Monday, September 08, 2008

Negotiating salary / package / remuneration / filthy lucre

This is an extract from Where's My Oasis that was picked up by Lifehacker when it was posted on the interwebs. That original post seems to have moved now, so I'm sticking it up here again.
NEGOTIATING REMUNERATION
The motto of the Gucci family is: Quality is remembered long after the price is forgotten. In this extract from the best-selling job-hunting book, Where's My Oasis? Rowan Manahan looks at one of the make-it-or-break-it moments of the selection process - negotiating your package.

Salary negotiation is one of the most delicate parts of the whole job search process, and it is at this stage that many candidates inadvertently disqualify themselves. At some juncture in every selection process, you will be asked, "How much do you want?" What they are, in effect, asking you is, "What do you think you are worth?" Or, put another way, "Do you have delusions of grandeur (or no self-confidence), are you going to be impossible to manage, or are you a total wuss that I can micro-manage into an early grave?"

QUESTIONS WITHIN QUESTIONS
What a lot you can reveal with the answer to a predictable, relatively innocuous, question! Another thing you reveal in this answer is whether you told the truth in response to earlier questions (particularly those probing your motivation and enthusiasm.) Naturally enough, the best response is to not directly answer the question at all, but rather to turn it back on the interviewer:

"Well, I'm not sure. Obviously, in an ideal world, I’d love to be coming in somewhere in the top half of your scale, but I presume that you have guidelines for what the starting salary should be for someone of my experience and qualifications, so what do you think I would be worth?"

1ST LAW OF NEGOTIATION
TRY NOT TO STATE YOUR OPENING POSITION. IF AT ALL POSSIBLE, MAKE THEM SAY A NUMBER FIRST.
You should practise this in role-play with friends and relations, so that you get good at batting the ball firmly but politely back into their court. Of course, you cannot play this sort of crude game for a senior level post. Your head-hunter/network should have given you a clear picture of what is on offer and your reputation and the organisation you work for should have done the same for the interviewer.

MENTIONING MONEY AT THE WRITTEN STAGE
Some advertisements will specifically instruct you to "submit a full CV and details of references and current salary" as part of the screening process. Unless the role is in public service and you will be disqualified for not doing this, I would not recommend showing all of your cards in this way this early in the process [see page 177, Managing Your References].

However, sometimes it can be to your advantage to kill off time-wasting placement agencies or employers by including some information about your package. If you are just about scraping by on your salary of €XXX, then obviously it is a complete waste of time applying for a job that turns out to pay €XXX minus 20 per cent. Employers, too, are very interested in what you are currently paid as it is a key indicator or your perceived worth in the marketplace.

So if they ask for these details at the written stage of the selection process, for very junior positions, I would say okay, include them. For mid-ranking jobs, you should mention that your current package is "competitive" and that your expectations on that front are "negotiable" or "to be discussed at interview."

For more senior roles, it is probably to your advantage to mention your current package in broad strokes or to highlight the range of your expectations for the next move: "My total package with Widgets Inc. in recent years has been in the range of €XXX to €YYY. Given the pivotal nature of the Operations role in Gidgets Inc., I would expect that the remuneration on offer would be of a similarly competitive nature." This quickly cuts to the chase and means that you will not be wasting time chasing after low-paid jobs that have been dressed up to look more senior in the advertisement.

CURRENT PACKAGE?
In many instances at first interview, the other side will not directly ask you what your expectations are; they may just inquire as to the level of your current salary/package. Still a sticky moment. Most candidates at junior to mid-level exaggerate at this point and interviewers have learnt to automatically deduct 10-15 per cent from the figure that you mention, especially if your body language gives away the lie [see page 288, Body Talk].

If you are currently underpaid and this is a major factor in your reason for leaving your present organisation, then you will have to talk up the package that you are on. Maybe you are about to have a salary review? A new bonus scheme is being introduced that is going to significantly improve your current take-home situation? There’s a company-wide negotiation being rubber-stamped at the moment, which will give you X per cent more than your current number and your next review will improve that by a further Y per cent? That’s your starting point, not the number that you are on today (this holds true for mentions of your package in writing too – see above.)

It is also imperative that you find out what the norm is in your target organisation, so that you don’t (a) give yourself away too cheaply or (b) inadvertently disqualify yourself from the process by mentioning what they regard as a staggeringly large figure:
  • Placement agencies (particularly the larger ones) frequently conduct salary surveys. For senior positions, your liaison person should be able to give you a hard number. If they can’t, tell them to go away and get one.
  • You will find this kind of material in the business sections of the broadsheet newspapers on an occasional basis. This will be somewhat generic and may not include remuneration details for the role-type that you are applying for, but a little educated deduction should have you in the right ballpark.
  • Use any contacts you have in the Human Resources world. They frequently conduct benefits surveys to ensure that their organisation is in line with market norms. Talk to your network – someone may have at least a scale or range that you can work to. This information is not hard to get hold of, so don’t be caught out for the lack of it.
WHEN TO TALK ABOUT MONEY
As a general rule of thumb, you shouldn't raise the subject of remuneration first. The exception to this is if you are dealing initially with a placement agency – in which case, ask away. But once you are talking directly with the employer, it is appropriate to let them raise the subject. More to the point, when they start talking about money can be a useful ‘tell’ as to their attitudes and motivations. If they introduce the negotiation very early, it may be that they are less interested in getting the best possible person for the job and more concerned with keeping the hire cheap. If they introduce it very late in the process, it’s a better sign but they may be hoping to lull you into a false sense of security and then yank the carpet out from under your feet when you are more than half-committed …

2ND LAW OF NEGOTIATION
DON'T BACK YOURSELF INTO A CORNER. NEVER SAY A HARD, "NO."
If you are disappointed (or downright insulted!) by the figure that they mention, you have two options: (a) snort derisively in their faces and say something along the lines of, "Pay peanuts, get employees with simian characteristics. Come on – get real." or (b) don’t confront – say that the figure is way lower than it should be and you will go away and come back with a counter-proposal (which will be based upon your research and should be very difficult to argue with.) Which leads us neatly to ...

3RD LAW OF NEGOTIATION
IF YOU DO HAVE TO SAY, "NO," BE PREPARED TO WALK AWAY.

SHOW ME THE MONEY!
How much you will and won’t move for is a critical milestone on your road map for the job-hunt. That being said, it can be worth your while to look at an holistic picture. If your target organisation pays a little less, but really invests in its employees, it might be worth giving them at least a few years of your time. Maybe you want to gain a further qualification and they have a particularly generous reimbursement programme for employee education? They might do something very creative on car expenses that leaves you considerably better off over the course of a year than your existing package. Their bonus scheme is way better than your current one and you have always been good at hitting targets …

Don’t be closed- or narrow-minded on this. Drawing a line down the middle of the page and comparing your total net worth in your current role with what’s on offer is more than a clichéd or cursory exercise – it is a vital one.

REMUNERATION IS NOT THE SAME AS SALARY
Another common mistake made is to restrict the discussion to salary alone. Do not fall into this trap. When you are discussing your total remuneration package, you should include:
  • Bonuses
  • Stock options
  • Profit sharing
  • Working hours – do they offer FlexiTime/part-time work/job-sharing schemes?
  • Overtime rates or time in lieu if they don’t offer overtime
  • Pensions (is it contributory or non-contributory, do they operate AVCs?)
  • Health and other insurances (do they cover just you, or your family too? Death benefits for your family?)
  • Car, mileage rates, car allowances (if they provide a car, how often is it replaced?)
  • Travel allowance – could be very important if you are looking at a lengthy, expensive daily commute
  • Per diem and overnight allowances
  • Frequency of salary reviews
  • Subscriptions to publications
  • Memberships to professional bodies, sports or health clubs
  • Training, personal development and CPD
  • Further education
  • Leasing arrangements and/or preferential loans
The list is long and depends on the type of organisation that you are about to join. Time to think broadly and get creative!

HAVE A CLEAR OBJECTIVE
As in any negotiation, you should also have a very clear picture of your objectives; in this case your minimum figure. Calculate how much you actually need, how much you want and how much you’d really like (more lines in the sand!) Employers tend not to be interested in how much it costs you to live, but if you can talk in concrete terms about your fixed outgoings - rent/mortgage, utilities, groceries, insurances, savings - it immediately becomes obvious that you are not being frivolous in the negotiation.

4TH LAW OF NEGOTIATION
DON'T NEGOTIATE WITH UNDERLINGS - NEGOTIATE WITH THE PERSON WHO HAS THE ULTIMATE POWER TO SAY 'YES' OR 'NO.'
This is very important. If you go into a garage to complain about the quality of the repairs done on your car, you don’t talk to the guy with grease under his fingernails – you talk to the guy in the suit. In a negotiation on your salary and benefits, DO NOT engage with someone who can say, "I’ll have to get back to you on that." One of the keys to successful negotiation is that both sides have the same amount of thinking time. If you let the other person out of the room to talk to a boss, that means they have two to three times your thinking time. You will be up against the negotiator, the decision-maker and probably at least one other player from their side. Three brains to one? I’m not betting on you. As soon as someone tries the, "I’ll have to get back to you on that" line on you, it is imperative that you get past that person. Make this a deal-breaker if you have to, but talk directly to the ultimate decision-maker.

"WE COULDN’T POSSIBLY …"
Irrespective of the level of the player, a stock line used by negotiators on the employer side to keep your starting package low is, "Oh, we couldn't possibly do that. It wouldn't be fair on the other staff" OR "Everyone would want that if we gave it to you." My friends in the Human Resources world are particularly prone to trotting out this one.

Bull! Your immediate answer to this kind of jaded nonsense should be, "Are you seriously trying to tell me that there is no confidentiality in this organisation and that everyone’s salary and package is an open book to everyone else?" Watch them run for cover! Their stammering response is typically something along the lines of, "Of course not, but you know how these things get out …"

Your counter should be to smile pleasantly and say, "Well, with respect, I see that as being an issue for you and your department. It only becomes my problem if it affects this negotiation. Are you going to let that affect this negotiation?"

GOOD COP/BAD COP
Another common tactic used by employers is a ‘Good Cop/Bad Cop’ routine, whereby the person that you will be reporting to hands off the negotiation to a colleague, typically someone from Finance or Human Resources. Do not let this happen. The Good Cop doesn't want to harm her/his working relationship with you at the outset - hence the hand-off. Insist politely, but firmly, that you deal with your boss directly (as long as she/he has final say on your package) for the negotiation. She/He will ultimately be the person who decides your pay rises and who is aware of your value to the organisation. So it is not unreasonable to ask to deal with the person that you will be dealing with for the rest of your time in the organisation.

THE WRITTEN WORD
If you really want to join a new organisation and they are promising you the sun, moon and stars, get them to put all of the elements in writing. This is of particular importance if you have to take a step backwards on some aspect of your package, for whatever reason. An airy undertaking of, "Oh, that’s just a starting salary while you’re on probation. We’ll be raising that by XX per cent after six months" for a fairly junior position is all very well; but if you make them write it into your contract of employment, you will quickly determine whether or not they mean what they say.

Any unwillingness on their part to put their promises on paper should set off alarm bells in your head. It is fair to say that the selection process involves a degree of seduction on both sides, but an employer who is unwilling to provide concrete reassurances on promises made is not going to respect you in the morning …

5TH LAW OF NEGOTIATION
IF YOU DON'T ASK FOR IT, THEY'RE NOT GOING TO GIVE IT TO YOU.
Have a look at this little scale. It examines the ratio of earnings by CEOs of Fortune 500 companies to earnings by an average line worker in those companies over time.

1980 - 42 : 1
1990 - 85 : 1
2001 - 411 : 1

Do you think those CEOs got that kind of disproportionate pay rise without asking? Maybe the boards of management of all of those companies, in their infinite wisdom and mercy, decided to just hand over the cash? If you think so, I have a bridge that I want to sell you …

One thing I have noticed about senior players over the years is that they have the self-confidence to ask for items in their remuneration that would make you or I blush to the roots of our hair. Examples:
  • A CFO who demanded that a six-figure severance package be put in place, "just in case things don’t work out in the first 18 months."
  • An ex-pat Marketing Director who insisted that the company pay for 12 first-class flights per year for him and his family of four! (Naturally, the money was paid as part of his annual bonus and the Director flew back and forth only a few times a year, and travelled economy.)
  • A Regional Personnel Director who asked for, and got, a car and full-time driver and the company had to pay the driver’s rent so that he could live in the gate lodge of the Director’s home. The Director lived less than 10 miles from the regional headquarters.
  • Just take a gander at what Tyco's Dennis Kozlowski was paid even when he knew that all was not well in the state of Denmark.
  • When all the dust had settled, Enron’s Ken Lay had a pension of $900,000 per annum, agreed way back when …

  • Time Magazine reported that CEOs at major U.S. corporations took an average of a 15 per cent increase in total direct compensation from 2001 to 2002. If memory serves, that was the very wobbly year after 9/11. Did you get 15% of a raise that year?
You may not have the chutzpah (or downright gall) to ask for perks at that level, but, at the very least, you should know what the going rate is. Know what you are worth. Know what they can afford. Decide how much you want. And then ASK!

"Never let us negotiate out of fear, but never let us fear to negotiate."
(John F. Kennedy)

Extract from Where's My Oasis? (The Essential Handbook For Everyone Wanting That Perfect Job) by Rowan Manahan. © Published by Vermilion (Random House)

SUMMARY
  • Work to a plan. There is no point in hoping for the best - be aware of how much you need and work concretely towards that.
  • Broaden the discussion. It is not just about the shillings and pence in the pay envelope at the factory door on a Friday. Get creative!
  • Anger can be an effective negotiating tool, but only as a calculated act, never as a reaction.” (Mark McCormack)
  • Anticipation is the name of the game; their responses are predictable, so get your timing right, roleplay them and work around them.
  • It's not just about getting you cheap. If negotiation is going to be a key component of your role, we are very interested in seeing how hard and well you can negotiate on behalf of something we know you care about - yourself.

3 comments:

steveroesler said...

Rowan,

Thanks for running this. You've tossed in a wealth of accurate and necessary information that everyone needs to know, regardless of the job or the company.

BTW: Consultants should read this closely as well.

Tom said...

Whatever job you may be in, if you feel you are worth it and deserve that bit extra, then when the opportunity arises go for it.

Anonymous said...

The best compact yet so detailed answer I've ever seen, thanks. Your mind is like a parachute it won't work if it's not open, forgot who said that but oh your answer helps us be creative, just open up!