Negotiating The Offer

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  • 1. NEGOTIATING THE OFFER DON’T LEAVE MONEY ON THE TABLE!
  • 2. Three Basic Principles • Labor is an intangible • Salary relates to level of responsibility • Employees must make the company more money that they cost Ok, now what?
  • 3. Consider This • The million dollar blunder – Incorrectly negotiating will cost many dollars over your lifetime • The issue of quality that you will bring • The vicious cycle and the virtuous cycle – Vicious: overworked, underpaid, and undervalued – maybe an adequate employee – Virtuous: negotiated top dollar and achieves success, well paid for her efforts
  • 4. Consider This2 • Both sides should applaud the outcome – Employees feel they are worth something – Employers feel they hired someone of quality • Tangible vs Intangible – Labor is intangible – Cost of labor is a range – No guarantee how good the labor will be • Universal Hiring Principle: Make Me a Buck – They will hire you if you make them more than you cost
  • 5. When to Discuss Money • Ever bought something you can’t afford? • The issue of “budget bending” – Budget • The illusion of controlling finances – Judgit • We buy something we can’t afford because it will pay for itself – Fudjit • We’ll shuffle things around if there is something we really want
  • 6. When to Discuss Money • The best time to discuss money is when the other person is in the judgit stage • Wait until a job offer has been made – When they ask your previous salary they are screening you. Don’t get screened out! – He’s now decided you are the best candidate – He’s now willing to be flexible http://salarynegotiations.com/step1.htm
  • 7. When to Discuss Money • How do I put off the discussion? – “I’m sure we come to a salary agreement if I’m the right person for the job. Let’s first agree on whether I am.” – “Salary? Well, so far the job seems to have the right amount of responsibility for me and I’m sure you pay a fair salary, don’t you?” – “Let’s hold off on salary talk until you get to know me. What other areas should we discuss now?” – “Are you offering me the job?” www.youtube.com/watch?v=-qNGc-q_mhw
  • 8. When to Discuss Money • The Pre-emptive Strike – You bring it up! • “By the way, Mr. Employer, I know it’s too early to discuss compensation in detail, but I wonder if you can give me a rough idea of the range you were thinking of for this position? . . . Thank you. I’m confident that if I’m the right person for the job we can find a salary that works.”
  • 9. Who Goes First • If you go first – Too high? Risk = the job and your dignity – Too low? Risk = the job and money – Just right? You’ll always wonder… • If the employer goes first – He becomes the seller – It’s his job to tell you
  • 10. Pressure To Go First – Stay on Track • “I’m sure you have something budgeted for this position.” • “I have some idea of the market, but let’s start with your range.” • “I’m paid very fairly for my responsibilities and I expect a fair salary with respect to my responsibilities here.” • “Don’t worry about salary. I know I have to make you more than I cost. Let’s make sure the fit is right.” • “What did you have in mind?”
  • 11. Your First Response • Repeat the offer with a contemplative tone • Have a look of concern • Shuffle your feet • Count to 30 and think… – Calculate what the offer means – Compare offer with your expectations – Your pause should bring you an immediate raise! • Respond with the truth http://salarynegotiations.com/step3.htm
  • 12. Responding With Truth • Choices – “Sounds Great.”, “Sounds Acceptable.”, “Sounds Disappointing.” • Make sure you did your homework! – You must be comparing the offer with your homework, not your previous salary. – www.salary.com, www.worknet.wisconsin.gov – Determine your fair market value • But how?
  • 13. Your Fair Market Value • Not an exact number, but a range • Three Pieces – Objectively Researched Value (ORV$) • Present – Individual Value (IV$) • Past – Risk-factor Dollars (Rf$) • Future Market Value = ORV$ + IV$ + Rf$
  • 14. Fair Market Value Explained • ORV$ – Information that is currently published – This year’s average earning range • IV$ – An assessment of the strengths of your past work record – Entry level, seasoned? • Rf$ – What you are willing to make based on the success of your contributions
  • 15. Calculating Fair Market Value – ORV$ (What is the range?) • Find out what the market is paying – Internet – Library – Printed information – Person to person research • Rely on job descriptions rather than titles • Review the ranges that exist • Calculate honestly where you fall in that range of experience
  • 16. Calculating Fair Market Value – IV$ (What is your place in the range?) • How well or how poorly do you perform compared to the next person? • Do you bring positive or negative value? – Well known? – Special expertise? • Adjust accordingly – May need to adjust up or down depending on your situation – Be honest with yourself
  • 17. Calculating Fair Market Value – Rf$ (What is your value-added?) • You need to prove you will earn the company MORE than you will cost! – How will you MAKE them money? – How will you SAVE them money? – Prove you are worth at least 3X your salary – Pay attention to what is said during the interview
  • 18. Your Researched Response • By now you should know: – The highest value you are worth – The lowest you will accept • Counter their offer with your research – Too high – Too low – Just right http://salarynegotiations.com/step4.htm
  • 19. Your Response – Too High • If the company overpays you they will eventually feel ripped off and eventually resent you • Now you can’t get another job without a pay cut • You can’t get promoted because you are being over paid • You might be in over your head • “Well, that’s a very good offer. I take it as an indication of your belief in me…Let’s get the benefits clear and I think we can make the deal.”
  • 20. Your Response – Too Low • Try to increase it: “$___. I appreciate your offer and I’d love to work here. I’m sure you want to pay me a compensation that is fair and will keep me committed and productive, isn’t that right?” • From my research I estimate that positions like this for someone with my qualifications pays in the range of X to Y.
  • 21. Your Response – Too Low2 • Give a range slightly higher than you found (i.e. found $35-38k, state $37-40k) • The interviewer will respond • Negotiate and talk. Keep mutuality in mind and try to find a common ground. • Continuing to talk can increase their respect for you. Don’t worry! • Keep going back to your research. Jill Story…
  • 22. Your Response – Too Low3 • Don’t say no in the room – Make the employer sweat it out – You still have an offer to consider – but make sure that it will stay on the table – Set an agreed upon time to get back together to talk
  • 23. Your Response – Just Right • Unlikely – But if it happens… “Your research matches mine exactly. I think that’s a perfect starting point. Since I expect to learn fast, work hard, and become very productive for you, I’d like to discuss scheduling a tentative raise to $X in 6 months.”
  • 24. Clinch and Deal Some More! Bennies and Perks • First agree on take- – Professional home pay Memberships – Vacation and Personal • Bennies: Days – Salary Reviews – Relocation Expenses – Sales Compensation – Other – Performance Bonuses • Christmas Bonus – Insurance • Matching Funds – Cars and Expense • FSA Accounts • Free Parking • Pension, etc
  • 25. Bennies and Perks-Salary Reviews • The higher the base, the higher the raise since it’s usually a percentage of the base – Consider: timing, basis, percentage • Determine if salary increases are based on COLA, demonstrated worth, or are just a mechanical procedure • Determine how long you need to prove your worth and then double it
  • 26. Bennies and Perks – Sales Comp • Learn what the commission rates are and try to increase them • Understand how and when they pay out • Negotiate both rate and duration of payment • Be clear about what happens when you leave the company • Get it in writing
  • 27. Bennies and Perks – Performance Bonuses • Work to set up a bonus structure that is a workable one • Use a measurable criteria • Do your research • “Let’s consider setting up a special bonus to encourage excellent performance. Can you think of one?” – Profit sharing – Stock Options
  • 28. Bennies and Perks - Insurance • One of the most common • Ask to see the plan – Coverage – Deductibles – Co-pays – Premiums – When does it start and end? • Ask employer to cover you after you leave
  • 29. Bennies and Perks- Cars and Expense Accounts • Discuss travel and mileage allowances or getting a company car • Talk to your accountant • Discuss expense accounts and what is considered customary and what the exceptions are
  • 30. Bennies and Perks- Professional Memberships/Licenses • Explain how your membership would benefit them • Determine if you will be given time off to attend meetings, conferences, and seminars
  • 31. Bennies and Perks – Time Off • If you can’t increase the money, perhaps you can reduce your work time! • Ask what their policies are for vacation, sick time, and personal days. • Frame requests in terms of how they will help you be more productive. • “I tend to throw myself so entirely into my work that I need a few breaks during the year to recharge. I’d like X weeks’ vacation.”
  • 32. Bennies and Perks - Relocation • Usually common if you are an executive • Can happen if an employer wants you badly enough • Things to ask for: – Moving fees, closing costs, broker’s fees, mortgage penalties, transportation costs, appliances, and lodging.
  • 33. Now What?! After the Negotiation • DON’T TAKE THE JOB – YET • Make no decisions in the heat of the moment (i.e. shopping while hungry) • Stay enthusiastic • Ask for offer in writing • Find out when they need to know • But how?
  • 34. Considering the Offer • “This sounds terrific! I think we’ve really got a solid match here. Would you jot this all down so we’re clear? I’ll get back to you as soon as you need to know. When do you need to know? • “We’re done! I can’t wait to get started. I will need to look this over to make sure we haven’t forgotten anything. When do you want my final confirmation?
  • 35. In Conclusion • Do your research • Be honest and realistic • Discuss salary in the judgit stage when there is an offer on the table • Let the employer go first • Take your time • Don’t give up and don’t cave in!
  • 36. References • Negotiating Your Salary: How To Make $1000 a Minute by Jack Chapman • http://salarynegotiations.com/