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This seems to be a common question that is asked as a normal part of an interview. Can anyone speak to what the interviewer is really looking for when they ask this question?

And is it best to simply be honest about whether you are/are not talking with other companies or can answering one way or the other significantly harm (or help) your odds of being offered a position?

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Honesty is the best policy.

The main reason the interviewers ask that question Are you interviewing with any other companies? is because they are interested in you and they want to figure out how much salary they should offer you. The other possible reasons are curiosity, job market survey, etc.

Had they been not somewhat interested in you, they would not bother(they have better things to do). They would finish the routine questions and say Nice to meet you. then let you go.

So, it's an indicator that they are somewhat interested, they want to know if you have or will have other offers.

Now, on your side, if you have not had any interview yet, just say so. It won't hurt you because you actually have nothing yet and you tell them you would be somewhat available. If you say yes you already have interviewed other companies, there would be two possibilities. One, they would make a better offer which is good for you. The other possibility is, they have budget concerns or they think you are good but not a perfect fit, they would rather wait and think about it. This would delay the hiring process. If I were you and if I want to work for that company, I want to go to work as soon as possible. Particularly if I am between jobs (unemployed), start my new job one week earlier means I earn 2% more salary this year. (I would make one more week pay.)

If you already have interviewed other companies or have scheduled interviews, give them the information. But, don't tell them what are the companies you have or will have interview with.

Honesty is the best policy. However, you don't have to tell them everything !

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Um, please dont use statictics such as '2% more salary' without explaining why. As one week is 2% to you you only plan to stay for 50 weeks at any given job? Otherwise that one week slowly becomes a smaller and smaller percentage, its not static... –  RhysW Feb 15 '13 at 8:42
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@pdr Honesty is the best policy. Once you lie, you have the risk to be caught. When you're caught, you're finished. –  scaaahu Feb 15 '13 at 11:34
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@scaaahu: There are very few cases where I'd disagree with that, but I think this is one of them. In fairness, I am usually at least waiting on a call on another job, so I'm not sure I've ever said this dishonestly, but I don't see how you can get caught in a lie if you say something like "I'm expecting to hear from one other company, but they're going to have to impress, now that I've seen what you have to offer." –  pdr Feb 15 '13 at 11:49
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@scaaahu: I see what you're saying and part of me wants to agree. But the realist in me wonders if "Give up your entire negotiating position," is good advice when dealing with trained negotiators. –  pdr Feb 15 '13 at 12:07
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@pdr All I am saying is, if you lie to get better negotiating position, you need to prepare for the worst possible consequences. That's why Honesty is the best policy. I did NOT say it's the only policy. –  scaaahu Feb 15 '13 at 12:14
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As someone who does a lot of interviewing, I would appreciate honesty at all times in order not to waste each other's time. That said, I am more interested in general information regarding your availability than specific details.

If you are interviewing for a rival company in a sensitive or leadership role or in any jobs that might be considered conflicting in nature and you give me all the details, it will more often than not backfire.

The main reason being I might not be able to trust you to keep your mouth shut when you do start working for me...

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Would you be okay with candidates telling your competition they're interviewing with you? –  Blrfl Feb 16 '13 at 14:55
    
Very much depends on the nature of the job. If it is of a sensitive nature, I'll often request that the candidate not publicize it. If its not (e.g. general clerk), it doesn't really matter. –  Permas Feb 16 '13 at 18:32
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The answer can vary depending on your current employment situation, but they're trying to get more informationon your job search: Are you available? Are you in demaand? Are you seriously looking for a job? Are you working with another recruiter?

Availability is a problem in interview scheduling. If you're not available, they need to determine if they have to make additional demands on the interviewer. Recruiters and HR people run into this problem the most because they have to make this request on someone else. A manager that is working directly with you, probably won't care and I don't think I've ever had a hiring manger ask me if I had other interviews.

Some have indicated that not having other interviews is a sign that you are not in demand. That's not always true. Example: Someone with a job may occassionally "entertain" other job offers, but rarely accept an interview. They're selective and have a way above average salary requirement, so it's a waste of everyone's time. This isn't the case with a recent grad or someone who is out of work.

The more interviews you have, the odds are better of getting an offer, so they may try to interview you sooner. Again, I think this is more important to recruiters and HR people than the person directly doing the hiring.

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If the real concern is availability, asking about other companies could lead to making the wrong assumption if there are other demands on the candidate's time, such as being busy at his current job. –  Blrfl Feb 19 '13 at 17:14
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I favor ambiguity and answer that with "you should operate under the assumption that I am" for three reasons:

  • Confidentiality. It's not the candidate company's business. If you work in a highly-specialized field, revealing that you're interviewing elsewhere could give the candidate company information about its competition that the competition may not want revealed. That fact that you're not interviewing elsewhere can also be telling.

  • Integrity. You could, in theory, walk out the door of the candidate company's office, bump into an old friend on the sidewalk and end up with an interview and a job offer from his company. If you accept that offer and decline one the candidate company makes, having told them "no" at the time won't look good no matter how rational the explanation. This may get you ruled out as a candidate in the future.

  • Leverage. A company making a good candidate an offer should bring its "A" game to the table. After all, the candidate brought his to the interview and will be expected to bring it to work should he accept. Companies should do thorough interviewing and understand the business landscape well enough to determine if a candidate would be in demand without having to take a shortcut and ask. Doing this reveals a willingness to bring only its "B" game and allows candidates to apply the better biases when evaluating offers.

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I disagree with answer that with "you should operate under the assumption that I am". You're an interviewee at the time, not an employee yet. How that company operates is none of your business. –  scaaahu Feb 17 '13 at 1:35
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@scaaahu: The company is explicitly asking the candidate how it should proceed (operate). See my edit to Leverage that explains why they don't need a simple yes-or-no answer. –  Blrfl Feb 17 '13 at 13:35
    
You're assuming the company and the candidate are on the equal basis. Actually, one is the interview_er_, the other is the interview_ee_. If the interview is successful, one is the employ_er_, the other is the employ_ee_. The leverage never exists. –  scaaahu Feb 18 '13 at 2:17
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@scaaahu: Any interview where the "er" and "ee" positions don't change often is a pretty lousy interview. A hiring is an economic proposition, where each side is out to sell the other on the value of what it has to offer. Not showing one's cards forces companies to figure out how much demand there might be for a candidate of similar caliber and make an attractive offer. That's where the leverage is, and is separates the serious companies from the pikers. Come to think of it, every offer I've accepted has been from a company that didn't ask that question. –  Blrfl Feb 18 '13 at 5:27
    
For good companies, the er vs. ee ratio is probably 1 : 100, in other words, they get to choose candidates. For so so companies, the er vs. ee ratio would be 1 : 2 or even less. They don't get many choices, the candidates do. It's your choice between working for a good company and a so so one. I'll shut up here. –  scaaahu Feb 18 '13 at 6:30
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My general assumption has been that the biggest driver is timing. People look with all sorts of motivations and for all sorts of reasons, and there's no magic formula for figuring out what pressures exist on the interviewee's side of the equation.

I'd say the big force is urgency. Both the position and the candidate probably have an unspoken timeline that is somewhat up for negotiation, and it's generally better if everyone can get clear on it. Here's some examples:

  • You've been interviewing or applying to jobs assiduously because you're really eager for something new. You might be employed and looking for something better, you might be relocating or completely jobless - in any case, you're eager, and I won't have to wait long for you to tie up any existing commitments.

  • You've realized you are hot on the job market, you're taking crazy numbers of interviews... pressure's on the hiring company - if we want you, we better not hedge or mess around. Keep in mind - pressure doesn't equal desirability. It cuts both ways - if I have to make a snap decision, I may rule you out without considering your many possibilities.

  • You have a true, serious, competitive offer on the table, but you were too polite to say it outright. I'd rather know if you need a 2 day turnaround for an offer. Our timelines may not mesh, but at least I know there's a real deadline there.

  • No big hurry - you're looking with no strong urgency, you're just open to the new possibilities. This, too, can be a win or loose. Maybe it means the job offer process will slow down, but maybe it means that the company will take the time to consider where you fit best and if this job isn't it, they'll keep you on file.

There's really no one answer here... the goal is to prevent an "if I'd only known" moment.

Secondarily - yes, there's a competitive element here - if you have a job offer in hand, you have the option of working on negotiating a better offer for your salary & benefits. Keep in mind, though, that this isn't a situation where companies are banking with unlimited money - blow the estimate up too high and you'll hit the ceiling of "no, this guy isn't worth it to us" and "if we pay him that, the rest of the staff gets hosed, too bad, I guess we won't offer" - some companies are confident enough that they'll make a low ball offer just to see if you'll take it, but don't bank on it. Like any negotiation, the more information you have about the capabilities of the company to pay you what you want, and your own market rate, the better off you are.

But in all honesty, in asking about other interviews, my general goal is to make sure I know limitations with respect to timing.

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Another important reason scaaahu didn't mention is timing. If you've other procedures going they're under more pressure to reach a decision and make an offer if they want to.
It also indicates they're not the only ones considering you a potentially good asset, of course, can't hurt :)

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Answers should be full, complete, and backed up by referenced source or personal experiences. This does not meet the requirements for an answer. –  Chad Feb 15 '13 at 14:16
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