Is banning salary negotiations a good idea?

Rachel Zheng Business Development Manager at Honyee Media

April 14th, 2015

Ellen Pao recently announced that reddit had done away with salary negotiations in an effort to equalize pay between men and women - as men often negotiate (harder). This doesn't feel like the right answer though - isn't that just attracting the wrong people? Furthermore, if an existing employee is getting an offer from another company will Reddit just not counter offer ever? If they will negotiate at any point then this is sort of null and void. Does anything think this is really a good idea?

Joe Emison Chief Information Officer at Xceligent

April 14th, 2015

I think banning negotiations is an extremely lazy way to handle the problem. It implies that Reddit frequently has a lot of salary negotiations, which is an indication of a larger HR problem. A much better model, at least for current employees, is to be proactive and firm with salary adjustments, so you aren't forced into out-of-cycle raises that you can't budget for. You should be budgeting for salary adjustments, and applying them based upon particular criteria, and if you have employees that want more, you let them go elsewhere. (This means that you need to spend the money proactively to keep your best employees; you don't wait for them to demand money).

For new hires, you have to expect a level of negotiation. In my experience, salary is only one component of new-hire negotiation (other common pieces: start date, vacation/leave). I think as long as you make equal offers to people who are equally situated, you will maximize employee happiness by allowing negotiation for new hires, but not for ongoing HR, since you don't want to get caught with out-of-cycle raises.

Ben Horowitz writes really well on this in The Hard Things About Hard Things.

Zachary McClung Chief Customer Officer | Cloud Servers | Disaster Recovery | CDN | Dedicated Servers

April 14th, 2015

Rachel -

I truly believe this was a bad idea. It goes back to the saying if you give someone a fish they'll eat for a day, if you teach them how to fish they'll eat for a lifetime. Men's ability to neg. harder isn't the issue. They have developed a skill. We need to empower woman and develop the same skill in them. Anything less than that, is simply putting them down because it is saying you aren't capable of getting more so we have to restrict someone else to help you.

Karen Leventhal

April 15th, 2015

I wanted to throw in an entirely different perspective. That there are men and women and then there are typically feminine and masculine ways of doing things, which can adopted by either men or women. As a women, who was socialized to be stereotypically feminine, I can say that you are taught to be compliant, to be pleasing. To be assertive , as in negotiations, and rock the boat takes a counter culture training for a lot of women. I've had to learn to set those self standards, and become quite good at it. I think with training, most people can. I wouldn't think imposing a no negotiation policy would be good for most companies. That being said, maybe some companies want a different culture and that would fit. No every motivation has to be about the bottom line.

I think "masculine" assertive ways are extremely important in business. But we overlook that traditionally "feminine" ways can be equally important. I worked in non for profit organizations for 15 years (mostly female dominated). No one talked about their salary. It's not as if people didn't want a living wage, but they worked in the industry because of the mission. They work was emotionally fulfilling and the salary was secondary.

This might sound incredibly naive, but when I started a for profit social enterprise, I was shocked about how many people were concerned about money first. It wasn't that I thought money shouldn't be important, but not the most important. I was like "isn't the mental and emotional fulfillment of the work your first concern?!" "Isn't doing something amazing for the world, your first concern?!"

Traditionally masculine ways are about knowing your worth, being assertive, taking initiative- All extremely important. But traditionally feminine ways, like '"how an I serve you?" "how can I put your needs above my own?" are also important because it is the basis of customer service, and a customer centric focus is the basis of any successful organization. How can we meet you, the customers, needs? In spades.

So I think the salary question, is a bit of red herring for a bigger issue that both men and women, can take on the positive traits of "men" and "women.

Christi Muoneke Corporate Counsel | Advisory Board

April 15th, 2015

If I may, the issue is not about women needing to learn negotiating skills. That really comes across as condescending. It's about how women are perceived, and what results they get, when they attempt to negotiate on their own behalf. Said by someone who negotiates for a living, apparently quite successfully.

Benjamin Olding Co-founder, Board Member at Jana

April 15th, 2015

I think what Ms. Pao is doing may be genius.

The main problem with restrictions on new hire negotiation is that you're interfering with the bottom of the hiring funnel. You can overcome that, of course, with a strategy to increase your candidate pipeline beyond the restriction. Cutting your ability to hire in half is solved by doubling your reach.

Agree or disagree with Ms. Pao's choice to very publicly endure being on the losing end of sexual harassment civil suit, you cannot deny she has the media's attention more than you or your CEO does: anything she does related to gender is going to get picked up and broadcast right now.

So, take a step back for a moment, temporarily ignore your opinions about gender and society, and really look at what she's just done: she's framed hiring at Reddit - the thing most startups are bleeding for - as a gender issue, which in turn cranks up all these news outlets. What's the message? No new candidate at Reddit (not existing employees, mind you!) can negotiate their salaries.

Downside: people who love negotiation or are proud of their negotiating skills may be less inclined to apply. Upside: people (not just women - the policy itself applies to all people) who don't want to deal with the hassle of negotiating may perceive they'll be treated more fairly at Reddit than other companies, where better cold negotiating skills are more richly compensated.

You may have noticed there are many engineers - and this has nothing to do with gender - who are a bit, well, introverted, and for whom negotiating and interviewing in general is actually pretty stressful. The idea that they may be treated more fairly at Reddit, since they are going to be guaranteed the same deal as someone who is better at negotiating, even though the same quality of engineer, may be more appealing than you (as an excellent negotiator) appreciate.

Setting this policy at your own startup only makes sense if you have a free megaphone to tell all these non-negotiating (but, in my experience, often just as excellent) engineering candidates about your policy. If you don't have this, you wind up with the same pipeline of candidates you would have had otherwise, but limit your ability to hire them. Not good. Unlike you or your company's CEO, however, Ms. Pao does have a giant free megaphone: all she has to do is say the word gender. Literally anything she frames as a path to gender equality is going to end up in the press. Ok, some less than flattering things are going to be said about her (again), but she's pretty clearly demonstrated she has the stomach for that.

Honestly, thinking about it this way, I'm now jealous. If I could get this kind of coverage, I'd tell everyone we were not just eliminating negotiation, but blindly committing to paying in the top 20% of our investors' portfolio for equivalent positions.

I would definitely not do this, of course, if I were trying to hire sales people. Unlike the sales team, however, I really don't need the engineers to be all that aggressive or savvy negotiators, and, given the current overall market, I'm happy to pay for their engineering excellence, even if I could - due to my "superior" negotiating ability - land them for 10% less with a different policy.

And sure, I'd miss out on a few hotshot engineers who are also great negotiators and don't like the idea of the policy; but I'd make it back with all the others I reached through the media attention. Genius.

Michael Baker

April 14th, 2015

"Banning negotiation" is actually a negotiating position (albeit a rather rigid 'take-it-or-leave-it' stance). Everybody lives in the market. Negotiation is just part of life.

Shingai Samudzi

April 15th, 2015

@Clara

"What are we supposed to say to our daughters? Negotiate aggressively like a man and then you'll make an equivalent wage? What sort of impression does that make on a young woman's mind to tell her "you have to act like a man, because men are just naturally better at business"?"

This mode of thinking is problematic. Demanding to be paid what you are worth, and no less, does not mean you are "negotiating like a man" any more than throwing a ball without much arm strength means you "throw like a girl." Both attitudes are highly sexist and just unhelpful. And I would rather my daughter negotiate aggressively, if need be, in order to get a wage commensurate with her skill and expertise than to unquestioningly settle for a lowball wage that is too low to sustain a reasonable quality of life. This zero-sum approach to achieving equality only creates future systemic problems that will be more expensive for society to address later on.

Also, the whole 77 cents on the dollar line is widely known to be untrue. For men and women doing the exact same job working the same number of hours, the gap is somewhere between 3 to 9 cents less per dollar depending on things like age (younger women make more relative to men than older women) and specific occupation. Which all suggests that new hire negotiation doesn't actually make the massive difference that was being suggested at the conference you attended. I can't speak for raises, however.

http://www.huffingtonpost.com/christina-hoff-sommers/wage-gap_b_2073804.html

http://www.slate.com/articles/double_x/doublex/2013/08/gender_pay_gap_the_familiar_line_that_women_make_77_cents_to_every_man_s.html

http://www.outsidethebeltway.com/women-make-77-cents-for-every-dollar-men-earn-only-if-you-rely-on-misleading-data/

Tom Maiaroto Full Stack Consultant

April 15th, 2015

I agree with Shingai.

Yes you do tell younger generations to negotiate hard. Not like a man or a woman. Gender has nothing to do with how you negotiate. You basically have the distinction in your vocabulary right here. "Ask" or "tell" and both genders are capable of each action. Unless you are saying one gender is incapable of something?

There are plenty of men and women with varying amounts of confidence and personalities. Plenty of men out there ask and don't tell. They too are walking out with similar results when compared to those who tell.

Now. Men who "ask" vs. women who "ask" may see a difference. Where's the study on that? Do I believe gender inequality exists? Absolutely and it's very wrong. Same as ethnicity and religious bias. 100% a thing in the workplace. That's why there's laws for much of it. Yes, despite that it's still a problem...But what we're talking about here specifically - the negotiating, that's not a gender issue. It's a personality trait and even a cultural thing.

David Crooke Serial entrepreneur and CTO

April 14th, 2015

I am always very skeptical of such programs, it seems to me like it's a move to keep salary down across the board, and you're right, the driven people will move on. I don't know if you have the chain CarMAX near you, but this is their business model. They claim fair fixed pricing for those who don't know cars and don't feel comfortable haggling, but actually they just rip people off. I once took a used car there for a lark to get a bid, they offered me $5k which was well below auction value, I sold it on CraigsList for $10k and apparently underpriced it judging by my inbox.

Shingai Samudzi

April 14th, 2015

Given her recent history, I can understand where she is coming from (whether or not this is a move truly motivated by social justice intentions). That said, I agree with Zachary's point - this seems like equality by reduction rather than equality through empowerment. To Tom's point around reducing salary variance for the same job/output I can see how a CFO would love this as it will help optimize labor costs. This also won't be a disincentive for anyone but the top 0.1% of talent who could literally walk into any company and demand their salary. For the rest, the salary will likely be set close enough to some median market rate to not be a huge deal unless you're the type of employee focused only on salary maximization.

In short, I can definitely see this becoming an operational cost optimizing trend for larger, more established companies in the SV/Bay Area.

Is banning salary negotiations a good idea?

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