Compensation: Negotiate beyond money

Compensation: Negotiate beyond money

Question

I recently decided to leave a Fortune 100 company after nearly seven years. I accepted a generous severance package and have just been offered a good job at a small but growing company. I don’t think this company can match my salary demands so I would like your advice on compensation — how to negotiate professionally with them. Thanks.

Nick’s Reply

compensation negotiateJob candidates can flub negotiations if they fail to recognize that there are two components to compensation. There’s money, and there’s everything else. If you ignore that dichotomy and focus primarily on the money, you miss the point of compensation and you might forego a job you really want. Of course, if salary is the key for you, then much of this advice won’t be helpful. But if you’re open to alternatives to salary alone, read on.

What is compensation?

Compensation is not necessarily just money. An employer compensates, or “counterbalances or makes amends for” actions you have taken (that is, work you have done) for the employer’s benefit. Viewed this way, compensation might have little or nothing to do with paying you money.

You might think I’m batty, but if you’re forced to negotiate with an employer who can’t meet your salary requirements, suddenly the idea of negotiating beyond money gets interesting. Let’s consider what compensation really means.

What is compensation for?

You devote time, effort, brain power, and perhaps muscle to do a job. These resources are all limited. You deplete them from your life as you deliver them to your employer.

For example, you take time away from your family so you can do the job. Who takes care of your kids? Who grows the potatoes for your dinner? Where do you find time to build a shack to shelter your family from the cold?

If you’re going to tend the job your employer needs done, who will take care of your needs? Simple: your employer. A company must compensate, or counterbalance, for what it takes away from your life — or you will not be available to do the job you’re hired for.

What kinds of compensation are there?

An employer could provide you with housing. (Coal mines used to build entire towns to house their workers. We won’t get into how this system was often abused.) Or, it could give you food. (Restaurants often feed their workers.) In recent times, companies have provided on-site day care for children, or have allowed employees to bring pets to work. If your mortgage, meals, and child care were covered, salary might not be the only salient component of your compensation. You might instead focus on negotiating for a house rather than a shack; for education in addition to child care; and for steak rather than potatoes for your kids.

Did you negotiate for any of those things the last time you entertained a job offer? Maybe you should have, especially when the employer couldn’t cough up the cash you wanted. (See How I negotiate compensation.)

Of course, the list of potential forms of compensation is virtually endless and depends on the company and on you. The challenge is to explore the best, most reasonable alternatives together.

Compensation: Negotiate beyond money

Now, some of these examples are admittedly extreme. But when a company is strapped for cash, should you hang your head and walk away? For better compensation, negotiate beyond money. The smart job hunter knows to shift the negotiation to non-cash, non-salary forms of compensation. You can suggest acceptable alternatives and help the company identify ways to “make amends for” its inability to compensate you in cash. To do this, you must be able to express your needs in terms that can get them satisfied.

Cash futures. If a company can’t match your salary requirements, but you still want the job, don’t fight it. Instead, put other compensation options on the table.

These might include “cash futures”: company stock, an early review with a guaranteed raise, an incentive plan based on agreed-upon performance criteria, guaranteed severance upon termination, elimination of a non-compete clause, or a retention bonus payable once you’ve been on the job for one year.

Salary alternatives. Then there are indirect benefits, on which a company gets a discount (think tax write-off, too), but which deliver value to the employee: computer equipment and other technology to use at home, extended paid vacation, a transportation reimbursement, an expense allowance, child care benefits, a paid cell phone, education benefits, and tax advice services or even payment of taxes (not uncommon for executives).

Priceless time. There’s also quality-of-life compensation: flex time, sabbatical leave, unpaid time off and, nowadays, the freedom to work from home. Most people crave more control over their schedules. You won’t get paid for those summer Fridays off, but if a company can’t afford a full week’s work anyway, you still have a job to go back to on Monday.

Money is great because it’s fungible. It’s an almost universal medium of exchange. It gives us the freedom to buy what we need. But when cash is tight, there’s also freedom in knowing how to negotiate beyond money to get compensated for our work in other ways. You must be able to discuss alternatives, because creative compensation terms might yield a job where there was none.

I’d never suggest taking a job that doesn’t pay well enough, unless maybe if you’re desperate. To be a really effective negotiator, you must be prepared to walk away from any deal that’s not good enough. But before you walk away from a good job with a good employer that “can’t afford you,” try to boost the compensation — negotiate beyond money.

Have you ever foregone higher salary for something else important to you? Have you successfully negotiated beyond money? What are the top three forms of compensation for you? What’s the most unusual form of compensation you’ve received for your work?

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2 weeks vacation time? Are you kidding?

2 weeks vacation time? Are you kidding?

Question

I’m one of those people who’s been waiting all year to quit my job and just did it. Your advice about negotiating salary (explain your value) worked great! But a careful reading of the offer and benefits (thanks again) revealed I’d get only two weeks’ vacation time! I’d be walking away from five weeks at my old job. Do I really have to give up my hard-earned vacation?

Nick’s Reply

vacation timeThis is the perfect time to negotiate assertively for what you want because employers are dying for good talent. If you’re really good at your work, you have excellent negotiating leverage in the current economy and labor market. I’m glad to hear you got a good salary offer. Now let’s work on that vacation time!

Many companies want a new hire to start earning vacation time all over again — but that doesn’t make it a done deal. If you want the vacation time you deserve, you must negotiate to get it.

I have never understood why companies claim vacation time isn’t negotiable. Their position is, “That’s the way we’ve always done it. It’s the policy.” What a company means is that it won’t be able to keep a lid on vacation policy if it negotiates special deals with new hires. But that doesn’t make sense. Just as some people are worth more salary, some are worth more vacation time.

Salary history & vacation time history

Employers demand to know your last salary because they want to base their offer on it. “The only fair way to structure an offer is to look at what you’re already earning,” they explain. So if a job offer is based on your last salary, why shouldn’t your vacation time be based on the amount of vacation time you received at your last job, too? When a company asks for your salary history, why doesn’t it ask for your vacation history? Both reflect your industry seniority and your value.

So what does it mean when a company offers you a job with a paltry two weeks of vacation, and you’ve been taking four or five weeks off at your old company? Okay, let’s get to the advice part of this column. But please remember: this is advice, not a guaranteed way to get five weeks of vacation.

Time off is compensation, not a benefit

The reason you can negotiate salary but not vacation time at most companies is because salary is part of your compensation. Vacation time is not. Vacation time is considered a benefit. Salary can vary, but benefits are fixed. (Or so companies would like you to believe.)

But there is no rhyme or reason to this distinction.

In my opinion, time off is compensation just like cash is because “time is money.” You get compensated for your work with money, and you get compensated for your work with time off. Your expertise, experience and seniority make you worth higher compensation because you probably do more and better work than most junior employees. So it makes sense to give you more time off. Your work still gets done.

I think vacation benefits are negotiable if you have the leverage of expertise and experience (or “seniority”), and when the company isn’t policy-bound.

Negotiate all compensation

My advice: Wait until the offer has been made, then diplomatically and matter-of-factly explain that just as you wouldn’t take a lower salary, you wouldn’t accept less vacation time for your level of seniority in the industry.

Of course, you must decide in advance whether vacation is a deal-breaker for you. In fact, you could test an employer by bringing this up before you agree to do an interview — make vacation a condition, just like your desired salary range. Some companies will balk at this. The more they need you, the more likely they are to negotiate. When employers aren’t flexible, you might want to take an alternative approach.

Tips from an HR insider

To get a well-rounded perspective on this issue, I turned to an expert I respect. Marilyn Zatkin is a veteran HR manager and consultant in Silicon Valley. Her perspective on both the policy and practical sides of this question is solid. She reveals that some companies will be flexible because they understand that vacation is a form of compensation. They also don’t want to lose a great candidate! Here’s what she has to say about this:

“Most companies do not like to alter their vacation policy and create internal equity issues. There are alternatives to granting more vacation than policy allows, such as giving the person a sign-on bonus equivalent to the desired vacation amount, and then letting the worker take the extra time off without pay in the first year. A company can also take that ‘extra vacation value’ and include it in the total compensation package. However, they usually try to limit a special deal like this to the first year.”

I’ll point something out: The moment Zatkin (or any HR manager) concedes that there is a dollar value to vacation time (after all, she’s offering a cash bonus to pay you back for less time off), we have established that vacation time is, indeed, part of compensation. The only thing left to negotiate is how much. I don’t see why that sign-on bonus or “extra compensation” can’t be permanent. (See also Can’t negotiate a higher salary? Ask for more money.)

This may not solve your long-term vacation problem, but it suggests to me that companies are indeed aware there’s an issue they have to face. So I say, negotiate and be as firm about vacation time as you are about salary.

Is time off a benefit, or part of compensation? Have you sacrificed vacation time when changing employers? If not, how did you negotiate it? Do you think you’d have more negotiating leverage nowadays if you changed employers?

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Salary Negotiation: How much to ask for

Salary Negotiation: How much to ask for

Question

salary negotiationWe’re told that whoever mentions a number first in a salary negotiation loses. When employers also demand to know our current salary, that just makes matters worse. So what are we supposed to do in a job interview when this comes up? How do we know how much to ask for and when to do it?

Nick’s Reply

This question came up in a Zoom workshop I did today for about 50 job seekers in a professional group in New Jersey. It triggered a wild discussion. It was great! And I think it’s worth having our own discussion about this important topic here.

I’ll start!

The silly salary negotiation myth

The myth that “whoever says a number first in a salary negotiation loses” has become penny-ante advice served by self-anointed negotiation experts and career coaches who feel safe telling you “it’s best not to say or do anything!”

That’s bunk. Researchers in behavioral economics give us clear guidance from their work on the anchor effect. To wit:

“A well-known cognitive bias in negotiation, anchoring is the tendency to give too much weight to the first number put on the table and then inadequately adjust from that starting point…”

What this essentially tells us is that whoever puts the first number out there can effectively control the final number agreed upon. That Harvard Law School reference isn’t much fun to read. If you’re serious about negotiating, please study William Poundstone’s excellent (and very readable) Priceless: The Myth of Fair Value (and How to Take Advantage of It).

Then read Predictably Irrational by the brilliant behavioral economist Dan Ariely. Don’t fall victim to old wives’ (or husbands’) tales about who goes first. Who wins is who knows what they want and takes control of the negotiation immediately.

Why salary is called compensation

In the rush to negotiate the best deal possible, job hunters every day forget what they’re negotiating for. You’re not negotiating money. You’re negotiating the price of freedom to do the job without distraction.

The money and benefits a company bestows on you in exchange for your services should completely free you from worry about the demands of your personal life so that you can devote your time to, and focus your energy on, the work the employer needs you to do.

Literally speaking, a good job offer should “relieve, equalize or neutralize… pressure or stress” associated with any aspect of your life that might distract you from the job. That’s what compensation means.

It matters that you’re earning what you’re worth and that you’re earning all you can. But, a good job offer starts with a company taking care of your needs so you can take care of its needs. It ensures that the employer has a healthy worker. That’s the foundation of a good deal. And that’s why it’s called compensation. (A living wage is fundamental to commerce. It’s why I take the position that a healthy national minimum wage is so important.)

How to decide how much you want

So, how much salary, or pay, or compensation do you tell an employer you want?

Once we understand the anchor effect, we want to make our stated desired salary as high as possible — without jeopardizing a job offer altogether, if we can help it. We want to make our number the anchor for negotiating.

It’s important to have an idea of how much money you’re worth when considering a particular job. But, it’s also important to know how much you want. This is a very personal decision.

Few things are more painful than accepting an offer only to realize that you were wrong about what you really wanted. I have a simple method to help a job candidate understand what they want with regard to pay.

Consider the specific job at hand and ask yourself three questions, so that you’ll have three ascending figures to work with:

  1. What is the least amount of money I would accept to take this job?
  2. What kind of an offer would put a smile on my face and make me happy to take the job?
  3. How much money would make me jump up and down with glee, and make me want to start work tomorrow? (Caution: this last figure must be reasonable.)

Don’t take the job unless you can negotiate the offer to somewhere between (2) and (3). If an offer isn’t going to at least make you happy (2), it’s not worth accepting. If it doesn’t come close to making you jump with glee (3), the job probably won’t, either.

Express this number as a range so you’ll have wiggle room. You might even note to the employer that if you learn during your interviews that the actual job turns out to be materially more involved or demanding than what they expressed, then your range may change, too.

Finally, ask them whether that’s in their range, and whether they want to proceed with serious discussions about working together —- that is, a complete job interview. It’s actually best to point out that since you’ve disclosed what you want, you’d like to know what their salary range is for the job. But most employers won’t tell you.

Who wears the negotiating pants?

Employers could save themselves a lot of time and trouble by setting a realistic anchor when they post a job. They should post the salary range with it! Why is it a secret anyway? In my experience, most of them are surprisingly naïve. They believe they really might get a bargain because they’re such good negotiators! They’d do better to invest time with candidates that know the salary range in advance. That’s right: A smart employer will set the anchor point first!

Now for the put-on-your-big-boy-or-girl-pants. Two things.

First, if you’re afraid that naming a salary range will put you at risk of getting a lower offer than the employer is willing to pay, let me put your mind at ease. It is highly unlikely that the employer will hear your range and smirk to themselves, “Wow! What a fool! We were going to offer double that! We’ll save a ton!”

It doesn’t happen. At worst you might leave a few dollars on the table. Chump change compared to the salary. If  you want to wear the pants in a negotiation, take control of the terms immediately.

Second, the far greater risk is letting them set the anchor. That is, you state no range at all and then the employer makes a low offer after you have invested hours and hours talking with them. Now you’re forced to negotiate from a lower number.

Salary Negotiation: Know what you want and say it

If you don’t establish that anchor before the interviews start, don’t be surprised when the employer sets the anchor with the job offer. Oh, you can negotiate. But unless you are a truly stellar candidate, the final offer is not likely to be much higher.

Know what you want. Don’t be afraid to set the anchor. And be ready to hitch up your pants and walk away if the offer is not what you want — or more.

How do you negotiate compensation? At what point do you make clear what you want? What makes you walk away from an interview or a job offer? Has anyone ever told you it’s crass or unprofessional to bring money up “too soon?” Has an employer ever told you that “your concern about money reveals that you care more about money than about the job and our company?”

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Can employer clawback my $6,000 bonus?

Can employer clawback my $6,000 bonus?

Question

clawbackThe company I worked for paid me quarterly bonuses for performance but the bonuses are based on the final performance of the entire team for the whole year. The final calculation determines whether you get even more bonus or give some back. The calculation was done after I left. I thought that I would be due more bonus but they claim I owe a refund. The bonus is $6,000; not a lot for them, but for me it is. HR sent a letter asking for it. I reviewed the policy. There is no clawback clause and nothing was signed. I don’t know of any other case where they took back bonus money from an employee who left. What do you think?

Nick’s Reply

I’m not a lawyer and cannot give you legal advice, so I advise that you talk with an attorney. It will likely be worth the few hundred bucks it will cost. All I will offer are some observations and opinions.

Avoid clawbacks to begin with

I don’t like any kind of compensation or bonus plan with clawback provisions. A clawback is when an employer pays you money, then wants some or all of it back. Use of the word “claw” says it all.

Clawbacks are contractual provisions. That means you agreed to it, usually in writing. Unless it’s an executive position, I advise people never to sign or agree to such deals. A clawback is usually a penalty, and that’s no way to establish a good working relationship. Because most people don’t have employment contracts to begin with, and your company already paid you the money, I think they are at the disadvantage — but it depends on the details.

What was the clawback agreement?

I also think there is an important distinction between the company re-balancing the bonus at the end of each year as you described, and paying a bonus and attempting to claw it back after an employee is long gone. The time to establish such a claim is in the exit meeting. (I discuss that further below.)

Review what you and the company agreed to upon hire and upon separation from employment.

  • Did you sign anything agreeing to this as part of your compensation and bonus plan?
  • Did the company notify you there would be a clawback on your departure?
  • Upon your departure did you sign any exit documents at all that might apply to this? Go back and read them carefully.
  • Now that you’re gone, how are they going to come after you if you don’t pay the bonus back?
  • Would they take legal action to collect $6,000? How much would that cost them?
  • What happens if you just ignore the demand and let them go suck rocks?

If you agreed to this in advance, I’m not suggesting that you stiff them just because you might get away with it. But it seems when you departed you honestly believed the slate was clean and your account zeroed out, because no one told you otherwise.

Parting terms

To avoid this and other problems when exiting a company, see Parting Company | How to leave your job. This PDF book includes a bonus mp3.
As I said earlier, the time for an employer to establish a clawback claim is in the exit meeting. I think the reasonable expectation is that all liabilities (on both sides) are settled upon your exit. A good HR department will make the terms of your parting clear, usually in writing, and ask you to confirm your understanding with your signature.

HR will reconcile all accounts just before an employee leaves, not after the fact. For example, they’ll take back the computer, keys, credit cards and other assets they issued to you. And they’ll give you a statement about what they owe you (e.g., an outstanding paycheck or expense reimbursement) and what you owe them.

What claim does the company have on that bonus now that you’re gone? That’s what a lawyer will help you determine based on the facts of your unique situation.

These are my observations and opinions based on what I’ve seen over many years. What you do is up to you, of course. A good lawyer can explain your legal options once you share all the details.

Have you ever lost money to a clawback provision? What happened? Does your employment include a clawback? What’s it for? What could an employer give you that would be worth you signing a clawback agreement? Are clawbacks even fair, or a smart tool for anybody?

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Negotiate salary but leave something on the table

Negotiate salary but leave something on the table

A reader wants to negotiate salary without being greedy, in the December 8, 2020 Ask The Headhunter Newsletter.

Question

negotiate salaryEmployers never make their best offer. You have to negotiate for a few rounds. I’ve read books and articles that give you tactics to improve an offer. I definitely want to get the most money I can, but I don’t want to press so hard that I talk them out of an offer altogether or come off like a jerk. What do you advise?

Nick’s Reply

Negotiate salary to get all you can, of course. But don’t be greedy.

Too often, people get battered by stingy employers in salary negotiations. This creates a climate in which job candidates feel there’s no choice but to turn up the heat to get every buck they can. I expect we’ll hear some ire about my advice: When you negotiate compensation, leave something on the table. Be assertive, but don’t be greedy.

I’d like to caution you that some employers do make their best offer off the bat. If you have reason to believe otherwise, go for it. But only a naïve job seeker automatically asks for more. Take stock of the specific employer. Use your judgment.

So, what am I talking about?

Leave something on the table

In America we are taught to eat heartily but not to take the last portion from the serving plate, out of respect for the generosity of our host. This is a good lesson in salary negotiations, too. Get all you need, but leave something on the table as a show of respect to your new employer.

Does this mean you should decline more money? Of course not. But remember that a job offer can have several components. Smart job hunters know how to negotiate for more than salary.

Negotiate more than salary

For example, a cornucopia of compensation components may be on the table: salary, bonus, performance incentives, relocation costs, vacation, company stock, job title, first review, tools to be used on the job, and so on. The more components you negotiate, the more you might be able to win — and the more opportunity you have to make some concessions as a show of respect and reciprocation.

For more about the many levers you can pull to negotiate compensation, check out Fearless Job Hunting, Book 9: Be The Master of Job Offers.

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A negotiation should never be adversarial and it should never include only demands. A good negotiation is a friendly acknowledgment and frank discussion of each party’s needs and limits.

For example, a candidate may not be able to accept less than a certain base salary because of fixed family expenses. A company may not be able to pay a higher salary due to budgetary constraints. As a solution to these issues, the candidate might forgo a higher salary if the company agrees to a guaranteed bonus to be paid every six months for two years until the new employee has a chance to get promoted and earn raises. (Part of the secret behind this is that bonuses are not fixed costs on the employer’s ledger, like salaries are.) The only way to get creative is to talk it through together.

Respect

Respect is paramount in a successful negotiation. (If you feel an employer is not negotiating in good faith, then nothing you consent to is going to make this a good place to work! Walk away.) That’s why such discussions are handled better on the phone than in e-mail, and better in person than on the phone. That is, make it as personal as circumstances permit — but face to face is best.

If both parties are to understand one another, a job interview requires a personal, nuanced exchange. So does negotiating the terms of employment. This promotes personal responsibility and a higher regard for one another’s needs. And that’s where concessions are important.

Negotiate a relationship

When you’re dealing with a good employer that demonstrates a high regard for you and your needs, don’t automatically apply tactics to get every dollar you think you can. Consider the long-term value of demonstrating your ability to let the other guy win, too. The end of your negotiations marks the beginning of a business relationship. What do you want that to look and feel like to you and to your new employer?

Take what you need, but leave something on the table as a sign of respect for the other party’s willingness to negotiate with you. If the employer is worth working for, this can pay off after you start your job, because you will be regarded as a worker who is concerned not only for their own well-being, but also for the employer’s.

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Is it worth a few bucks to signal your belief in a win-win deal? Did you ever fight for every last dollar in a salary negotiation only to regret it? What happened? On the other hand, did you win big and still make everybody happy? Tell us about it!

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Am I underpaid?

Am I underpaid?

A reader may be underpaid but doesn’t really know. Let’s explore how to find out in the August 25, 2020 Ask The Headhunter Newsletter.

Question

underpaidI want to change jobs because I suspect I’m underpaid. I’ve been looking at Glassdoor and other salary surveys. Are they accurate? How can I find out what salary I should expect from a new job, so that I can figure out if I am currently underpaid, as I contend, or if I should stop my whining?

Nick’s Reply

We live and work in a quasi-capitalist environment. For the most part, the market determines value. So put yourself on the block and see what kinds of bids you get. Seriously.

Do surveys say you’re underpaid?

Salary surveys are usually either out of date, or they are naturally biased toward the mean. That is, they survey people who want to be surveyed and they emphasize the value of the average worker. They’re not good at explaining why people on the leading edge of the curve are paid what they are paid. (See Glassdoor Salary Data: Worse than useless.)

Trying to look up a job title that fits you in a salary survey is like trying to find a job ad that matches you exactly. You’re not likely to learn much about your individual worth from either.

Surveys don’t predict individual value

You don’t say what work you do or what industry you’re in, but you seem to suggest salaries in your field are increasing while yours is not. Does it matter? Does it mean you will get a bigger raise or a bump in salary to change jobs? Asking me what you’re worth is as good as consulting the salary oracles — not very! While a survey may be useful in understanding trends, it does not predict salary for any individual. That means you.

Short of putting yourself on the block, I think the next best way to get an idea of your value in the market is to talk to real, live people in your field.

Ask your peers

Get the information you seek straight from the horse’s mouth. Meet these people through professional associations, at industry meetings, through industry publications and at training courses outside your company — and, of course, in relevant online professional communities. In other words, discuss compensation issues directly with people who are not under your company’s control so you can form a better picture of what your compensation could look like.

(I am not suggesting blasting messages to 50 people with your job title on LinkedIn and asking how much they earn. I prefer venues where you’ll have to earn your reputation and credentials before you’ll get any really useful information.)

Of course, some people won’t discuss their own salaries, but I find in general that people will talk about compensation in their field and share what they know about it. You’re far better off talking with others who do the kind of work you do simply because such dialogue is far richer than reviewing cold numbers from a survey.

If you’re not participating in your professional community this way, you’re making a big mistake. These are the folks who can help you figure out the value question, and perhaps help you find your next job. Don’t whine. Go mix it up with your peers!

This is a good exercise for all of us. We can’t ask questions of a data point on a salary survey. But we can ask one another.

How does anyone figure out what they’re worth? How do you figure it out? Does it change the way you handle your career? What advice would you give this reader about whether they’re underpaid?

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Is hiring a cost or investment? How employers blow it

Is hiring a cost or investment? How employers blow it

In the March 31, 2020 Ask The Headhunter Newsletter a reader says hiring and job offers should not be based on your tax returns.

Question

hiringI was once asked for my tax returns after a job interview, evidently to determine a job offer. I thought you priced a salary to a job — not what you might have to pay a candidate to hire them. I declined the job because the request displayed the kind of people I would be working for. They were forced to sell the company shortly thereafter. What’s your opinion on how to set a salary and job offer?

Nick’s Reply

I don’t believe in setting compensation based strictly on the job. That’s shortsighted because it assumes a job cannot be done in a way that increases its value to the business. I think sound job offers are based on the value of the job at that company, and on the added value the best candidate brings to the job. In other words, if it recruits effectively, a company spends more than it planned because it finds a hire who can do more than it expected. HR managers will want to hang me for that.

Consider the example of a job posted to write computer code using computer language X. Hiring a programmer who knows language X would get the job done just fine and within the budgeted salary. A programmer who is facile in languages X and Y (languages unexpected and not required by the job description) shows it would take less code and time to produce a more powerful program in language Y. (Software developers don’t hang me! This is an over-simplification.) But this programmer expects a salary 25% higher than the budget for the position. Does the employer calculate the benefits of investing more in that programmer?

Hiring: How are job offers determined?

A smart company has to start by (A) pricing a salary to a job. But that means management has a realistic idea of the value of the job. That is, how does it contribute to the bottom line? I don’t know many companies or managers that could explain how any particular job contributes to profits. Of course, it’s a game of estimating, but I think few even try. They focus strictly on the overhead cost of filling the job.

Once that number is set, I think a company needs to (B) look at the market for availability of candidates, and adjust how much to pay accordingly. Of course, that’s an estimate, too. (I do not advocate relying on salary surveys.) We must assume employers are rational and that they calculate expected profits before making hiring decisions, right? Or, how could they defend their business model and be successful? (Yes, those are loaded questions and snipes.)

Job offers test the employer

As an employer, you find out how well you understand your business when you actually make job offers. Your job offers are a test. If you get turned down by your best candidates, then your (B) estimates are probably incorrect. You’ve failed.

But it’s also possible your (A) number is off — and I think that means you have to reassess your business assumptions: Is that job really valid? That is, does it really feed the bottom line, or is it actually busywork? Put another way, can your company afford to hire someone to do the job? The accuracy of your job offers — Do the best candidates accept them? — tests the viability of your business model.

If you can’t afford to hire the best workers, there may be something wrong with your business.

Learning from candidates

I think the fun starts when you talk with candidates who can upend your (A) estimate. That is, they show you they can do the job in a way that increases profitability beyond your expectations. This is where the interview process really pays off if you do it properly. You’re learning about the candidate, but you’re also learning from the very best candidates, who will show you how to tweak the job and the work to cover higher compensation and to produce more profit.

Do your interview protocols identify such candidates? Does your compensation policy enable you to hire them?

Perhaps a candidate has unexpected skills and expertise that would boost creativity and efficiency in that job, thereby increasing the value of the hire. (That means you’re recruiting well!) Isn’t that the “dream candidate” every company would love to find? Isn’t that who HR is really advertising for when the job posting says, “We’re looking for stars who think out of the box!”

Is hiring a cost or an investment?

I find this is where most companies blow it — especially if their HR department is mired in policies that interfere with re-pricing a job to a higher compensation level. They absolutely will not consider paying more to get more.

Rather than change the parameters of the job and the compensation to suit an exceptional candidate, they reject the candidate “because they cost too much.” (Age discrimination, anyone?) But that exceptional candidate is not a cost. They are a potential investment that can pay off handsomely — if the company steps up to pay more to get more. (Of course, management must also know how to properly exploit exceptional skills.) This is an incredibly important part of a company’s learning curve, and I think too many companies don’t recruit to find that kind of value. They’re potentially blowing an opportunity to boost their return on investment.

So much for “We want to hire people who are off the performance curve!” They’re also off the normal compensation curve. They’re pricier!

How companies blow it

It’s one thing when a company prices a job inaccurately. That is, when it gets its estimate (A) wrong. But I think a company really blows it when it inaccurately estimates (B) the value that’s available in the candidate market — and refuses to pay more to get more.

The problem is HR policies that make the very best candidates walk away. For example, “Our salary range is fixed. We cannot consider a higher salary.” Or, “We can’t proceed until you give us your salary history [so we can preemptively destroy your ability to negotiate your new salary].”

Or, as in your case, “We can’t proceed without your tax returns.”

These are all silly practices that drive away the very best candidates. (See Your Approach to Hiring Is All Wrong.) Exceptional hires return the investment required to get them, and then some. But again, I think the key is that management must know how to measure the value of both a job and the candidate who is going to do it.

Perhaps more to the point, management must understand the basic idea that the ROI of a job can be enhanced by investing more in a hire who can do it better.

Regarding the company that was sold shortly after you turned it down: It seems you heard the message loud and clear. “We rely on some other company’s judgment of your value (reflected in your tax returns). We have no competitive edge because we have no idea how to judge your value to our business! Run!”

What are you worth to an employer? How does a smart company figure it out? Here’s my challenge to you, dear readers: If you’re dealing with an employer that can’t figure it out on their own, is it worth making the effort yourself to explain it to them? (That is, to show them why you’re worth more?) How would you do that?

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3 reasons to say NO to a job offer

3 reasons to say NO to a job offer

In the December 3, 2019 Ask The Headhunter Newsletter a reader gets a job offer that may deserve a NO.

Question

job offerAfter months of looking for a job, I finally got an offer using your methods. (Thanks! The interviewer said I was the best candidate she’s talked to in a long time.) But there’s a small matter that concerns me, and it’s not the money. The salary is good. But neither the interviewer nor the HR person would tell me who my boss will be. HR just said I’d be assigned to the manager who needed my skills the most. Then she said they need my answer by end of day tomorrow. Is this a trap? Should I take the job?

Nick’s Reply

It may not be a trap, but it’s a risk in many ways — and not knowing who your boss will be is certainly not a small matter. Your story raises a bigger question. When should you say NO to a job offer?

There are many signals that might turn you away. I won’t tell anyone who needs to pay the rent or put food on the table to turn down a job offer. Take it if you really must, but consider the risks.

Here are three reasons to say NO to a job offer.

1. You don’t meet the manager you’ll be reporting to

You have no idea what you’re getting into if you don’t meet the manager. If the HR department (or a committee) does the hiring, you won’t be able to assess whether you and your new boss are compatible.

In Fearless Job Hunting, Book 5: Get The Right Employer’s Attention, I show how to conduct due diligence before and during the interview, and before accepting a job offer. These are just a few tips to help keep you out of trouble.

In the interview, don’t miss these points:

  • What must the company do to meet its goals? Is your job important in meeting these objectives? How?
  • Check out the tools that will be at your disposal. If they’re not part of the deal today, don’t expect you’ll get what you need later.
  • Who, in other departments, will affect your ability to do your job successfully? Meet them. Look for facilitators and debilitators—people that will help and hinder your performance.

From “Is this a Mickey Mouse operation?”, pp. 13-15

This cuts both ways. If the boss doesn’t meet you, it may turn out you’re not as qualified for the position as HR suggested. Your new job might be short-lived.

If the company won’t arrange a one-on-one meeting with the boss, it could mean the boss will shortly be gone. Where does that leave you? Ask to meet your future boss. Reconsider the position if the employer declines the meeting.

2. The job offer is low but you’re promised a raise “soon”

This is how companies seduce reluctant job applicants: with a promise of a raise “soon.” Will the company put the date of the future raise in writing along with the amount? Will it guarantee in writing a performance review in so many months? You have every reason to doubt the good intentions of the employer if it will do neither.

Compensation is what the written job offer says it is. Do not count promises as part of the job offer. Get it in writing.

(There’s another promise to watch out for: stock options. See What are stock options worth in a job offer?)

3. The details of the job are not made clear

It’s an old story: A person takes the job based on the description in the job posting, only to find that’s not the job. The actual work is something else. If all you get are vague answers when you ask about details, you may be accepting a broken job. The company may want you only for a short-term project or — even worse — “to fill head count.”

Ask the employer to list the main tasks you will be doing, and ask for a written definition of what exactly is expected of you after three, six and 12 months on the job. Or consider walking away.

Is the job offer really right for you?

These are just three of many reasons to say NO to a job offer. (See 13 lies employers tell about job offers.)

It’s important to pause when you receive an offer. Don’t get lost in the thrill of success. Take time to consider all the terms of the offer, the company that made it, the manager you’d be working for, the work you’d be doing, and — of course — the compensation. Like the proverbial car shopper, you must be ready to walk away from a deal that’s not really right for you.

Have you ever turned down a job offer? Why? What other reasons can you think of for saying NO? Have you ever accepted a job only to realize that the signs were clear that you should have said NO?

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Do you want a job, or higher pay?

Do you want a job, or higher pay?

pay

 

No sign of a recession, but wage growth is flatlining.

Source: The New York Times

pay

The first story: Jobs are plentiful and unemployment low. Most everyone who wants a job can find one…The second story: Wage growth is flatlining. For most of the last few years, pay to American workers has been rising at steadily increasing rates…But that rate of increase now seems to have leveled off or decreased. The year-over-year rate of growth in wages peaked at 3.4 percent in February and has receded to 3 percent in October, according to the latest numbers…

So most people can find a job and more people are working, but employers are not having to increase compensation much to recruit and retain people. This isn’t what economic models suggest should happen.

 

Nick’s take

Do you want a job, or higher pay? Because the U.S. Department of Labor says you can’t have both. News articles focus on big growth in new jobs but then can’t explain essentially flat pay in a market with high demand for labor. Meanwhile, companies are spending less and pocketing more: “compensation in private industry rose 3 percent in 2018, and only 2.7 percent in the 12 months ended in September.” Nothing’s changed. (See B.S. on the jobs numbers.)

What’s your take?

  • Are you making more money?
  • How much does your CEO make as a ratio compared to you?
  • Why don’t the Department of Labor numbers make sense?
  • When will job applicants wise up?

 

 

 

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Job Market Madness: What do you say?

In the December 18, 2018 Ask The Headhunter Newsletter we take a look at the madness of the 2018 job market — 3 issues that made me crazy all year long. What do you say about these topics?

job marketNick’s Question

For my last column of 2018, I’m turning the tables and asking you for answers. Throughout the year, news about the job market set my head spinning again and again. (It’s still spinning.) I saved some of the juicier stories so we could review them now, as the year winds down.

Here are three controversial topics and my take. What do you say about them?

What do you say?

It’s become a perennial issue in the job market: the constant, wild claims by employers that there’s a talent shortage because today’s workers lack the right skills. (See News Flash! HR Causes Talent Shortage!) My take on this is that employers are full of crap, and my take gets credence from Wharton labor researcher Peter Cappelli.

Training: More skills, not more pay

Three years ago I wrote about The Training Gap: How employers lose their competitive edge. I cited Cappelli’s research, which strongly suggests that while companies complain today’s workforce lacks up-to-date skills, employers themselves contribute to the problem. Cappelli notes that training and employee development budgets were slashed long ago:

“American companies don’t seem to do training anymore…the amount of training that the average new hire gets in the first year or so could be measured in hours and counted on the fingers of one hand.”

Recently, Bloomberg Businessweek (Companies give worker training another try) reported that:

“Fifty-five percent of U.S. employers surveyed by ManpowerGroup this year said they were providing additional training to cope with talent shortages.”

Sounds great, doesn’t it? But Cappelli wasn’t — and still isn’t — wrong. Cappelli suggested that if employers really need higher skill levels, you’d think they’d also be willing to pay for them in today’s highly competitive hiring market — right?

Well, they’re not. Cappelli claims — and I agree — that the “talent shortage” employers cry crocodile tears over is at least in part due to their failure to pay competitive wages and salaries. The same Manpower survey agrees:

“Only 26 percent [of employers surveyed] said they were offering higher salaries.”

What do you say? Are you seeing employers deliver more training and education to workers? Are employers making higher job offers — and paying higher salaries — to get and keep workers who have the “necessary skills?” What responsibility do companies have to educate their employees and new hires?

Tell Us Your Salary!

You already know my rule: Never, ever disclose your salary history to an employer. But the “news” is full of advice that hurts job seekers.

If you cough up your current or past salary information, it will be used to effectively cap any job offer. You’d be helping an employer negotiate against your best interests!

In a recent advice column, The New York Times explained How to Be an Ace Salary Negotiator (Even if You Hate Conflict). There’s some good advice in that article. But career pundits always seem to sell out their readers when employers and HR managers turn up the pressure.

Columnist A.C. Shilton says employers expect you to negotiate, so you shouldn’t be afraid to, as long as you view the negotiation as a discussion rather than a confrontation. I think she’s right:

“There is no obligation — legal or otherwise — to disclose this information, so your first move should be to parry this question to see if your potential employer will throw out the first number.”

But then Shilton chokes right where most job applicants choke:

“Still, read the room: Sometimes you’ll just have to cough it up.”

Shilton then cites an expert from the American Association of University Women who recommends double-talk rather than a forthright “No dice!” when the personnel jockey “in the room” demands your salary information. Here’s the script the AAUW expert says you should recite:

“This position is not the same as my last job, I’d like to discuss what my responsibilities would be here and then determine a fair salary for that job.”

Practice giving this response until it feels like second nature, says Shilton. In other words, force yourself to talk to the hand. Cave in.

But the estimable New York Times isn’t the only advisor telling you to take the salary sucker punch in a job interview. On CNBC.com, ace business expert Suzy Welch leads job seekers right off the negotiating cliff.

In What to say when a job interviewer asks, “What’s your current salary?” Welch warns that withholding your salary history “is no way to start a relationship.”

Welch says:

“The best way to secure your place at a new company and advance your career is to simply tell the truth.”

Why? Because, says Welch, “the decision to share your salary is worth the risk.” #GimmeABreak.

What do you say? Is your salary history anyone’s business but your own? Should you ever disclose your salary history to an employer? What has your experience taught you? Can you negotiate the best possible deal if you cave?

Men & Women ALL Get Lower Pay

The controversy about equal pay for women met #MeToo in 2018, but the men still don’t get it. (See Don’t blame women for the gender pay gap!)

On September 14 this year, Jeff Stein reported in the Washington Post:

“The gender pay gap has begun narrowing over the last four decades — and women’s earnings are now closer to men’s. But that is not only because women are doing better. The trend is also in part because men are earning less. Earnings for men have fallen in the decade since the recession, and are even below levels for much of the 1970s and 1980s.”

From ‘Not doing better than their fathers’: Men’s earnings have fallen since 1970s, Census Bureau says.


Yes, guys, that means #YouToo. Everyone’s getting screwed. I refer you back to Wharton’s Peter Cappelli, whose analysis of decades of data suggests employers own the “talent shortage” for three reasons.

  • First, they rely on silly HR technology that hinders effective recruiting.
  • Second, employers expect “just in time skills” — they refuse to train anyone.
  • And third, employers refuse to pay market rates to attract and hire the best talent.

All year long I’ve been running into data that fully support Cappelli’s contention that companies’ labor woes are due in large part to low pay — also known as greed.

A column I wrote last summer, B.S. on the jobs numbers euphoria, included a graph produced by Bloomberg based on data from the Bureau of Labor Statistics. BLS reported that spending on compensation between 2009-2018 for everybody is still way down from what companies were spending on compensation before the 2008 bust.

That red line — “Biggest gain of the expansion” — may be the biggest misnomer of the job year. “Pay still hasn’t recovered” would be the more honest tag for the failed compensation recovery.

Stein reported:

“From 1973 to 2017, men’s earnings fell by about $3,200, or about 5 percent, in numbers adjusted for inflation.”

The Census shows that while women’s earnings have “crept upwards,” men’s earnings have actually dropped. The same data set, of course, puts women’s earnings significantly below men’s.

What do you say? Did you know that real pay is actually lower for men, and unfairly low for women? Is it time for #UsToo? Have you ever calculated what’s happened to your “real earnings” since you started working? Why is this happening in a booming economy?

I hope you’ll chime in with your answers and opinions about these three topics that combine to create job market madness!

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This is the last Ask The Headhunter column for 2018. I’m taking a couple of weeks off for the holidays! See you next on January 8, 2019! Here’s wishing you a Merry Christmas and a Happy, Healthy and Prosperous New Year — and all the best for whatever holidays you observe this time of year!

If you’re new to Ask The Headhunter, or just want a refresher on the main ideas we discuss here every week, please check Ask The Headhunter In A Nutshell: The Short Course and The Basics!