Winning is great, not losing is greater
Professional traders on the stock exchange close multiple deals each day. When they close a deal they have certain expectations of how much risk and how much profit is implicated in the deal. One common way to limit the risk is to set a 'stop loss'. Let's assume a trader buys oil for 50$ a barrel and hopes to sell it later for 55$. He will sell as soon as the price has reached 55$ and take the profit. At the same time he will hedge against failure and set a 'stop loss' limit, in case the price should dip below 48$. At this point he will sell for 48$ with a loss of 2$. This way he is able to exit the deal at a predefined point and avoid any further loss.
Master Class MFR
The minimum feasible requirement (MFR) works the same way. The point is to define absolute limits prior to negotiations which you will not break under any circumstances. I usually go with a set of three items: fixed annual salary, days of vacation, ability to work remotely (ask for both technical and organizational feasibility!). The last one has become ubiquitous since the pandemic, but remember that when I negotiated my first contract back in 2011 it was just when Tim Ferris published 'The Four Hour Work Week'. It was pretty ballsy and far sighted to ask for such a perk those days, at least that's what I thought. Usually this is where I set my MFRs. For example if you set your MFR for annual fixed salary at 80k € and your MRF for days of vacation at 26 days/year, these will both be absolute limits where you will not make any concessions in a negotiation.
Buffered MFR
Pros take it one step further. In addition to your MFR, I suggest you define a buffered MFR as well. This 'buffer' works as a preliminary MFR and may only be broken for special perks, which you'll have to predefine as well. I used this in negotiations in the way that I predefined my buffer at 5% above my MFR (e.g. 80k € MFR => 84k € buffered MFR). My criteria for the special perks were these
1. The value of the incentive has to offset the value of the concessions below the buffer by at least 2:1, meaning that if I concede 1€ of the buffer the value I receive for that has to be at least 2€.
2. The value at hand has to be unique and unequaled by other options. E.g.
- the freedom to spend an annual budget of 5000€ on any training (even yoga class if you see fit) or
- to use a company car that is at least one class above the regular standard value of other contracts or
- to trade bonus salary for additional vacation days and so on.
It is important to note that 1. and 2. are conjunct conditions meaning that both have to be met; if either one does not apply the buffered MFR can not be broken.
Of course you are free to set up your own criteria for the buffered MFR with your own specifications. With the buffered MFR you will create a preliminary -mental- barrier and make concessions harder before hitting your absolute MFR. Breaking your buffered MFR should already fire up your inner alarm and should make you realize that the red lights are about to start flashing.
Before you break your MFR walk away
If you approach your MFR, you should not make any more concessions, no matter for whatever reason. This is your predefined absolute barrier. No matter how you feel about it now, you will regret having made those concessions at some later point - even if that is much later. See it this way: To prevent you from selling out and regretting it in the aftermath, you have installed checks and balances previously. These checks and balances are manifested in your MFRs. In case you can not cut a deal without breaking your predefined MFRs, you should always walk away from that deal. The kind of deals where either side sacrifices beyond limits are never lasting because they are not meant to be in the first place. Accept it: some deals are just not meant to be. If one side feels ripped off in the aftermath they'll soon be looking to put things right again, i.e. to cut a new deal.
Take it as an opportunity and be grateful for the lessons you were able to learn. These will make you a better and more successful negotiator, not only in salary related negotiations.
In the next post I will focus on viable strategies, how to make concessions and how to lead negotiations in a way that they are not confrontational but collaborational.
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