Negotiating a strong compensation package shares a similar motto with gambling: If you’re gonna play the game … you gotta learn to play it right. In fact, a joint George Mason University and Temple University study reveals that the compounding effect of a successful negotiation can enhance your earnings $600,000 over a 40-year career.
The field of career management has some pretty darn good negotiation instructors, as do many graduate programs. When alumni of Wake Forest University’s Charlotte-based MBA program reflect on the most beneficial classes they took, “Negotiations and Influencing” with Dr. Bill Davis is at the top. So, when I asked Bill to contribute to this blog and he said “It’s very good” and didn’t see “any reason to add anything”, it was a huge compliment.
Regardless of the teacher, the strategies taught help candidates earn their full potential. Although each instructor exhibits a unique, personal style, all tend to agreed that negotiating a strong compensation package starts with knowing when, what, and how to negotiate.
When should you start negotiating?
Salary negotiations start when a formal offer is presented and not a moment sooner. Although subliminal negotiations and tactics start from the moment you begin communicating with a potential employer, revealing your cards prior to receiving a formal offer increases the risk that you’ll be screened out, receive a lowball offer, or even get an offer that is in the ballpark of your previous salary.
Avoiding early salary discussions is hard because most employers persistently ask candidates about their present compensation or future salary requirements. In his book, Negotiating Your Salary: How To Make $1000 a Minute, expert negotiator Jack Chapman said “Your biggest leverage and strongest tactic in negotiations is to NOT show your hand to the employer.” He explains that decision makers move from “Budget,” to “Judgit” to “Fudgit,” and as their desire for something they want grows, so will their flexibility in terms of how much they can afford.
What do you negotiate?
Everything counts. Many people make the mistake of only focusing on the number that appears in the biweekly paycheck. Your salary should be calculated based on the value of the total rewards package. This includes not only pay, but health and retirement benefits, work-life balance, employee perks, education reimbursement, and performance-management rewards and recognition.
Put everything into perspective. You may interview for a great role that only pays 10 percent more than you make now, but maybe it comes with full tuition reimbursement (without service ties) or a properly aligned title (recruiters gauge career progression by titles). These benefits are extremely valuable to your long-term career development.
Try to think wisely about the entire offer, and do not let emotion overcome critical thinking.
How do you negotiate?
Before discussing numbers, know your market value. Gathering job search intelligence from numerous resources arms you with compensation data that is comparable with your geography and role. Since every organization groups their compensation bands and titles different, you must focus on the job description. Also, do not use the same tools that your human resources manager will use. Why? Because headhunters and recruiters agree that the majority of HR departments rely on salary surveys that tend to be outdated and based on groups of people rather than individuals with unique talents.
There is no foolproof method to starting the numbers game because each situation is different. However, there are some tried and true guidelines.
Jack Chapman suggests that you calculate three factors prior to negotiating:
- Objectively Researched Value (ORV$): An apples-to-apples job description comparison
- Individual Value (IV$): How well you can do the work compared to others
- Risk Factor Value (Rf$): Compensation contingent on performance or the employer’s ROI.
These figures all lead to your “Ideal, Satisfactory, No-Go” (ISN) numbers that you hold close during the negotiating process. Remember, the benefits and perks must be taken into consideration too.
Noel teaches the following three-step method:
- When asking for your desired salary, don’t tell them how much you’ll take. Instead, say: “I’m much more interested in doing [type of work] here at [name of company] than I am in the size of the initial offer.” This response will suffice about 40% of the time.
- More than likely, the company will pose the question again. Respond using a polite stall tactic such as: “I will consider any reasonable offer.” Noel said this will work 30% of the time with the buzz words being “consider” and “reasonable.”
- Noel claims that 30 percent of cases will continue with the company pressing you for a number. Again, exercise polite refusal using a response such as: “You’re in a much better position to know how much I’m worth to you than I am.” Although it will rarely go beyond this point, this should be your final answer—no matter how many times the company tries to get you to go first.
Know When to Fold
Remember, this is business; not personal. The best poker players don’t win every hand. Sometimes, it is wise to fold and walk away.
But unlike gambling, there is no need for a poker-faced expression or coldness. Ending negotiations with a smile and gracious demeanor—regardless of the outcome—is the smartest hand played.