COMPENSATION

NEGOTIATION

 

PREPARATION AND RESEARCH

BE AWARE OF BARRIERS TO GETTING WHAT YOU WANT.

How we perceive ourselves and our skills will impact what we see as potentially negotiable. If we are confident and feel worthy of the job and benefits, we are more inclined to expect flexibility from the employer. On the other hand, if we lack confidence, are desperate for the job, or have doubts about our abilities (which we all have), it may be difficult to approach the process in a manner that allows us to negotiate without interference.

WHAT MAY BE NEGOTIABLE?

Begin with a detailed understanding of what benefits may be available rather than what benefits you expect. Ask yourself, "do I know enough about the company to know what is negotiable? If not, how do I find out?" Information is your most powerful asset and effective negotiators must know what is available.

There is an abundance of sources for gathering information on a company's benefit structure:

· Company interviewer (remember, interviews should be two-way).

· Company employee handbook.

· Publications regarding best employer packages.

· Trade or industry publications.

· Current or previous employees.

The following is not intended to be an all-inclusive list, but does cover most potential benefits available:

Monetary: salary, profit sharing, stock options, sign-on bonuses, deferred compensation, performance bonuses.

Health benefits: medical, dental, vision, disability, fife insurance, counseling, Employee Assistance Program (EAP), Sec. 125 program (non-taxable/cafeteria plan) or standard taxable benefits, medical/dependent care reimbursement programs.

Paid time off. vacation sick leave, paid leave or paid time off programs, sick leave cash-out programs, holidays, sabbaticals, child care, personal time.

Retirement: Pension, 401(k), 403(b), Employee Stock Option Plan (ESOP), benefit continuation after retirement.

Position classification: (exempt/non-exempt, professional, "key") my affect level of benefits.

Other benefits: training, career development, seminars, tuition

relocation and moving expense discounts, scheduled tune off, flexible working hours, fewer than 40 hours as a work-week, work from home (including necessary office equipment), association membership, etc.

 

1. OVERVIEW OF THE HIRING PROCESS

This workshop will provide the you with knowledge and techniques for improving your negotiation ability in a successful way. The assumption is that both parties are genuinely interested in coming to an agreement that is mutually satisfactory. From your point of view, this is the stage where they've decided they want you for the job! The hiring process has several stages, the last of which is compensation negotiation. To put compensation negotiation in perspective or sequence, here's a review of the employment process:

• Submission of resume and/or application

• Interviews and reference checks

• Offer of employment

• Compensation negotiation

You'll note that the compensation negotiation step does not begin until after the job offer has occured!

WHAT PRICE NEGOTIATION?

A successful negotiation is a mutual arrangement and settlement of terms. It should work for both parties in the classic win/win manner. The common reality is that your prospective employer will try to hire you for as little as possible. You, of course, will want to get the most you can. In this case, if one of you wins, the other loses. Take a guess at who the loser might be if you're ill prepared for the process! Think of how you are going to feel about your new employer when you end up accepting less than you want or really deserve!

On the other hand, think of the relationship that is created if both parties feel good about the outcome.

Negotiation is a skill which many people find intimidating. If we are placed in the position of dealing with someone who has mastered the skill, we feel at a disadvantage and tend to distrust the other party. On rare occasions when we actually do negotiate, it's usually when making a major investment like a home or a car. By that time, it's too late to practice.

THE SKILL OF NEGOTIATING

Basic negotiation is the act of two or more parties trying to develop an agreement on an issue or a process through strategically giving and taking. (Sometimes it's even an agreement process for solving a disagreement!)

One of the keys is that neither party is required to come to an agreement. Each party may have the ability to not agree, but they want to agree! You want the job and they've offered it to you which means they want you to have it. Another important component is for both parties to understand what they want out of the process. In most cases that will be different.

 

It is important to examine the details of these items, not just determining that they exist. For example, if the employer contributes to the 401 (k) program, how much and when do you become fully vested? What other investment options are available to you? Does the health program cover catastrophic illness? How are the benefits impacted by your position classification? Does entering at a lower level delay or disqualify you? Remember, "the devil is in the details" and these details can make a tremendous difference in the value of the benefits.

WHAT DO YOU WANT?

Before you begin actually negotiating your compensation package, give considerable thought to what you want and what you need. It is recommended that you prepare a list of both your needs and wants; a wish list. If you don't, you may end up after a "successful" negotiation only to find yourself settling for less than what you need or completely different benefits than what want! Begin your assessment by considering:

• What are your financial requirements:

housing insurance vehicle/transportation

retirement food clothing

child care paid time off other

•What was your last salary?

Is it reflective of the position/responsibilities you are applying for?

• When was your last merit increase?

• How long can you remain unemployed?

Next, expand your wish list to include what the perfect job would look like in terms of compensation. Remember, there are a lot of non-monetary aspects to the compensation package. The more options you have, the more you have to trade and the more likely you will be successful. Develop a list of every conceivable benefit. Talk it over with your spouse. He or she has a stake in all this too! Build on that list of negotiable items by adding your own particular wishes and any non-traditional benefits not normally considered in negotiations.

WISH LIST STARTING POINT

Importance of this item:

Item To Me? How much? To Them?

Salary ____________ _____________ ____________

Health Plan ____________ _____________ ____________

Retirement contributions ____________ _____________ ____________

Education ____________ _____________ ____________

Time off ____________ _____________ ____________

Bonuses ____________ _____________ ____________

Flexible hours ____________ _____________ ____________

Employee Assistance ____________ _____________ ____________

 

ASSESSING THE BENEFITS OF THE POSITION: WHAT ARE THE COMPANY'S

LIMITATIONS AND FLEXIBILITY?

Develop a list of what the. company is looking for in filling the position for which

you are applying. Include skills or abilities which you offer which-they may not have

considered as benefits to their organization. Consider the following questions:

• What position are you applying for and how was it advertised?

• Why am you the best candidate for the position?

• What do they pay for this position (the whole range from bottom to top)?

• How long has the position been available and why?

• Why is the position open in the first place? Is it a new position?

• Was someone terminated or did someone resign ... and why?

• What has someone in this position done previously to be considered successful?

• Why have they chosen you?

• How many employees are there in the company and in similar positions?

• What is the financial status of the company and the division you will work for?

• What are the goals of the company and how will your position affect those goals?

• What is the culture of the organization and the management style of my supervisor?

Again, your success will be determined by the quantity and quality of your

preparation and research. Remember, one of the most important assets in negotiation is

information The more of it you have, the more likely you will be able to successfully

negotiate within a win/win.

 

REALITY TESTING

To help you successfully posture yourself for negotiations, you need to test your

perception of reality. Who wouldn't like to earn $1 -million a year? You may think you're

worth it and maybe even feel that the company can justify paying that much. However,

you should verify whether or not it's likely to happen before you posture yourself in an

unreasonable position. The following questions can help:

• What is the prevailing compensation package for this position (again, "what are the company's limitations and flexibility")?

• What is the supply and demand for people in your field of expertise?

• What special mix of background, skills and abilities do you bring to the position?

• Do you meet or exceed their needs and how closely?

• Do you have an inside mentor?

• What can you do for the organization at the "bottom line" that justifies what you want?

In addition the following list may assist you in identifying what special skills or

solutions you bring to the organization; be prepared to discuss the following types of

items:

MANAGEMENT:

• Budget management

• Team building

• Total Quality Management; Just In Time

• Personnel, hiring, training etc.

TECHNICAL:

• Computer skills, languages, platforms

• Software(hardware design

• Schematic/blue prints

• Project management

PERSONAL SKILLS:

• Communication skills

• Personal productivity

Employee motivation and development

Interpersonal skills

OTHER:

 

ACTUAL NEGOTIATIONS

Now that you have been introduced to ideas regarding compensation negotiation, how do YOU put it all to use? The following is intended to help you apply what you have learned so far:

• You are always negotiating, from the time you walk in the front door for your first interview, to the hand shake at the time you close the deal ... and beyond! That's one of the reasons it is so important to "be aware of the barriers to getting what you want." Posturing or positioning begins very early in the game.

• The first person to state what they want loses. If you tell your prospective employer what salary you want, it becomes the highest point at which the employer will settle. Most likely you will end up somewhere below that figure. Phrases like, "could you give me an idea of the range being offered?" or, "the salary would depend upon the entire compensation package which I haven't had a chance to review" can be effective. Most important, until you've had a formal offer (not necessarily in writing), do not begin negotiations.

• Know your bottom lime and be willing to walk away. Without the ability to say "no" to the offer, you are not truly negotiating. Make sure you know what you will not accept.

• Build consensus by coming to agreement on the small items first. As you continually reach agreement on small items you build consensus which reinforces the other persons faith and trust in you. As you reach agreement on the Small items, you become ready to negotiate for the *big ticket" items such as salary. There tends to be a greater desire to agree on the tough issues after there has been continuing agreement on other issues. Tackling the tough issues first can lead to a failure to reach agreement, causing negotiations to break down.

• Never negotiate over just one issue. Someone will win and someone will lose. The more options and issues on the table give both parties room to maneuver. Also, as issues are agreed upon, do not remove them from the table but keep them available if you need something to trade for more important issues later on.

Preparation and obtaining as much knowledge as possible, is critical. It is also

important to practice negotiations before you get to the one job you really want. As is

true with most skills, the more you practice the better you will be. It is recommended that

you begin practicing in less critical situations to enhance your skill base.

GAMBITS

The term "gambit" comes from the game of chess. It refers to an "opening" in which a player sacrifices a piece to obtain a more valuable piece or position. There are many gambits or maneuvers in the skill of negotiating. These are suggested as the most appropriate for use in a salary negotiation process:

THE FLINCH:

When you first hear the other side's offer, react both physically and verbally. Flinch by restating the offer in an incredulous or questioning tone of voice while moving back. The other side is always watching for your reaction and will adjust to any verbal and non-verbal response you make. Inexperienced negotiators often give away their negotiation range or other vital information. Don't be too broad and, if you're not comfortable restating the offer, choose another utterance or simply suck air. Get the picture? However, you must be congruent. Your words, tone of voice, and other nonverbal body movement must say the same thing: "It is too low!" So, follow these steps:

• When you feel the other side is ready to make the offer, lean forward in anticipation.

• Once the offer is made, lean back away from the other simultaneously repeating the offer with an incredulous tone of voice.

• Do not say or do anything else-Just sit there and wait for the other to respond.

THE TRADE OFF:

Avoid giving concessions if you can, but if you feel you must, always trade for something in return. When you are asked to make a concession, ask for something to take it's place. Maybe it's not more vacation time, but it can be flexible hours so you can pursue some freelance project on the side. It might be something not yet agreed upon that you now have leverage to discuss, it may be some future benefit or, if you've gotten down to small items, even just something as a statement of good will. The point is, don't conceed without getting a little something for the concession.

THE HIGHER AUTHORITY:

A method for the interviewer to avoid taking personal responsibility for making a decision or creating a delay is for them to say that a higher authority must give final approval. It could very well be that a boss, the general manager or an executive committee might need to review you as a candidate and give an OK. If the higher authority is vague or nebulous, though, it probably means that they are avoiding giving you a "yes" and you could be closer to the line than you want to be. Acknowledge that you understand, but get the interviewer to commit to providing a positive recommendation when referring you to that higher authority.

Use this same technique in reverse when you are offered a compensation package. Ask for time to review any package with a spouse (your higher authority!) or at least request time to make an objective, careful decision. This is not in any way unreasonable and employers will expect you to take time to review the package.

 

ASK FOR MORE:

Ask for much more than you expect. You can surely indicate flexibility and a

willingness to negotiate, but if you don't ask, you won't know how far they are willing to

go. Additionally, you may need room to come down in your price as part of the win/win

negotiation strategy. Remember, you can also use the trade-off to get non-monetary

benefits. Always indicate flexibility by using round numbers. Work on a salary of $4,000

instead of $3,834 per month (even though the latter equals the equivalent of $46,000 a

year).

THE HOT POTATO:

The hot potato, as you might suspect, is an issue "tossed" to you to by the other side. It is usually a limitation or restriction which you are lead to believe is nonnegotiable. Let's say you are given a salary figure that is fixed and not up for discussion. Maybe you've even flinched and got no reaction. Toss it back! Test the validity immediately. You want to find out if everything comes to a halt if you can't reach an agreement. Ask, "if we can't reach agreement on this item, is this a deal breaker?" The hot potato is a condition that may very well be invalid and not as critical to the deal as they want you to believe. If nothing else, you’ll know by the answer you receive.

THE NIBBLE:

After the negotiation is complete, ask for a small addition. When agreement is reached, both sides relax and let their guards down. Also at this point all psychological doubt is removed and a strong positive feeling exists. Plan ahead. Set a single, minor item that you will ask for immediately after the agreement. The format for the question is critical:

• Cock your head.

• Smile.

• Say their name first (this is a must!!).

• Ask for the item you want.

• Shut up and wait for them to respond.

"WHAT IF" SCENARIOS

Here is some practical guidance on how to handle specific situations regarding compensation negotiations:

WHAT IF THE COMPANY REQUESTS PAST OR DESIRED SALARY?

Never include a salary history on your resume. You may want to indicate in your cover letter that you have been compensated competitively or at the industry standard. When asked for desired salary, indicate that you are negotiable. The same goes for the employment application.

Where it is requested that you give the beginning and last salary for each position held, put a line in the box on the application indicating that you have read the item and have chosen not to provide the information. If you're not comfortable and believe you must fill in this space, give only the most recent salary information. There is no need to go past the last 7 years.

If you state, "will discuss at interview," you've locked yourself in. The object is to avoid this topic until you've been offered the job.

WHAT IF THE INTERVIEWER ASKS WHAT YOUR SALARY REQUIREMENTS ARE BEFORE THE JOB IS OFFERED TO YOU?

Do not give the interviewer your salary requirements! Remember, the first one to quote the salary loses. If you're hired, you should expect no more than what you've indicated. More likely, though, it will screen you out of contention on the spot. In some cases, this question could come from a human resources staff member who may not have the decision making ability, but they surely will pass the information along to the hiring management. Possible responses include:

• "Am I being offered the job -at this time?"

• "Before I am able to discuss salary, I need to review the entire compensation package."

WHAT IF THE INTERVIEWER ASKS FOR YOUR SALARY REQUIREMENTS AND HAS OFFERED YOU THE JOB WITHOUT DISCUSSING SALARY?

Do not give a figure, but instead ask for the entire package along with 24 to 48 hours for your review. Then:

• You might consider asking what the salary range is at the time you receive the package information ... but remember to flinch!

• Certainly develop a list of questions about the package as you review it later.

• Remember to schedule a follow-up meeting to negotiate the salary and compensation package.

AFTER YOU HAVE REVIEWED THE PACKAGE AND COMPARED IT TO YOUR PRIORITY MATRIX:

• Ask questions, clarify.

• Settle on small items first, building consensus.

• Remember to flinch when offered a salary.

• Know when to say "no" (your walk away point).

• Use other gambits as appropriate.