up at the outset rather than dripping them into the process over and over.
The key takeaway from this research is to approach job offers and salary negotiations with an awareness of the potential dissatisfaction that comes from having your first offer accepted without question. By understanding this psychological quirk, you can make better decisions and feel more satisfied with the outcomes. A little back-and-forth – while uncomfortable – could save you from the perpetual discomfort of "what if" thoughts.
As always, I'd love to hear your thoughts on this topic. Have you experienced the dissatisfaction of having your first offer accepted? More pressingly…. are you selling a home in Westchester, New York, and want to avoid the hassle of putting it on the market!?