The Social Cost Of Negotiation

The Social Cost Of Negotiation

While diversity mandates and talks about equity abound, there seems to be a deep-seated unconscious bias about women and what they are worth.


Every other day, we hear news of women leaders shattering the glass ceiling and doing great things. The rest of us sit back and read with envy, wondering what it is that makes them tick. At some time, we have also wondered about their hefty pay packages and perquisites and asked ourselves how they manage to pull it off. It seems cool and emancipated to hear of women talking about profit shares, equity, valuations and hefty bonuses. However, at other times, we also question whether it is all as hunky-dory as it seems to be.


Research indicates that there is a significant pay gap. Women are being coached to demand what is due to them, “lean in” to be part of the inner coterie and make their value and contributions clear. However, research indicates that the root cause does not necessarily stem from the inability of women to negotiate, but rather, from some other issues involving social constructs and gender-based expectations.


Bias at every angle


Studies published in the Journal of Applied Psychology seem to point out that the backlash against women who assert their value is a huge barrier against women voicing their financial value. The researchers conducted over 1200 diagnostics into the negotiations made by male and female executives to conclude that the differences in perception of how women are expected to behave lead to a “social cost” of negotiations for women, making them draw less than what they might truly deserve.


 It is an interesting problem to consider given the rising number of women who are attempting to shatter the glass ceiling. While diversity mandates and talks about equity abound, there seems to be a deep-seated unconscious bias about women and what they are worth. Research has indicated that both male and female financial advisors have a bias against women and assume that they do not take financial decisions. Similar biases are at play in hiring decisions in the workplace.


Women themselves have an intuitive sense of the proof that they are paying when they attempt to ask for their fair value. This “social cost” promotes them to resort to seek reconciliation, not raise the pay divide issue or resort to less efficient methods such as active disengagement with work to balance their sense of inequity. The problem is also particularly tricky to eliminate because it plays out under the surface and is difficult to spot and address proactively. Given the increased societal pressure on equitable fair and gender-neutral messaging, most people like to appear to be right.


Organisations tend to resort to a prescriptive approach to address this issue. Set diversity mandates, train hiring managers on unconscious bias, treat women negotiation skills and ensure a strong enough pipeline of women candidates for senior level roles. However, these do not really go to the root of the issue and tackle the question of whether a male and female Candidate of the same calibre, applying for the same job, would get the same pay. Women also tend to set up their own barriers by not competing with the male incumbents on an equal footing and giving up on negotiations over the fear of losing out on the opportunity to a man.


The Social Cost


Even more interesting is the dynamics that women face in their personal relationships as a result of their financial prowess. The imbalance often tilts the power dynamics between the man-woman coupling and creates tension if the man feels inadequate. It could also lead to a loss of respect for the man by the woman because she still harbours an unconscious belief that the man needs to be the primary provider. This leads to other “social cost” implications within the family construct that again go back and affect the productivity of the woman at her workplace.


The Society as a whole endorses the belief that the man is the financial decision-maker, assumes that the woman wants direction and caring for, considers the combined income of a couple as one and expects that the woman would take the second position when it comes to matters involving financial risk. Consciously, women also tend to take lesser interest in finances and investments, and refrain from giving their opinion on matters if they feel that it would affect the relationship.


This constant watering down of her abilities has a direct impact on a woman’s self-confidence in situations that require her to take charge of her financial value and demand that she negotiates. Her mental and emotional conditioning propels her to gravitate towards what is acceptable to maintain the harmony in the negotiator-incumbent equation, rather than push back and make herself heard. In the words of a senior woman executive, “If a man negotiates, he has business acumen, if a woman negotiates she’s a b***h”. Another woman executive has shared that she was told that she would be a bad wife because she exercises strong financial wisdom.


Differences in perception


There seems to be some strong differences between the perceptions of male and female incumbents about the gender bias issues related to pay parity. More than 25 per cent of males believe the extent of the pay gap is grossly exaggerated, while only 6 per cent of women believe that the parity issues are exaggerated. Women generally find it easier to voice their concerns about this gap with other women at similar levels who are not in direct competition in their workplace.


Gender diversity ratios are the order of the day and there is a general consensus in the view that improved representation of female leaders will lead to better stakeholder value and customer insight. However, are women themselves really as ambitious as the trends seem to indicate? Studies indicate that women in entry-level positions in management do not always envision themselves in a top executive position and many of them are actually planning their exit from the workforce or alternative career paths while still in the early stages of their careers.


Women grapple with the challenges of balancing family and work, perceive that management roles would add to the pressure and cite politics as a reason why they would not want to be at such levels. Women are also not encouraged to network and spend evenings over drinks and discussion. Given this, they mentally start pulling themselves out of the mindset of wealth creation and start looking at career in terms of more immediate fulfilment than as a long-term game. This leaves them unprepared and out of practice for when it truly begins to matter.


Seeking a solution


Wherein lie the solutions? Positive affect could be one such solution. If women associate positive emotions with negotiations, they are more likely to be flexible and open in their approach than those whose affect is negative or neutral. This means that a woman needs to be encouraged to negotiate and raise questions about her expectations at every step of the way and wins need to be celebrated. The home atmosphere also needs to validate her actions and she should be encouraged to take an active role in planning investments. It is a tricky slope to navigate as male partners tend to feel challenged by the participation and start looking at their female partners differently if they choose to be financially savvy.


Women also need to be more emotionally secure about asserting themselves and more confident about their financial freedom and choices. A woman can learn to deal with the anxiety about such situations and feel more secure about her value if she is encouraged in the early stages of her career. Education also has a role to play in this as the messaging in schools and colleges about the career options for women needs to change.


Women also need to be encouraged to participate in the stock market, get access to wealth creation courses and have a financial mentor to help them navigate their career. Confidence may also reduce the anxiety over handling a negotiation.


In the book, Women Don’t Ask, the author outlines the “high cost of avoiding negotiation,” and emphasises that, “Negotiation skill is not something you’re born with, but can be taught”. However, a deep dive into various studies also seems to indicate that women intuitively do not choose to negotiate when they sense that the negotiation could lead to a loss. And therein lies the Paradox - perceived loss seems to have a higher weight in the negotiation game than the probability of a win. Loss aversion in behavioural economics explains this phenomenon as a situation where a real or potential loss is perceived by individuals as emotionally more painful than an equivalent gain. What is surprising and needs more exploration perhaps is why is it that women experience this more than men.


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