Small? The consultants I know took cuts of up to 50%. Decent benefits can easily cost an employer half again or more of the base salary.
And, since they’d pay half the Social Security, you’d get at least 8% more, assuming you are a SE Contractor.
You may have a point but I don’t know many consultants who have agreed to a 50% pay cut just for doing the same job unless they were low paid already and the benefits associated with permanent employment are that attractive. That can happen with some people that desperately need a good family medical plan but my rule of thumb for a conversion penalty is to take more than a 10% hit and maybe 15% tops.
The funny thing is that benefits and salary are what we consult for and I do it even for our parent company. It was trivial for me to account for every single penny that they would spend on me as an employee as well as comparing it to any coworker or outside person in other companies. I even knew exactly how much they were paying my consulting company overall for me. Unfortunately, I found that my coworkers were getting the same below-market deal and it is seriously discouraged to admit that you know things about people based upon your job even when it is obvious that you would.
They say that information is power yet I had the ultimate amount of information and still lost because they employed the same strategy as I described in the OP. I played every card I had and walked away with good but still marginal market pay for the position. Every time I would put something together, vice-presidents and directors would repeat the same line. It is a phenomenally successful business at the moment too.
I can’t complain because I agreed to it and I can leave whenever I want. I just think it is a powerful reminder that many times people automatically think about negotiating when they should just start telling others what is going to happen if they want to strike a deal. This was always one of the brilliant ideas behind both McDonalds and Wal-Mart even back when they were much smaller than they are today.
I think negotiating is an innately dangerous activity that tends to break the societal bonds that keep cultures civil. Taken too far, negotiations tend to devolve into one person taking advantage of another, and who is generally the winner in any negotiation? The one who is willing to take his position the farthest. So there’s an innate tendency to take things too far.
Most big ticket purchases in America are institutionalized theft (cars, homes) with an army of trained and experienced negotiators systematically working over ordinary folks who have little or no experience with negotiated purchases.
Let’s examine how negotiating chips away at one’s moral structure, shall we? Say, you’re a car salesman. Your job is to get the highest price possible for the least value in terms of a car you can manage. What’s more, since most people only buy new cars once a decade now, you aren’t looking for a lot of repeat business. Screwing the customer makes sense here.
Now, as a salesman you are trained not just to sell the car, but to sell the customer. What this means is, you look for flaws and/or weakenesses in your customer’s character or situation and use those to your advantage. For example, if your customer betrays that he has never consulted the Consumer Reports car buying guide but instead reads high-performance auto magazines, you’re going to lead him to a muscle car that will spend half its road life in the shop. If the customer’s wife wants a car that’s a certain color, you’ll see that they get the most broken down old beater you have (restored so it doesn’t LOOK like a beater any more, of course) that is that color.
And you’ll try to get your customer to finance the car through your company’s finance program, which will charge ungodly high rates.
All this works to your advantage and the customer’s disadvantage – it’s a zero sum game, because you aren’t looking for repeat business. It’s not the business model for ALL automobile dealers, but it is for most of them.
And all that I have said about the adversarial nature of car salesmen and their customers goes double for housing, of course, which is much more of a one-time sale.
Car salesmen and real estate agents trained to use these techniques in selling, and their employers look for people who are naturally talented in such transactions, i.e., morally flawed scum, to work for them. With their training and their natural inclinations, they have a huge advantage over the ordinary citizen who’s looking to buy a car or a house, especially the gullible sort who doesn’t read the fine print and would just want to work with the sort of salesman (or President) he’d enjoy sitting down and having a beer with.
Naturally, this kind of dealing creates a lot of bad feelings, and is undoubtedly the chief reason why car salesmen and real estate agents are so universally despised in American culture.
Thus, negotiating, or haggling as it is also called, breaks down community because it separates people into prey and predator, victim and victor and “vae victus” as the Romans liked to say.
Now in most kinds of economic enterprises everyone is trying to maximize their profits and so forth, but there’s no personal element to it. Best Buys, Target, Walmart, etc., all offer a number of different CD players at different prices with different features, and different people buy them according to what they want and can afford. Nobody takes advantage of anybody in a personal way. You don’t feel like you lost or won when you make a purchase, just that you got what you were looking for.
But imagine the corrosive effects of haggling relationships extended to every purchase you make. No one simply sells you a CD player at a fixed price, the fixed price is merely a starting point for an extended round of haggling between buyer and seller. Even going to the grocery store for food purchases becomes a haggling experience.
That’s how things are in the Middle East. They haggle over everything, well, not everything, but a lot of things that we don’t haggle over.
Of course, some of the haggling involves repeat business and well developed relationships between customer and vendor, but even then there are ample opportunities for distrust and misunderstandings.
But what’s more important is the corrosive effect all this haggling has on the culture. The people of the Middle East are literally out to “get” each other every time they buy something. They have a saying “I against my brother, my brother and I against my cousins, my brother, my cousins and I against the world.” Makes perfect sense if you understand that it’s the product of a culture where everyone haggles, all the time."
Haggling turns what should be an unemotional transaction into two people out to rip each other off. Furthermore, in addition to the economic advantages of being able to out-haggle others, ego tends to enter into it, turning the transaction into a “my dick is bigger than your dick” contest.
This will break social structure down too.
Finally what is the best way to negotiate? From a position of strength. In any deal, the guy who needs the deal most is the one who is going to accept the least favorable terms. And the deal was sealed in the Middle East when Achmed told Abdullah, “Man, it’s incredible how much better negotitions go with Mohammed when you have an AK47 and he doesn’t.”
That’s why most Middle Eastern countries are governed by brutal goons who can and will kill any members of their population who won’t accept their deals, i.e., “I make the rules, you follow them.”
There’s even proof of my theory. Because if you replace the brutal thug with someone who won’t kill off whole huge groups of people when they get out of line, by my reasoning you should have a period of near-anarchy and civil war as all the people who were held in control by the former brutal dictator negotiate new deals with one another with their AK47s and RPGs and whatnot. It happened recently. Little place called “Iraq.”
The Middle East isn’t just a region. It’s an object lesson.
Shagnasty has the right of it in negotiating, though he may not agree with every point I have made.
On a house, if you made an offer and it was quickly accepted with no back-and-forth, that generally means you offered too much. For all you know you could have opened at 90K below asking and negotiated your way up to a mutually acceptable 80K below asking, and you’d have ended up with the house and an extra 5K in your pocket. Instead, by making a high opening offer, you avoided the negotiations and probably paid a little more.
There’s nothing wrong with that, BTW. I loathe dickering and will generally make a similar choice – for cars, I’m firmly in the “this is my offer, take it or leave it” camp. (Not for houses, though.)
But as to why other people choose to negotiate – they know (or at least believe) they can save money by getting the price knocked down, and they feel that they’ve accomplished something if they are able to get the item for under the asking price.
My advice: try lowering your offer by about 10% next time 
This doesn’t have much to do with the world in general but it does illustrate that you never know what is going on behind the scenes. Our house purchase was probably the strangest coincidence that has ever happened to me. The previous owner was in terrible health and died this year. His house was his only asset and he couldn’t even afford to pay a real estate commission so he asked a long-time family friend from Maine to sell it for just a small commission. Our house was the mother of all fixer-uppers and we knew that it would takes years and a whole lot of money to restore it. There aren’t too many people interested in antique houses alone let alone fixer-uppers of that magnitude. Still it had 2 1/2 acres of land that were worth about as much as the asking price just by itself.
I called the realtor in Maine and he drove down to meet him the next day. We made an offer that afternoon and he called back shortly to say that it had been accepted. It took a few months to get to the actual closing and after the closing, Dave (the realtor) told us he had to tell us something. He told us that we wouldn’t know him but he knew us quite well and had for a long time. Dave was like an adopted son to my wife’s grandfather not here but in Florida where he lived next to him the years his health was failing and he helped to care of him. Dave was also engaged to my wife’s aunt for a while as well. He pulled out some photos of my wife’s family in Florida that he thought she would like to see. There was Dave fishing with her grandmother and grandfather etc.
I don’t know what made Dave move back to Maine but he got really spooked out when I called him about the house. When we made the offer, he decided that it was probably Divine Intervention and that we were going to have the house so he told the former owner to just take the offer right away.
This isn’t typical of course but you never know everything that goes on with these things.
Evil Captor, I like your theory. You can never fully trust someone you are haggling with and that isn’t good for interpersonal relations.
I’m a believer in Divine Intervention myself, and I’m glad it worked out for you, but I can’t help thinking the ol’ guy would have done better with a seller’s agent who better understood his obligations to his client.
I think I’ve seen pix of your house around here along the way, BTW. VERY cool.
Thanks!
Maybe this story ties together my point better than I would have guessed. The previous owner wanted his friend to help him sell the house because he trusted him. He knew that he was dieing and only had a few years to live. I just wanted enough money to help him live in reasonable comfort until that happened. The Boston housing market was heated up even then and our tastes exceeded the price of conventional housing stock. We knew we would have to go the fixer-upper route. The house was obviously overpriced because of its condition. We just gave an honest offer of what we were willing to pay.
I have no doubt that one party would have gotten a better deal if we resulted in hard-core negotiations put I don’t like the thought of that. The former owner got enough money to live out his life and he didn’t have any family. We can’t feel ripped off because we offered exactly what we thought it was worth to us. The real estate agent was happy about the circumstances and the fact that he didn’t have to drive down from Maine anymore. We did get our dog Bear as a small negotiation however. That is what you call a happy ending.
A couple times in my career, I’ve had people try to negotiate a lower price for a surgery (I’m a veterinarian). I’ve been a tad insulted, and told the people that the price was not open to negotiation.
And, like Shagnasty, I do not like sales pitches for extended warranties and the like. On one occasion I told the salesman once that I was not interested. When he repeated the advantages of the extended warranty, I asked him if he heard my initial response. When he started back on his script, I walked.