June 23, 2015

Saturn illustrates how no negotiation drives up prices. Credit: Anne Wardwell / Flickr Creative Commons

Many have lauded Reddit's radical new HR policy: no more salary negotiation. Supporters have hailed CEO Ellen Pao's decision as a major step towards gender equality in Silicon Valley.

But Stanford professor Margaret Ann Neale has a different take. By putting negotiation on the chopping block, companies like Reddit risk falling behind in a competitive market.

“Because they attract people for whom negotiation is more aversive, and that could be both men and women, there’s much less pressure on them to keep salaries at a market level. So it may be that, over time, those salaries get depressed.”

Neale points to Saturn, the first no-negotiation car dealership, to illustrate the “double-edged” nature of a seemingly forward-thinking strategy:

“Saturn was actually more expensive than an equivalent General Motors car [that allowed] negotiation. Saturn was saying, ‘we’re happy that you don’t want to negotiate…but there’s a cost for that.’”

negotiation, innovation hub, Business, ihub, maragaret ann neale, Kara Miller

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