The Stories We Tell Ourselves #3 I Don’t Really Need The Money
Since starting Women In Negotiation, I have had the privilege to speak with a lot of women about negotiation and the role it plays (or doesn’t play) in their lives. Many of them are fine with negotiating on behalf of their companies, colleagues, partners and family members. In fact, research shows women excel at that type of negotiation.
The research – and probably your own experience – shows a different picture, however, when it comes to women negotiating on behalf of themselves, such as negotiating for a raise. Simply speaking: we don’t do it and when we do do it, our results aren’t as strong as the guys’ get.
The reason for this is, of course, that girls are raised differently from boys. Society expects girls to focus on others, not to speak up for themselves, and not to risk anything. In short, we are not expected to ask for ourselves, and so we don’t do it. As a result, we hit the work place as less experienced negotiators. We are lacking self-confidence and clarity on how to ask for ourselves, in a way that feels authentic to us, preserves the relationship and still gets us results. And as a result of not speaking up, we are missing out on respect, career opportunities… and lots of money.
But exactly how much money we’re leaving on the table, most women don’t know. When I speak with potential clients, they often surprise me by claiming they’re not that bothered about earning less than their male peers. The principle might bother them, but the money itself isn’t the problem. Because on a monthly basis, it’s not that much, they say. They don’t really need it. Sure, it would be nice to get that extra couple hundred of dollars a month, but it’s not like they’re living on the breadline, their partner earns well. Basically, when they think about it, the extra money just isn’t worth it when compared to the – awkward, horrible, etc – conversation they’d have to have with their manager to get it.
But friends, it isn’t “a couple of hundred of dollars a month”. There are two different mechanisms at play here that greatly affect this number. The first is the increased propensity to negotiate, borne from successfully negotiating for a raise once. The second is compound interest. Let’s discuss these for a moment, before going into the outcome they provide.
The research confirms what you and I already know based on common sense. And that is that when you have successfully negotiated once, you’re very likely to do it again. If you experience once that you don’t get ridiculed, shouted or laughed at when you’re making a reasonable and reasoned request for a salary increase, but instead you actually get what you’re asking for, it grows your confidence and skills. At the next negotiation opportunity, you will most likely go for it again.
Add to that the compound effect, whereby the increases get bigger each time because they’re based on an ever increasing principal, and you realise your income grows at an increasing rate. Warren Buffett has been singing compound interest’s praises for six decades now – he was onto something, my friends!
To see the difference that these two mechanisms make, I often run my clients through a calculation of the imaginary Bob and Bella, and two different career scenarios for them. In the first, they are both offered a 100K starting salary (Bob and Bella both just graduated from an imaginary MBA). Bella accepts this offer without asking for more: she is one of the 93% of women that don’t like negotiating, or perhaps it hasn’t even crossed her mind that she could. Bob, on the other hand, knows how to play the game and requests and gets a 5% raise. After that, they never switch jobs, never negotiate and each get the company’s standard annual increase of 4%. After 3 decades, Bob will have made almost 300K more than our friend Bella (296,642 to be precise). Not a bad outcome for a 5 minute conversation, is it?
But it’s an unlikely scenario. Why would Bob ever stop negotiating if he was successful that first time? And who in this day and age works in the same company in the same role for 30 years??
So here’s a more likely scenario. Bob and Bella are yet again are offered 100K out of B-school. Bob gets a raise, Bella doesn’t ask and doesn’t get. But now, after a couple of years, she changes jobs, where she gets a 5% raise, without asking for it but as an incentive to jump. After yet again a few years, she does the same again, and so on. Bob, our more forward friend, is on a roll and gets bigger pay checks with each job change: he knows how the game is played, and he is loving it. Because he gets paid more, he is also valued more and so he gets more interesting, senior roles overall than Bella is ever offered (yet again influencing the salary). Check out the second picture for one likely scenario.
When we look at the difference between their total life time earnings in this this situation, a different picture emerges. Now we’re not talking a 300K difference. We’re talking approximately 3 MILLION.
All as a result from negotiating your career on a couple of occasions…
Despite this being a made up, most clients tell me this sounds like a reasonable scenario. And that 3 MILLION is a lot of money, ha!
So please, next time you think that negotiating for that raise or higher starting salary is not worth the stress, please think again.
And if negotiating for yourself still sounds scarier than that number sounds attractive, get in touch to see if I can help you overcome that mental hurdle.