On the Wrong Foot

Over the years I have counseled many students as they negotiated for new jobs. Often the key challenge for them is being really clear about their own goals and options, but in some cases the challenge is dealing with companies that are extremely aggressive, or just plain inconsiderate, in their negotiations. The classic aggressive tactic is the “exploding offer,” in which companies try to keep candidates from considering other job offers by saying that theirs is only good for a few weeks, or even a few days. At other times companies may leave a candidate hanging, without information about what is happening in the hiring process, or signal a lack of respect toward the candidate in any number of ways.

Having seen this process over the years, Professors Neta Moye, Meredith Ferguson and I began to wonder: Does it matter if companies create negative feelings on the part of job candidates during negotiations? Obviously the goal of an exploding offer is to get a candidate to agree to the company’s terms, and many candidates do sign on as a result of this tactic. In the end the company achieves its goal, regardless of potential negative feelings. While disrespectful behavior may make them less likely to join a company, candidates still sign on because it is a good job in terms of pay or responsibilities, or because there may not be any other good alternatives. If that is true, then why should it even matter how job candidates feel?

Our answer to that question is that the relationship between employees and companies requires long-term commitments. An employee’s feelings toward a company build over time. Those feelings affect whether an employee is likely to keep an eye on other jobs or really commit to the company. The costs associated with turnover are high. They include direct recruiting costs, as well as the time and money it takes to get an employee fully up to speed. Indeed, it may not be until a new MBA’s second or third year that he or she is really productive for a company. A premature exit by a highly skilled employee can be costly.

Looking at the literature on “justice” in organizations, we know that people care not just about the financial results of personnel decisions, like pay and job assignments, but also about how those decisions are made. People want to be treated with respect, have procedures explained and feel that others recognize their individual needs. It is not just that people like proper treatment; it is also about whether the organization sees them as valued members of the community. An employee builds his or her first impressions about a company during the job negotiation. As a result, we predicted that the treatment of employees during job negotiations would affect their sense of negotiation “interactional justice,” which in turn would affect their interest in looking for jobs at other companies—even long after the initial hiring process was over.

To test our predictions, we conducted two studies. In one we surveyed 68 MBA graduates about the hiring processes for their current jobs, which had happened on average a year or two earlier. We asked if they thought their companies used high-pressure negotiation tactics, if they felt unjustly treated, and if they were currently looking around for other jobs. When we did the analysis, we statistically controlled for the quality of the actual outcome (that is, how satisfied they were with the actual deal they got) and for their impressions of the overall HR practices at their companies. This was done to be really clear about the effects of the job negotiation process. Our results showed that those MBAs who felt that their initial job negotiations were unjust reported a higher desire to leave their companies. And, we know from prior research that this desire to leave a company (called “turnover intention”) does predict actual job exit.

In our second study we surveyed 52 MBAs just as they were leaving their MBA programs and right after they completed their job negotiations. We asked about pressure tactics during those job negotiations and how they felt they were treated. We then did a follow-up survey asking about turnover intentions six months later, with 31 of those MBAs responding. This study showed that high-pressure tactics did enhance feelings that the negotiation process was unjust, and it also confirmed what we found in our first study: that perceived unjust treatment experienced during job negotiations enhanced turnover intentions six months later. Thus, using two different research methods, we were able to show that how a company treats an employee during the negotiation process has an impact on turnover intentions months or even years later. That first impression is a very strong and enduring one.

What are the implications for companies? Most importantly, companies should pay attention not only to what they offer new recruits but also to how those offers are made. Note that these effects occurred controlling for actual outcomes (that is, the actual terms being offered to new hires). So, we are not suggesting that companies need to pay more or give higher benefits. Totally separate from what is actually offered, it is important to make the offer and manage the conversations and interactions with job candidates in a way that is respectful and considerate. This can be done at no cost to the company, and can potentially save lots of money down the road.

Does this matter even during hard economic times? Actually it may matter even more. Hard times are when people may take job offers simply because they have no other choice. They may be even more willing than usual to overlook bad behavior by a hiring company just to get that job. So while it may be easier to get the recruit, the feedback received from that person will be less clear. During hard times companies are more at risk of being overconfident, being sloppy in the negotiation process, and undermining the foundation of the relationship with that employee in the years to come.