Strong résumé? – Tick!
Compelling interview performance? – Yep!
Salary negotiation skills? – Gulp!
Rightly or wrongly, many Executives think that they have the basic tool kit of applying for jobs down pat.
Salary Negotiation, however, is another kettle of fish. I haven’t met many Executives who are confident about their current skills set in relation to attaining a fair salary. And, as I work through the issues with them, I equally haven’t met anyone who’s said: “You didn’t need to tell me that – I already knew.”
It’s critical for an Executive to convey confidence and negotiating skill in the workplace. The number of Executives who have told me that they just accepted the first offer laid on the table is quite disturbing. What sort of impression does this make?
Show me the money
According to a recent study in the Journal of Organizational Behavior, failing to negotiate on an initial job offer could mean missing out on over $800,000 in salary during a typical career. This is truly a life-changing issue.
The last time I was an employee, pay rises were in the order of 5-10%, with 5% generally being reserved to mediocre performers. Those days are well and truly gone.
I also used to think that the starting salary wasn’t important. I thought that if I performed well, my results would be rewarded at the next salary review.
That would be unwise in these lean and mean times. It is critical to set your base salary correctly. All future pay rises will be a percentage of this amount, so if you set it too low, you will suffer for many years into the future.
It’s not for the likes of me…
One of my friends, Rachel, was offered an internal promotion a few years ago. She was shifting from a State IT Manager role to a National IT Manager role. At the time, I made the idle comment: ‘That would have to be worth at least $200,000’.
Rachel was quite surprised and went off to investigate. She found that, indeed, the roles generally were paying in excess of $200,000.
When Rachel negotiated with her organisation, they were aghast. They commented that to give her what she wanted would be a 70% salary increase, that they had never awarded such an increase to an internal applicant and that they couldn’t do it.
Rachel held firm and told me later that she was only able to do so by repeating the mantra ‘What would a man have done?’
She was successful!
Immediately afterwards, her organisation prepared itself for an international IPO, which resulted in a world-wide salary freeze for two years. If Rachel had not held firm, she not only would never have caught up with her desired salary, she would have effectively gone backwards, as did most of her colleagues.
Master the 4 P’s
Effective salary negotiation is a very important part of the Job Search process. It can set the tone for your work life and your experience with the organisation. Doing it well requires the 4 P’s: patience, persuasiveness, poise and persistence. Here are 5 tips for you to consider.
Tip #1: Research market rates
As you prepare to negotiate with your prospective employer, your focus may be on ensuring that you are not going to be underpaid. Don’t ignore the dangers in being overpaid.
Your new employer will quickly assess your true worth once you settle into the role. If they believe that you are not worth your salary, it generally leads to trouble. Often, your role will be the first to go in a restructure.
What if you were overpaid by your previous employer?
It can be very difficult to come to terms with adjusting your salary requirements downwards. However, it is critical that you do so at the start of your hunt for a new role.
I can remember working with employees of a multi-national company, who would cheerfully announce that they knew they were paid 20% more than market rates and that they would never get that money again. They easily moved into new roles, with such a realistic attitude.
1. Ignore your current salary.
Your starting point is the market rate for your skill set. This may be higher or lower than what you expect, but it is what it is.
2. Know the salary you can reasonably expect.
Take into account the size and sophistication of your target organisation. Find out before the interview what they are likely to pay for the type of position you seek in comparison with your experience, education and the industry wage standards.
3. Plan a solid outcomes-based presentation to the employer.
You must be able to compellingly present your case and justify your claim for the compensation you think you deserve.
4. Accept that you may be paid less than your current role.
If you have previously been paid above market rates yet insist on matching your previous salary, you risk missing out on good roles. Moreover, it can be very difficult to regroup and maintain your confidence if you have to start your job search again several months later at a new, lower salary level.
Tip #2: Keep your salary under wraps
You may be interviewed by a prospective employer who asks for your current salary details. Apart from this information being none of their business, do you really want to prejudice an employer’s judgment about you by divulging what someone else paid you? Should it really matter to a prospective employer how much money you made in the past?
There is no law that says you have to divulge your past salary or that you must allow your future income to be limited by your past income. There’s also no law that says you have to help an employer negotiate against you.
Your value actually depends on the needs and judgment of the particular buyer, and on the buyer’s ability to pay. The minute you expose your salary, any negotiating leverage you have disappears. The employer now has the edge. The employer’s ability to pay you what you’re worth isn’t the key issue now. In fact, the employer will usually forego real negotiations.
1. Decline to provide salary history.
State politely and firmly that you think it is more useful to focus on this role and what it is worth in the current market place.
2. Plan an alternative.
If you decide to go ahead and provide your salary history, consider making a very firm statement of your required salary range. Then, add that the employer won’t want to waste her time or yours if she can’t make an offer in that range.
Tip #3: Prepare a strong and strategic salary negotiation approach
Defer talking salary as long as possible. The longer you wait, the more power you have. The ideal time for talking salary is when you are the final candidate standing and you get the job offer. Asking at any point earlier in the process can be perceived as you being too focused on money and can also lead to you having to reveal what you would be willing to accept.
The single most important ingredient for negotiating effectively is to set the right attitude about the process and people you are dealing with.
I suggest to my clients that they identify three distinct elements well before they talk turkey with the employer:
- A elements – their ‘must haves’, which have to be met if they are to accept the job
- B elements – their ‘wanna haves’ which they’d like to achieve but which are not deal breakers
- C elements – their ‘throw aways’ which they use as bargaining chips so that they can achieve their A’s and B’s
While every situation is different, there are some basic tenets to keep in mind when you begin to develop your negotiating strategy.
1. Use your value, skills and experience to negotiate.
Do not use your need for the job to negotiate. Negotiations should never become emotional or hostile.
2. Negotiate from a reasonable position and link each negotiable item to the job itself.
There must be a rationale for your proposal. Paint a clear picture of how performance results will be enhanced by granting your request.
3. Set all your negotiation points out at one time.
Otherwise, you create the suspicion that there will always be one more item about to be disclosed. The other party will lose faith in you and you will lose their goodwill.
4. Set the agenda to control the discussion.
Develop an agenda for the negotiation and prioritise the items on your wish list, either starting with the particular item that is most important to you or building up to it at the end.
5. Be willing to make concessions.
Negotiations are two-way and it is important to show that you are willing to compromise. Otherwise, even if you’re the only candidate, the employer might just sit it out and wait for someone else. Here is where your C’s come in handy.
6. Avoid impromptu decisions during a negotiation.
You must know your bottom line and decide the limits of your flexibility before you begin negotiation. We’re talking about your A’s here.
7. Don’t assume the first offer is fixed.
Even if the interviewer tells you it is, it rarely is. If the same figure is offered a couple days later, it probably is the last offer.
Tip #4: Balance salary, bonus and benefits
In most negotiations, base salary is the most important item for both parties. For you, it is probably the key tangible factor; for the employing organisation, it is the cost factor. To many, salary is also the scorecard of value and progress, which gives it symbolic importance, too.
1. Avoid an early deadlock.
If the salary you want is outside the norm or the salary issue is difficult to resolve for other reasons, explore how your skill can positively impact the organisation or how the job scope might be enlarged to justify more salary.
2. Explore the bonus structure.
Enquire how it will be determined and what range of magnitude is likely, based on history and current profit trends.
3. Consider non-salary rewards.
There are many other remuneration factors that can be traded off in the package e.g. benefits, stock options, equity and profit share. And there are other non-financial perks to negotiate such as additional leave or study allowances.
Tip #5: Delay your response and manage ambiguity
Do not accept an offer on the spot. Express your appreciation and strong interest in the job. Request at least 24 hours to consider it, even when you intend to say ‘Yes.’ Job Search is not always straight-forward. You may have queries, multiple offers or you may want to turn down an offer. Finesse is the key here.
1. Make a list of the pros and cons of the job offer.
Assess the job offer in terms of your needs, benefits, and long-term career and life goals.
2. Communicate with clarity.
If you want the job, make it clear. If you are uncertain, state there are some items you would like to discuss before you can accept the job. Suggest a further meeting to talk about the offer.
3. Juggle multiple offers skilfully.
Unless the immediate offer is for your ideal job, this is the time to get on the phone and obtain an up-to-date reading on all the situations that are in flux.
4. Manage the timing of multiple offers.
If your skilful push accelerates negotiations with one or more of your prospects, then the question is whether it is practical and prudent to delay your response to your first job offer while you bring one of the others to a close.
5. Keep the door open with the first employer.
The organisation that has made you an offer may take offence if they sense that you are negotiating with others. However, sometimes a prospective employer may be willing to let you have plenty of time to make a final decision.
6. Factor in the risks.
This sort of delaying action requires judgement and a bit of luck. At some point, you may have to accept or reject the offer in hand and bear the consequences.
7. Refuse gracefully if you decide to decline the offer.
Even when saying ‘No,’ leave the door open to negotiation. (Do not use this to negotiate a higher wage. When you decline a role, be ready to lose the job forever.) It could be that six months from now, they will remember you favourably when a bigger job comes up.
R…E…S…P…E…C…T (as the song goes)
Salary Negotiation is not about greed. It’s about respect. It’s about you ascertaining your worth in the market place and being a good enough negotiator to obtain it. Done with the requisite skill, it starts your relationship with your new employer off on the right note – you present as someone who is strong, who expects to be and is treated with respect.
Negotiations are a process, not an event. A successful negotiation is one where both you and the organisation think as well or better about each other after the negotiation ends as you did before it began.
You are no longer operating in an economy where you work for 30 years and retire with a gold watch. In fact, you are likely to switch jobs every four to five years on average. This means that being able to negotiate your salary is a critical skill.
Any situation that involves asking for more money can be awkward and unpleasant. But when it comes to salary negotiation, you should consider it one of life’s necessary evils (like dentist trips or insurance payments) that you just have to endure to prevent future regrets.
Getting it right brings immense benefits. I can remember one of my clients announcing to me after his salary negotiation, ‘Catherine, you have no idea! They gave me my A’s, B’s and C’s’. He was certainly what I call a happy chappy.
So start today. Next time you’re at the table, gather your courage and do it! Negotiate your salary for your future.