Are Great CEOs Born or Made?
A panel of experts discuss the business world’s preeminent position.
Are Great CEOs Born or Made?Joey Guidone
The scenario is one many of us have faced in the course of navigating our career paths: You are underpaid and underappreciated. You apply for another job knowing that, if you get it, you will be better compensated and better treated. Indeed, you get an offer, but in the first few minutes of the salary negotiation, the human-resources director asks you, “How much are you making now?”
As someone who teaches a class in negotiation, I’ve been asked for help with variants of this question countless times. A survey conducted by compensation-data website PayScale found that 43 percent of respondents were asked about salary history during a job interview, and just over three-quarters of them provided an answer. The same survey found that women may be penalized for withholding their salary history—women who refused to discuss their salary earned 1.8 percent less than women who didn’t—while the reverse is true of men. The situation is so treacherous for job seekers that, as of May 22, 2018, it has been banned in nine states (including California) and eight cities (including New York). A number of these bans were approved since we posted the above scenario for our first installment of Business Practice in April! In some cases, employers are prohibited from asking for salary information on an employment application in addition to during the negotiation process.
Nevertheless, in most of the United States (and other countries), many interviewees still encounter this question, and a large percentage of them are flat-footed and unprepared.
So what’s the best way to handle it? Should you tell the truth, acknowledging that any offer from your prospective employer would be a step up and thereby sacrificing most of your negotiation leverage? Should you lie? Make an artful dodge? The hundreds of answers and thousands of ratings we received via Business Practice offer some valuable insights.
We posted this scenario—in which we asked readers to imagine they earned $105,000 a year at a company called LexCorp but had hopes of scoring a position at Wayne Enterprises—on April 24 and closed the survey on May 18. We received 364 separate responses, ranging in length from one word (37 responses) to 190 words, with a median length of 23 words. The responses collectively received 7,273 ratings. Each response was rated, on average, 19.9 times (median: 13) with 293 responses (80 percent of them) receiving five or more ratings. (The infrequently rated responses were submitted late in the cycle, close to when the survey was closed.)
Responses were rated on a scale from 1 (“Strongly disapprove”) to 7 (“Strongly approve”). The mean rating was 3.36—considerably below 4, the middle of the scale. A histogram of all ratings is shown below.
Two observations jump out:
The analysis below is restricted to the 293 responses with five or more ratings, starting with a histogram of the average ratings for each response. Average ratings range from 1.57 to 5.44.
About 75 percent of responses came from men. However, female responses were rated slightly higher (3.5) than male responses (3.27). Just over 16 percent of responses came from participants who used a ChicagoBooth.edu email address; these responses were rated significantly higher (3.76) than others (3.26). I’ll let you draw your own conclusion.
To give you a sense of the range of ratings, I’ve listed a few responses, spanning from the unfavorably rated (5 percent, 10 percent, and 25 percent in the distribution, meaning that 95 percent, 90 percent, and 75 percent of responses were rated better), to average (50 percent in the distribution), to favorably rated (75 percent, 90 percent, and 95 percent in the distribution). All of these responses had 20 or more ratings. (All responses included in this article were subject to light editing for grammar and style.)
1. 5 percent response
2. 10 percent response
3. 25 percent response
4. 25 percent response
5. 50 percent response
6. 50 percent response
7. 75 percent response
8. 90 percent response
9. 95 percent response
The responses judged to be most effective attempted to pivot the conversation to value (“The value I can provide to Wayne Enterprises is the most important factor here.”) or anchor the conversation at the high end of the range (“My experience would land me in the $130k–$170k range.”). Some cautiously acknowledge the disadvantageous current salary. (“I feel I am underpaid now.”)
Why Business Practice?
Words matter. The first year I taught negotiation, I ran into one of my students in the cafeteria. After a few minutes of small talk, she asked me: “What qualifies you to teach negotiation?” Ouch. I believe that she meant to ask: “Negotiation is an interesting class to teach. How did you come about teaching this class?” Words matter.
Preparation matters too. The “what qualifies you” question is one I did not anticipate, especially in my early days as a professor. But years later, I’ve heard many questions—straightforward, incisive and cutting, sincere but naive, tricky and lined with booby traps, difficult to answer, and just plain bizarre.
Preparation matters too. The “what qualifies you” question is one I did not anticipate, especially in my early days as a professor. But years later, I’ve heard many questions—straightforward, incisive and cutting, sincere but naive, tricky and lined with booby traps, difficult to answer, and just plain bizarre. I’ve encountered them in class, while talking about my research, and in dealing with students, faculty, and staff members at Booth. I’ve learned to reflect on conversations I’ve had that have gone poorly or well, or, most likely, a bit of both; to anticipate what questions I will be asked; and to prepare for an upcoming conversation by scripting words and simulating how others will respond.
Business Practice is a new quarterly series designed to help you better deal with challenging conversations. It is a partnership between Chicago Booth Review and the Harry L. Davis Center for Leadership, of which I am the faculty director.
We built these elements into Business Practice:
The inspiration for this series comes from my friend and former PhD student, Cade Massey, a Booth graduate who is now a professor at the University of Pennsylvania. Over the years, Cade and I, like all negotiation teachers, have been bombarded by requests for advice on how to deal with difficult negotiation situations. We do our best to answer these questions with students one-on-one. Why not be more efficient and systematic and discuss these in class? And, perhaps more important, why not help students learn from these encounters and come up with a better answer for themselves? So, in my class, I have students script responses to five difficult negotiation questions. “Scripts,” as I call this part of class, has consistently been one of the most popular elements of my Advanced Negotiations course.
Students in my negotiations class learn by seeing the wide range of student responses—some very different in style and strategy, some identical in intention yet executed very differently. Students also rate responses in real time, giving letter grades ranging from A to F. Students are often shocked to see the broad range of ratings for the same response—it is not uncommon for a response to elicit an impassioned A and an equally vociferous D.
That’s why the crowdsourcing of ratings in Business Practice is especially valuable. The readers of Chicago Booth Review are a sophisticated bunch. They reflect a wide range of perspectives, interpersonal styles, experiences, and culture. Tons of research in social psychology has documented our tendency to be egocentric in our predictions: I choose a response because it is appealing to me, and hence I expect it to be effective with others, some of whom may think like me but many of whom will not. Learning to step out of our shoes and into the shoes of the many others we may encounter is an extraordinarily useful skill.
Needless to say, difficult situations are not confined to negotiation; they are part of daily organizational life. That’s the impetus for Business Practice. We look forward to helping you prepare for the difficult situations in your own professional life—just as you, through your feedback, will help others prepare for theirs.
To me, the best-rated responses are solid responses, but they are not bulletproof. They do not fend off the obvious retort: “Before we go there, can you answer my question? What’s your current salary?” You need to be prepared for an onslaught of badgering of this sort. The HR manager’s script is really easy to play, and this explains why even the best responses are not rated that highly.
Responses 2 and 3 are interesting. Both provide a specific answer to the employer’s query. Response 3 includes a truthful $105,000; Response 2 contains an admittedly fraudulent $115,000. People rated the truthful response more favorably. Overall, 99 of 293 responses (34 percent) provided a specific salary figure, with 19 percent of responses surrendering the $105,000 figure, and 15 percent suggesting a salary that was, well, not quite truthful. The scatterplot below shows the ratings for each of these 99 responses. You can see that Responses 2 and 3 are somewhat typical of the general pattern of ratings: people thought that it was more effective to tell the truth than to lie. Responses that truthfully reveal $105,000 received an average rating of 3.49, slightly higher than the average rating of all responses, 3.36. Untruthful responses got a rating of 2.52.
Of course, every response that contains $105,000 isn’t equal. The two responses below reveal the true salary, but they nevertheless are judged quite differently.
The strategy of the more effective disclosures seems to be to get the salary out there and out of the way, but to quickly pivot the conversation to one of value. If I am going to surrender the number eventually, why don’t I control the discourse and minimize the hit to my reputation?
Another interesting strategy—one that involved deception but not a false salary—was for the respondent to suggest that he or she was not at liberty to say:
I am assuming that your firm doesn’t have such a nondisclosure policy. (Otherwise, you would indicate so and this would cease being a hard question.) This answer, nevertheless, elicits a varied response, with a modal rating of 7 but almost 20 percent of ratings at 1. (See “An interesting response,” below.) Indeed, this is the single response with the widest variation of ratings.
Incidentally, my favorite kind of falsehood is in Response 8 above: “I am glad you ask, Sally.” No, I’m pretty sure that you are not glad that she asked.
Below are the top five responses among all those that received at least five ratings. I’ve listed names and background information when I’ve gotten permission to do so.
#5 (tie)
#5 (tie)
#3
#2
#1
For their contributions, each of these respondents will receive a Business Practice coffee mug. Display it proudly!
I noted earlier that the ratings are not particularly high. This is because the situation is just plain hard! One part of your preparation should be to ask yourself: “Why is this question difficult?” When I ask my students, a few reasons surface:
I will offer one final reason: this situation violates a strong norm in negotiation, that of reciprocity. In most social situations, when I offer information, my counterpart will reciprocate by giving me something. In this case, the HR manager asks but does not give. So, I close with a response that I got from one of my students a few years ago.
You understand that your question makes me very uncomfortable in the same way that you would feel uncomfortable if I asked you for the salary of the last four people who have been hired into this position. So, if you don’t mind answering my question, I don’t mind answering yours.
The norm of reciprocity. I love presenting this response in class. My students’ faces reveal all. Reactions usually divide themselves evenly into three categories:
This motivates my final and perhaps most important point: the best response is the highest-expected-value response that you can pull off. The data above show a considerable variation in how different language is evaluated, and that variation makes it impossible to predict perfectly how someone will respond. But don’t lose sight of the fact that the most effective response for you will be something that you can execute.
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