Asking for a Raise
You desperately
desire
a $20,000 per year raise. The company you work for likes money as much as you do, however, so you will get the raise only if you can convince your boss that it is in her interest to give it to you. But why should your boss give you a raise? Why is it in her interest to be “nice” to you? If you have any chance at getting a raise, you contribute to your company, which would be
worse
off without your labors. Your best chance of obtaining a raise, therefore, lies in convincing your boss that you will leave if you don’t get the money.
If you simply tell your boss that you will quit if you don’t get the raise, she might not believe your threat. For your boss to take your threat to quit seriously, she must think that it would be in your self-interest to walk away if you’re not given the money. The best way to make your threat credible would be to
prove
to the boss that another company would pay you $20,000 a year more. (Of course, if you’ve found another firm that’s willing to give you the raise, then you don’t need to read a book on game theory to learn how to get the extra $20,000.)
Another way to get the raise would be to tell everyone in the firm that you will definitely quit if you don’t obtain it. Ideally, you should put yourself in a position where you would suffer complete humiliation if you were
denied
the money and still stayed in your job. Your goal should be to make it as painful as possible for you to stay if you weren’t given the salary increase. This tactic is the equivalent of reducing your options. By effectively eliminating your choice to stay, your boss will find it in her self-interest to give you the money because she
knows
you will have to leave if you don’t get the raise.
Figure 3
presents
the game tree for this raise negotiation game. The game starts at
A
where you ask for a raise. Then at
B
your boss has the option of giving it to you or not. If she does not give you the raise, the game moves to
C
, where you either stay at your job or quit. There are thus three possible
outcomes
to the game, and Figure 3 shows what your boss gets at each outcome. Obviously, your boss would consider giving you the raise only if she knew that at
C
you would quit. So, you need to make your threat to quit credible. You do this either by getting a high payoff if you quit or a low payoff if you stay, given that your raise request was rejected. Interestingly, if you got your raise, then the game would never get to
C
. Your boss’s perception of what you would have done at
C
, however, was still the cause of your triumph. Often, what might have
happened
, but never did, determines the outcome of the game.
Figure 3
Relinquishing Control
Giving up control of events can also strengthen your negotiating position. Imagine that you’re now a manager trying to resist wage
increases
. Your employees are extremely
valuable
to you, but
unfortunately
your workers are aware of their importance and know that you would be reluctant to lose them. You consequently have a weak negotiating position, for if your
employees
could ever convince you that they would leave if not given a raise, then you would give in to their salary demands. Giving up control of salary decisions could free you from this dilemma. Relinquishing control allows you to credibly claim that you can’t increase
wages
.
Of course, your precious employees could play their
games
with the people who now make the salary decisions. But these new salary setters might not care if an employee left. For example, the loss of an efficient secretary who understands your routine would be devastating. If the secretary grasps his importance, he has a very strong negotiating position if you have the power to grant him a raise. A manager in human resources, however, might not care if your efficient secretary quit. If your secretary had to negotiate with this indifferent manager, then his position would be weakened because the HR manager would be more willing to allow your secretary to leave the company than you would.
Telling others that you have given up control is a common negotiating tactic. When
lawyers
try to
settle
lawsuits, they often claim that their client has authorized them to go only to a certain amount. If this limitation on the lawyer’s authority is believed, then the lawyer’s promise to never accept a higher offer is credible. Broadcasting your lack of decision-making authority makes it easier to
turn
down unwanted
requests
.
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An ancient English law punished communities that paid tribute to pirates.
[3]
Had a
coastal
community merely told pirates that they would never pay tribute, the pirates would probably not have believed them. The ancient law, however, made their statement more credible by effectively eliminating the option of paying tribute.
Smith College, where I teach, has a similar antitribute law that protects professors from students. At Smith College professors are not permitted to grant students extensions beyond the last day of finals, so students must go to their deans for such extensions. One might think this policy signals that Smith professors are administratively weak relative to deans. In fact, professors dislike dealing with students asking for extensions, so Smith professors are consequently made better off by a rule that circumscribes their extension-granting
abilities
. Managers can similarly benefit from limitations on their authority. Many managers, like professors,
desire
popularity and consequently dislike having to turn down their peoples’ requests. It’s much easier to say no when everyone understands that you lack the ability to say yes.
[3]
Schelling (1960), 19.