Beware this ONE psychological trigger that can cause you big losses

The impulse to avoid pain is deeply embedded within us.

It functions as a primal mechanism designed to protect and preserve.

It's a legacy of our ancestors, whose survival often depended on their ability to avoid immediate dangers and long-term threats in their environments.

This is the cognitive bias of loss aversion. It is the very real concept of where the fear of losing outweighs the appeal of gaining equal rewards.

The Nobel-prize winning economist, Daniel Kahneman demonstrated this bias with a simple experiment. He created a coin toss experiment where participants were asked to make a decision involving risk.

Specifically, they faced the possibility of losing $10 on a coin flip. To determine the conditions under which they would accept such a gamble, he asked them what was the minimum amount of money they would need to win to consider the risk worthwhile.

Surprisingly, the amount required by most individuals was significantly higher than the potential loss—often more than double. At least $20 to proceed with the bet!

What was clear from the experiment was this: the discomfort with a potential loss disproportionately influences decision-making compared to the prospect of an equivalent gain.

Impact of Loss Aversion on Professional Decisions

This aversion to loss can significantly influence our careers. For example, even if we have exceeded job expectations, we often hesitate to ask for a raise due to the fear of rejection or awkward interactions with our boss. The same is true in negotiations for a new job offer. People tend to worry disproportionately about the possibility that if they ask for more, the offer might be rescinded.

Interestingly, the fear of loss often leads to missed opportunities, ultimately resulting in overall losses...

Strategies to Combat Loss Aversion in Salary Negotiations

1. Understand the Facts: Realize that it's extremely rare for job offers to be rescinded because you negotiated for a higher salary. In my 20 years of seeing negotiations in action, this has happened once and not because the person asked. There were other factors that were at play. Ask any career coach or a HR manager or hiring manager you have a close relationship with - I guarantee they will say the same.
2. Define Your Salary Objectives: Before entering negotiations, clearly outline what you will accept, what you expect, and what you aspire to earn: Minimum Salary: The lowest pay you are willing to accept. Target Salary: A realistic salary expectation based on your role, experience, and industry standards. Dream Salary: An ideal amount that would significantly enhance your satisfaction and lifestyle.
3. Prepare: It's easy to react based on fear when you go in 'winging it.' Establish a decision-making framework to assess offers systematically. This will help you remain objective.
4. Focus on Positive Outcomes: Before negotiating, remind yourself of your professional achievements and your value to the company. This may sound like a cliche but it does work. A positive mindset can boost your confidence and reduce the stress associated with negotiations.
5. Highlight Your Contributions: During discussions, bring up specific skills that you will bring to make an impact. You can talk about driving revenue growth, improving operational efficiency, or leading successful projects - concrete examples will help you project confidence!

Conclusion

Loss aversion is natural, but you don’t have to let it hold you back. Being aware of it is half the battle. Then, by preparing well, setting objective targets, and thinking positive thoughts can bolster your confidence and turn a anxiety causing negotiation into a positive experience that extracts maximum value for you!

Need help negotiating a job offer? Book a mini-coaching call.