What are stock options worth in a job offer?

On November 12, 2018

In the November 13, 2018 Ask The Headhunter Newsletter a reader asks whether to accept stock options as part of a compensation package.

Question

stock optionsI’ve been with the same company for five years, with total 18 years’ experience. I’m considering an attractive offer from a year-old start-up financed by a very respected venture capital group. The offer includes stock options. The idea is that someday they’ll go public and will be hugely successful, or someone will buy the company, and we’ll all become rich (on paper).

My question is, how would I go about putting a value on the stock options offered? Understanding the risk I assume, what should I negotiate for? Any suggestions?

Nick’s Reply

Venture funding for start-ups by respected venture groups is slowly picking up after a lull of several years – and that’s a good sign for the economy. But don’t count any stock options before they hatch.

There are as many subtle variations on evaluating options as there are start-ups. You could do well, or you could wind up very disappointed.

I’ll offer you two simple rules of thumb. There is no finesse in this. It doesn’t even involve calculations; just a blunt point of view that I’ve developed as a headhunter during many years of dealing with people who’ve faced this situation. A very few have profited from options, but most haven’t.

Stock Options: Rule 1

The first rule is that the factors which influence a start-up company’s success or failure are unknown to you at this point, and you have virtually no control over them. More important, to varying degrees we can say the same about the founders of the company and those who are funding it.

  • Thus, any attempt you make to rationally analyze how much start-up stock to hold out for — or to estimate what that stock is really worth today or in the unknown future — is a crapshoot.

Stock Options: Rule 2

Here’s my second rule:

  • All stock options in start-ups are worthless by definition because you cannot put a value on something you cannot sell.

How to think about that job offer

Now for my advice, based on those two rules:

  • Accept the offer only if the work and the compensation package without the options would make you take the job.

How to negotiate the job offer

Negotiate for all the stock options you can get. But beware: A company is not likely to give you more options than it has already decided on. Management has thought about this more than you have, under the guidance of people who put up their cash to start the business. Unless you would be a key employee whose expertise would have a key impact on the company’s chances of success, you probably don’t have much leverage to negotiate options.

Now here’s the most important thing to take away from this discussion:

  • Negotiate harder for salary, bonus, incentives, commissions and allowances, and consider the stock options a lottery ticket.

This is what will keep you truly motivated day in and out. While I understand when a start-up’s founders say they want employees who are truly motivated to “throw in with us and take a risk,” you must decide how much of a risk you can afford to take — and whether you’re willing to give up part of your own market value today (cash compensation) for a chance to hit it big later.

Talk with a lawyer

No matter what they put in your job offer, a startup is a special situation because the risks are different from those in a mature company (even a small one). That’s why you should talk with a lawyer to get your job offer reviewed before you accept it.

These Ask The Headhunter PDF books will help you with the compensation end of a job offer:

Fearless Job Hunting, Book 6: The Interview – Be The Profitable Hire. This works even when discussing salary with your current employer.

Fearless Job Hunting, Book 7: Win The Salary Games (long before you negotiate an offer), especially “The Pool-Man Strategy: How to ask for more money,” pp. 13-15. Sometimes it helps to ask casually.

Fearless Job Hunting, Book 8: Play Hardball With Employers, especially “Due Diligence: Don’t take a job without it,” pp. 23-25. This is a must when considering a job at a start-up, though this section applies to established companies, too.

Fearless Job Hunting, Book 9: Be The Master of Job Offers, especially “Non-Compete: Did I really agree to that?”, pp. 5-7.

This article by my own attorney will highlight some of the issues you should consider: Employment Contracts: Everyone needs promise protection.

What’s your tolerance for risk?

Here is a sobering question to test your tolerance to risk in this situation:

  • If you had a chance to buy into this start-up without working there, would you buy its stock today?

If you wouldn’t invest in this start-up as a bystander, why would you take part of your pay in stock?

No matter how many options you get, if the company strikes it rich, I guarantee you’ll look back and think, “I knew I didn’t get enough options when I took this job!”

If the stock winds up worthless, you’ll be glad you were doing work you really wanted to do, and getting paid a nice package in the meantime.

Have you ever taken stock options as part of a job offer (with a start-up or otherwise)? How did it turn out? How did you negotiate the details? How would you advise this reader?

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13 lies employers tell about job offers

On October 29, 2018

In the October 30, 2018 Ask The Headhunter Newsletter a reader recounts her experience with a small-business owner and how he plays games with job offers.

Question

job offersI just came across some of your articles when trying to research my job offer being rescinded (Behind the scenes of a rescinded job offer, Job offer rescinded after I quit my job). A lot of what you wrote resonated with me and made me feel much better about my experience today.

I interviewed for a high level position at a smaller company, so I was talking to the owner directly. Here are the key facts about the compensation:

  1. The offer was at the bottom of the salary range discussed during my interview process.
  2. The owner said I could make it up with a large bonus, but that they didn’t have a structure for how bonuses worked. If the company was doing well I’d get all or part of the bonus, but it was at his discretion.
  3. I asked if he was flexible on the base pay at all, and I brought up the industry average (which was a lot higher) and my experience level and what I could bring to the table.
  4. He first said he was flexible on the base pay and even said that what he was paying me didn’t matter to him, but he didn’t actually budge and said this was a good offer he was making me.
  5. He said I needed to trust that I would be getting the bonus and at the end of the day my pay would be much higher.


I said I was still very interested and excited about the role. I explained that I would really like to review the details of the whole package, including the benefits, in case I had any questions. It’s a small company and there were some non-standard things they were doing with benefits, like providing some kind of stipend for your cell phone and other things, but no 401(k).

Here’s how that discussion went:

  1. I asked if he could send the complete offer in writing so that I go over all of it to make sure I understood everything, and then confirm my positive response.
  2. He asked how long I needed to review it.
  3. I asked if I could get it to him before Friday (this was on a Tuesday).
  4. He sounded disappointed. He said that wasn’t the response he was expecting but he would still send over the offer in writing.
  5. He said he had other candidates that he needed to inform who weren’t getting the job and it was not fair to them to make them wait 2-3 days until he got a confirmation from me.
  6. I asked him if he had a timeline in mind that would work better for him, so he said Thursday morning.
  7. I said okay.


That evening, I got an e-mail saying he was rescinding the offer. He said he wanted someone who was so excited about joining his company that they are prepared and anxious to accept the offer when it’s made verbally.

He said that he felt I lacked passion for his company and that he didn’t want anyone there who was not passionate about his brand.

I wrote him back a professional response thanking him for everything.

I felt very validated when I found your articles because you explain that employers often make verbal offers because they are merely fishing for a reaction, not actually making a bona fide offer. That’s exactly what this was.

The job is an analytical one, so I was surprised that they would expect an instant, seat-of-the-pants response when they were looking for a detail-oriented, analytical person!

When I told my friends what happened, they fell into two camps. All my friends who work at various levels in corporate environments (including HR) thought I did nothing wrong. Two of my friends who both own small companies agreed with the owner and said they, too, would have rescinded the offer because they felt it was insulting to not immediately accept the verbal offer. They said that asking for the offer in writing showed I lacked trust. This of course goes against everything I know and believe.

I see what happened as a red flag for how I may be treated in the future. I’m at a bad job now but I don’t want to go to another bad job. I’m interested in this divide between large companies and small business owners, and I thought you would be, too.

Are the negotiating rules really different for small companies versus larger ones? Or are the small business owners I’ve described just outliers? Thanks for your comments.

Nick’s Reply

I think you dodged a bullet. Your story is important because it highlights a raft of games employers play with job offers.

Are these problems particular to small companies? While I can’t offer data to support this, my experience suggests small business owners are far more likely to play these games than managers in larger companies. I think business owners tend to be far more autocratic than their peers in companies that have many owners or investors.

Strike One

Let’s look at the facts you presented above — #6 through #9. This business owner decided to extend an offer after you satisfactorily negotiated a more-than-reasonable decision deadline. He made a verbal agreement with you about the deadline. Then he reneged on what he agreed to.

That’s strike one against him. It tells us he can’t be trusted.

Strike Two

You prudently asked for details of the offer in writing. He hedged, then agreed. Then he reneged and never provided anything in writing. I think he never had any intention of giving you a written offer.

Get it in writing.

Benefits: The employer trick that lowers your job offer.

This is different from merely agreeing to a decision timeline. This is about reneging on putting terms in writing. Do you think he does business deals on a simple handshake, without anything in writing? That’s a rhetorical question but, of course, he may in fact do deals with nothing in writing.

Either way, that’s strike two.

Strike Three

After tactful questions from you about the salary and bonus structure (#1 – #5), he refused to commit to anything concrete. He wants you to trust him, but he doesn’t trust you. He uses a double standard.

The old rule about “trust but verify” is why we put agreements in writing. I’ll repeat: This guy had no intention of putting anything in writing. “Trust me” means “No.”

Strike three.

Strike Four

The egregious management error this employer committed was to judge you unworthy because you failed to instantly display passion and a sucker’s excitement for an incomplete, dishonest job offer. He lost a potentially great hire.

If a strike four could be counted, that’s it.

If he wants to hire a foolish employee, he’s talking to the wrong person. If he’s looking for a thoughtless worker whose decision-making process is marked by a lack of prudence and due diligence, he should absolutely move on to another candidate he can lie to and hire on the spot.

The lessons from this game

It’s a good sign when an employer engages in a negotiation with a job applicant on compensation, on the terms of the job, and even on when a decision is due. It suggests you’ll be working for a boss who values your input and your circumspection, and who wants to make working together a win-win experience.

It’s a bad sign when an employer plays games.

You’ve taken the trouble to share your experience in very useful detail, revealing the many games employers play with job offers. This guy is bold enough to play them all at once — then to blame you for catching him.

Lies employers tell you about job offers

These are some of the lies employers tell, presented as a sort of “dictionary.” Here’s what unworthy employers will do in the hiring process:

  1. Salary Range. Establish a salary range to set ground rules for proceeding with interviews, then they pretend the low end is going to impress you.
  2. Good Offer. Tell you it’s a good offer without showing you exactly what the offer is.
  3. Competitive. Refer to “competitive” pay and benefits but never to precise sums or specific benefits.
  4. Bonus Structure. Refer to contingent forms of pay — like bonuses and commissions — but do not define objective, measurable, agreed-upon criteria that you must meet to earn those bonuses.
  5. Flexible. Say they are flexible on pay, but make no explicit compromises or concessions about pay.
  6. Industry Standard. Talk about industry-standard or average pay, but don’t define what that is or cite the sources of those numbers.
  7. Opportunity. Suggest that what this deal is really all about is a great opportunity for you, and that pay isn’t really the issue to them, when it clearly is because they won’t negotiate pay with you candidly.
  8. Trust. Tell you to trust them to pay you fairly, but will not define the compensation deal objectively in writing — or trust you to review their offer.
  9. Terms. Want you to agree to accept a job offer immediately based only on a few points — and “don’t worry about the rest of the details,” or what lawyers refer to as “terms.”
  10. Job Offer. Want you to commit to a deal verbally, while they balk about putting it in writing with their signature on it.
  11. Decision. Agree to give you two days to review a written offer they haven’t given you yet, then renege because you insulted them by not deciding instantly.
  12. Qualified. Judge how qualified you are for the job by whether you’re “excited” and “passionate” enough to accept on the spot.
  13. Commitment. Negotiate terms and make commitments then violate them.

These are all lies unworthy employers tell job applicants they try to take advantage of. The words in the little “dictionary” above actually mean something to good employers — and you’ll see that instantly in a good employer’s behavior.

Never work with jerks

You should never go to work for employers who play these job-offer games. You’d regret it because they’d behave the same way day-to-day. They’re jerks.

For more about how to negotiate the best compensation package, see:

Fearless Job Hunting, Book 7: Win The Salary Games (long before you negotiate an offer)

Fearless Job Hunting, Book 9: Be The Master of Job Offers

I think you’ve identified at least three people you should never work with — including your friends who said you insulted the employer and displayed a lack of trust. Don’t doubt your judgement – it has certainly served you well here.

Whether you’re talking to a big or small company, the approach and questions you relied on here will tell you all you need to know about an employer.

From the details you shared, I see a prudent, honest, forthright, responsible professional who treats others the way she wishes to be treated. I see no fault in anything you said or did during the hiring process. In fact, I compliment you for doing everything right – it all combined to help you dodge a bullet.

On to the next! Find a company that deserves a good hire.

My only suggestion is to carefully check a company’s and manager’s references before you invest your time interviewing there. You might find this useful: 5 rules to test for the best job opportunities.

What lies have you heard employers tell job applicants? What would you add to the dictionary above? What else should job seekers look out for in the throes of getting a job offer? What details do you insist on having in a written job offer?

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Salary History: Use California’s new law for better job offers

On October 23, 2017

In the October 24, 2017 Ask The Headhunter Newsletter, we take a deep dive into California’s new salary history law. Is it going to help you get a better job offer?

Note: This article is not legal advice or a substitute for obtaining competent legal counsel about salary history disclosure laws.

salary historyYou’ve probably heard this from an HR manager who has demanded to know your salary history while you’re applying for a job: “It’s required. If you don’t disclose your salary we cannot proceed with your candidacy.”

It’s akin to a salesman on a car lot demanding to see your bank account balance before he tells you the price of the car you want. Once that cat is out of the bag, you can’t negotiate effectively.

Now the State of California has made it illegal for employers to ask your prior salary. See Assembly Bill No. 168. (See also this article in the San Francisco Chronicle.) This can help you negotiate a better compensation deal.

You have 2 new powers over personnel jockeys

But not so fast. Hiding your old salary isn’t going to help you get a higher job offer unless you can obtain another critical bit of information from the employer: What’s the salary range for the job you’re applying for?

Good news: The California legislature thought of that, too. Starting January 1, 2018, employers can’t ask your old salary and, if you request it, they have to tell you what the pay range is for the job you want.

You now have two new powers over employers and their personnel jockeys in California. You may:

  1. Decline to disclose your salary.
  2. Ask the employer “to provide the pay scale for a position.”

What you need to know

It’s important to understand the details of your new rights. Therein lies your real power — the power to avoid wasting your time with jobs, applications, interviews, recruiters and employers who want to break you down so you’ll cave in and accept a lower job offer. Use these powers thoughtfully, and you should be able to get the kind of salary you want.

Here’s what the new California law says (emphasis added):

SECTION 1.  Section 432.3 is added to the Labor Code, to read:
432.3.  (b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.

Now we’ll expand on the aforementioned two new powers you can exercise when applying for a job.

1. Decline to disclose your compensation

This means never disclose your prior pay or the value of your benefits:

  • When you fill out a job application.
  • When an HR recruiter from the company requests it.
  • When a third-party recruiter (or headhunter) solicits you for a job at the company.
  • When you participate in a telephone interview.
  • When you communicate with the employer or recruiter via e-mail or otherwise.
  • During a job interview, and,
  • Apparently, under this new law, after you’ve been hired and you’re filling out employment paperwork.

An employer that doesn’t know your old salary and benefits has a harder time low-balling a job offer. I can’t tell you how many times I’ve heard employers say, “Our offers are 5-10% above a person’s old salary. That’s our policy.” As if that has anything to do with the value of the new job — or the value you bring to it! For more about this, see Revealing my salary earned me a lower job offer!

Never disclose your prior salary to anyone connected to an employer where you’re applying for a job in California (or anywhere else, but in that case for other reasons). Because if you do, you’ve relinquished your rights — because there’s a gotcha in the new law. We’ll discuss that in a minute.

First let’s look at the more important of the two powers California now grants you.

2. Request the pay range of the job

This is the best part. The employer has to tell you what the job pays. This is what will help you avoid wasting your time on jobs that don’t pay in a range you’re willing to accept.

(c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.

You read that right. They can’t ask for your salary history, but they have to tell you the pay range of the job you’re applying for. If you ask. So ask! And ask in advance of filling out forms, having interviews, and otherwise investing your time.

I think it’s more important to know the pay range of a job than it is to withhold your own pay information. But, of course, it’s best to use these two tools in tandem for maximum benefit.

Now, here’s the tough-love part. When they tell you the pay range, don’t kid yourself if it’s lower than you’d like. Don’t proceed under the impression that you can “talk them higher” later on. Conversely, if you use this law to apply only for jobs that pay twice what you may be worth, you’ll probably be disappointed if you expect enormous job offers.

Beware the gotcha in this salary history law

Those two new powers can gain you a lot during your job search in the State of California, unless you’re applying for a government job or other job that’s exempt. (Read the full text of the new law.)

Now let’s get to the aforementioned gotcha. Read this next part of the new law carefully. (Emphasis added.)

432.3.  (g) Nothing in this section shall prohibit an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer.

Yep. That means you’re free to spill the beans if you want to. And here’s how spilling the beans will get you screwed:

432.3.  (h) If an applicant voluntarily and without prompting discloses salary history information to a prospective employer, nothing in this section shall prohibit that employer from considering or relying on that voluntarily disclosed salary history information in determining the salary for that applicant.

Got that? Once you disclose your salary history “voluntarily and without prompting,” much of your protection under this law disappears.

Why you may need a lawyer

Any time you’re dealing with a massive amount of money — like the salary you’re going to earn for a year or more — it may be worth consulting a lawyer. A consultation with a labor or employment lawyer, to ensure you know what you’re doing in an employment matter, will cost you only a small fraction of that massive amount of money in order to protect that massive amount of money. Consider making an initial investment in legal advice, then proceed prudently.

You may also need a lawyer if you find an employer has violated California’s new law, because of one more gotcha:

(d) Section 433 does not apply to this section.

Section 433 of the California Labor Code says:

433.  Any person violating this article is guilty of a misdemeanor.

This means that while violations of other sections of the Labor Code are a misdemeanor, a company that demands your salary history or refuses to tell you the salary range of a job is not committing a misdemeanor. This new law does not define the penalties for violations.

If you want to fight violations of this new law, you’ll probably need a lawyer. It might even turn out that this Section 433 clause renders Section 432.3 toothless once it winds up in court.

What about your state?

Similar laws are under consideration (or have already been passed) in some major cities including New York City, San Francisco, Philadelphia and Pittsburgh, and in some states including California, Massachusetts, Delaware, Oregon and Puerto Rico.

Some of the legislation is controversial, and special interests are trying to block it. The Washington Post offers a good rundown in “New York City just banned bosses from asking this sensitive question.”

This issue is so hot that it’s best to look up your own city and state for accurate information.

What’s your best option?

We’ve barely touched on the myriad issues these laws raise. If you’re interested, you’ll find more here: Goodbye to low-ball salary offers.

Whether there’s a law against demanding your salary history or not, you can always say NO and decline to disclose the information. (See Keep Your Salary Under Wraps.) As long as you’re not party to a contract whereby you have agreed to disclose salary information (an employment contract might be an example), you never have to disclose it. There is no law I know of that obligates you to disclose your salary.

Of course, refusing to disclose might result in an employer rejecting you as a candidate. That may be their right.

In that case you may be better off finding a more reasonable employer who isn’t trying to manipulate salary negotiations by insisting on knowing your prior pay. You’ll get the best deal possible if you withhold information about your prior compensation, because the employer will be forced to base an offer on the value you prove you can deliver. (Did we just open a new can of worms? Yup. We don’t pretend anything is easy around here. See How do I prove I deserve a higher offer?)

Have you encountered one of these new laws in the wild? What happened? What’s your take on this kind of legislation — and on how to best protect your ability to negotiate compensation? What other issues do these new laws raise?

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How do I ask for 30% salary increase?

On December 5, 2016

In the December 6, 2016 Ask The Headhunter Newsletter, a reader wants a 30% salary increase to accept a big promotion and relocation.

Question

salary increaseAs a senior manager with a big manufacturing company, I lead a sizable sales team and have enjoyed good career growth over 18 years. I’ve been told I am a high-potential employee and they are considering me for a promotion to a director job at HQ or in one of our national regions, which would require a relocation. I’m ready to move, but I won’t do it without a considerable salary increase.

I have done some homework and 30% seems to be the right number. Our company typically would only give me a 10% raise. But my thought is that, if I am getting uprooted and taking on more pressure and responsibility, they need to compensate me for it. Is this a reasonable response to give them, or a bad one?

Nick’s Reply

Congrats on the good news. My view of this is, you put your proposal out there along with your justification, and that’s where the negotiating starts. But there are two potential issues.

  • Will you offend them because you dared ask for 3X what they were probably going to offer you?
  • Can you justify what you’re asking for?

Let’s consider the possibilities — and prepare for them.

The salary increase stinks

There’s not much you can do about management that gets offended easily, so you need to make a judgment. Could asking for so much get them upset? Are you prepared to deal with such a reaction? What I’m really asking is, would you decline the promotion — or quit — if they don’t give you what you think you’re worth?

Finally, have you prepared for the worst case — they dismiss you? (See Negotiate a better job offer by saying YES.)

You need to ask yourself what the odds are in each case, and you need to plan in advance what your response will be. Don’t wait to figure this out while it’s happening, because that’s when people make mistakes.

Your justification stinks

As far as salary surveys and what you’ve determined others are getting paid —that doesn’t matter to your employer. If they were looking at the same data you are, they’d give you 30%, right?

I believe people should be paid what they’re worth to a business. But I also believe it’s up to the employee or job candidate to demonstrate what they’re worth. The employer will not figure it out for you. Don’t rely on salary surveys like Glassdoor — your employer will tell you it’s not really relevant. (For other readers’ insights, see Am I chasing the salary surveys?) Best case, they’re looking to pay something “fair” that’s still a discount for them.

No matter what Glassdoor (or any survey) reports, all your employer has to say is, “Those positions don’t accurately reflect our company.” Or, your employer will bring out its own salary survey — which shows you’re not worth so much. (In that case, see Beat The Salary Surveys: Get a higher job offer.) If you base your case on such data, the negotiation will end there.

Make sure your justification doesn’t stink.

Be worth the salary increase you want

So here’s the only way to deal with this, in my opinion. The case you make for a 30% salary increase must address the benefits to your employer — not “what’s right” or “what everyone else is making.” That is, what will you accomplish during the next year, in this new job, that’s worth 30%?

Map it out. Produce a mini business plan that will convince them you’ve figured this out and that it’ll pay off for them, too. In my experience, that’s the absolute best way to negotiate a raise and a new job. (For a detailed approach to using a business plan to get what you want, see How Can I Change Careers? — it’s not just for career changers. Read “Put a Free Sample in Your Resume,” pp. 23-26.)

Compared to haggling about salary surveys, you’re far better off talking about your company’s business, its challenges and problems, and about a specific plan you’ve devised that makes you worth a 30% boost. The critical advantage of this approach is that it stimulates a discussion with your employer about something you’re expert at — your job. There’s the negotiating edge that can make all the difference.

Plan the outcome

There’s no reasonable or bad response to their offer. There’s what will work, and there’s what you’re ready to do if you don’t get what you want — assuming what you want is really that important to you. You must be ready to control the negotiation and to plan the outcome.

So there are really two challenges for you here.

  • First, can you demonstrate — hands down — that you’re worth what you’re asking for? (That is, worth it to the employer.)
  • Second, are you ready to walk away from this employer if you can’t get what you think you’re worth?

I wish you the best, and I’d love to know what you decide to do and how it turns out. I hope my comments help you in some way.

(Since you haven’t yet discussed this promotion with your company, there’s a completely different strategy you can follow. It’s covered in Fearless Job Hunting, Book 7: Win The Salary Games (long before you negotiate an offer), in the section titled “The Pool-Man Strategy: How to ask for more money,” pp. 13-15.)

Is a 30% raise even possible? How would you advise this reader? What are the angles and gotchas in this situation?

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How can I negotiate an NCA or NDA?

On June 20, 2016

In the June 21, 2016 Ask The Headhunter Newsletter, a reader doesn’t like giving up future opportunities by signing restrictive agreements.

Question

First of all, thanks for writing your columns and educating us folks out here. If we ever form a union, you’ll get my vote for union leader! Anyway, I was wondering about non-competes and NDAs. I know you’re not a lawyer, but I’d like to hear your thoughts on the subject.

valueI can understand why companies want and need non-competes and NDAs, but I feel signing such contracts limits my future job opportunities; at least the ones that would pay me the most. So, I could refuse to sign, and they can refuse to hire me. If I want the job, it seems I’ve gotta bite the bullet. Perhaps I could sign the contract as “Darth Vader” and they won’t notice.

Is there a fair, balanced deal that I could make here? Thanks for your thoughts.

Nick’s Reply

Ouch, you’re hitting a nerve. Non-compete and non-disclosure agreements (NCAs and NDAs) are a sore spot with me because I believe they’re over-used, misused and too often signed. Nonetheless, both documents are becoming more common. Heck, they’re such boilerplate that you might be right — you could sign as Darth Vader and they might never notice! Some companies might just file the darned thing without looking at it any more carefully than they expect you to. But, don’t bet your future on that.

What’s an NDA or NCA?

For those who don’t know what we’re talking about, an NDA is an agreement you sign as an employee prohibiting you from divulging sensitive company information while you work at the company and often after you leave. When you sign an NCA you agree not to compete with your employer (now and when you leave) by soliciting its customers, going to work for a competitor, or through other actions. Sometimes, an NCA and an NDA are rolled into one document.

I think companies often use NCAs and NDAs for no other reason than because “everyone else does it.” The fact is, these agreements are very controversial. In some states NCAs are illegal because they restrict a person’s right to earn a living. Nevertheless, when you take a job, it’s up to you to protect your rights.

There are some legitimate reasons for a company to ask you to sign such agreements; for example, when you’ve worked on a sensitive trade secret that, if leaked, could cost the company a lot of money. It’s up to you to decide what’s reasonable, or to discuss it with an attorney who represents you, not the company.

Negotiate the terms

There’s no reason to get into an argument with a prospective employer about an NCA or NDA. The best thing to do is negotiate it. Because these agreements are often legal boilerplate, a company that really wants to hire you may be willing to negotiate specific terms that you object to. You may be able to get both the compensation deal you want and a comfortable agreement.

Your goal with an NCA or NDA is to limit the constraints. Here are some terms to negotiate:

  • Geography: A 100-mile radius of non-competition may be reasonable, but a blanket “all of the U.S.” or “all the world” is just nuts.
  • Term: One year may be acceptable, but a five-year restriction is not.
  • Competitors: Prohibiting you from working for any company in an entire industry is extreme. Try to get them to list specific companies by name. Make sure the list is short and realistic.

In light of the limit that an NCA or NDA might place on your future job opportunities, I recommend getting quid pro quo. That is, get fair value for anything you relinquish — and work this out before you accept a job, not after you’re on board. An employer has no incentive to re-negotiate an overly restrictive NCA or NDA after you’ve already joined up.

Trade fair value

When a company wants an NDA or NCA to protect its interests, then you should get something to protect yours. Always trade fair value. If a company is going to restrict your ability to earn a living, it should compensate you reasonably.

Get a contract.
If you agree not to go work for a competitor for a year (by signing an NCA), then don’t agree to work “at will,” whereby the company can let you go any time it wants. In exchange for signing an NCA, request an iron-clad employment contract. That way, if the company terminates you, it agrees to keep paying you through the end of your contract. The NCA gives the company protection (perhaps for a year), and the employment contract protects you (for a year also). By asking for a year, you might be able to get six months’ pay, if you consider that sufficient.

Get a severance deal.
Another quid pro quo for an NCA or NDA is a significant guaranteed severance deal. Ask for it, since your choice of next employers will be limited. Negotiate a severance package as a form of compensation for relinquishing your right to compete or to “talk about your work.” (Be careful: A blanket NDA can actually restrict you from talking about work you’ve done that is not even proprietary to the company!)

What might be in a severance package varies. Usually, severance is one week’s pay for each year you worked at a company. But in this case, we’re not talking just about severance; we’re talking about a special deal that compensates you for relinquishing some of your freedom. In my opinion, if you sign a one-year NCA, the company ought to cover you for at least a year after you leave, or until you land a new job that does not violate the agreement. (If that sounds extreme, so is an NCA!)

If the company’s not willing to compensate for protection, then it should not require an NCA or NDA. It should instead keep better control over its proprietary information and avoid divulging to you anything during your employment that might compromise the company when you leave. It’s up to the company to manage its assets — not you.

If any of this perplexes you, it’s smart to consult an attorney. It will cost far more to defend yourself later than it will to protect yourself now. (For some valuable insights from my favorite attorney, Bernie Dietz, see Employment Contracts: Everyone needs promise protection.)

Thanks for your kind words about Ask The Headhunter. But, no thanks — don’t elect me as your union leader!

Have you ever signed an NCA or NDA? Did it come back to bite you? Or, did you negotiate compensation for a fair restriction? How would you advise this reader?

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These industries are more likely to screw you on pay

On May 23, 2016

In the May 24, 2016 Ask The Headhunter Newsletter, we dispense with the Q&A and explore some bad news about who’s hogging the profits.

Yes, You’re Getting Screwed

  • While the price of fuel has dropped and airlines and their shareholders run to the bank with higher returns, you pay more to sit in smaller airline seats and to arrive at your destination later.
  • Your stock broker gets rich off the higher fees you pay on your investments, while the value of your portfolio stagnates or declines.

The trend is hardly worth debating — you pay more to get less. And now we know for sure that it’s hitting your paycheck, too: As corporate profits soar, you get paid less for your work.

I love capitalism, but this isn’t capitalism — it’s greed, and it’s putting our economy and our society at risk because it’s devaluing the work you do and killing your motivation to be more productive.

greedyA banker’s story

The irony is that a guy at JP Morgan Chase — a big bank making big bucks — has spilled the beans. Bloomberg reports that JPM’s chief economist, Michael Feroli, recently published a research note that reveals — Ta-Da! — “workers’ slice of the economic pie is getting smaller.”

It’s doubly ironic because JP Morgan’s first-quarter profits beat estimates — while the firm slashed bankers’ pay. Even the bankers that are screwing us are getting screwed!

Feroli sharpens the point and explains the connection: As big business gets bigger, there’s a clear link between increasing concentration of ownership and “labor’s declining share… of the value a company creates.”

Which is the long way of saying, you’re getting the shaft while The Man gets richer. The owners of those industries make out while your paycheck gets smaller.

Sheesh — I never thought I’d find myself talking like a workers’ rights nut.

It’s worse than unfair pay

So I’ll make myself clear: While I worry about workers, I worry far more about the gross imbalance between the value of work and what people get paid to do it. Even more than I worry about tired employees’ families going hungry due to stagnant wages and salaries, I worry that American productivity and ingenuity are at risk — because who’s going to be productive and inventive if that behavior is not going to pay off?

It’s worse than you getting paid less. Our entire economic system is at risk because the concentration of ownership and wealth has reached such critical mass that it seems it’s going to destroy itself by ignoring a basic tenet of capitalism — at least according to my definition: Profits spur motivation to do more profitable work when those that create profit enjoy the rewards.

What happens when workers — at any level and in any kind of job — see where the profits are going? I think it spells trouble.

Is Feroli right?

Rather than discussing the regular Ask The Headhunter Q&A column this week, I’d like to ask you to please read Peter Coy’s short article about Feroli’s work in Bloomberg Businessweek: Rising Profits Don’t Lift Workers’ Boats.

And then, if you dare, skim a report written by Jason Furman, chairman of the president’s Council of Economic Advisers: Benefits of Competition and Indicators of Market Power. It’s dense, and one of Furman’s conclusions will seem obvious:

“When firms take action to impede competition, through anticompetitive mergers, exclusionary conduct, collusive agreements with rivals, or rent-seeking regulation to restrict entry, their profitability may increase, but at the cost of even greater reductions in consumer welfare and societal benefits.”

Feroli used this report to map where the value created by various industries goes — and to draw the troubling conclusion that…

“…industries with more concentrated ownership… pay out their extra profits to shareholders, or to the government in taxes, but not to workers.”

He notes that between 1997 and 2012, in transportation and warehousing, the “share of business accounted for by the top 50 companies rose by 11.4 percentage points,” while in health care and social assistance, it fell 1.5%. What’s telling is that between 1999-2014, in transportation and warehousing, the share of profits paid to employees fell 7.6% — the biggest drop of any industry in the study — while in health care and social assistance, employees’ share of profits rose 1. 8 percentage points.

Draw your own conclusions. Then let’s talk about whether you’re getting paid less — and whether it’s because a concentration of ownership and wealth doesn’t reward the people who come up with the ideas, do the work, and create the wealth.

This week’s takeaway

Since this is Ask The Headhunter and my purpose is to give you a takeaway to help you be more successful — here it is, based on the sources I’ve discussed above: It seems you’ll earn better pay working in an industry where there’s more competition and less concentration of ownership. So pick your job targets wisely.

Feroli’s and Furman’s work suggests, for example, that the healthcare industry pays more of its income to employees, while the transportation and warehousing industries (which includes airlines and railroads) pocket more of the profits and leave workers in the lurch.

Here’s how various industries stack up in terms of the revenue share controlled by their 50 biggest players. According to Bloomberg, Feroli’s analysis suggests “the share workers got tended to decline in industries where there’s more consolidation.” That is, when more revenues are controlled by a smaller number of firms (“consolidation”), the less that industry is likely to pay to its workers.

cea-table

Of course, being the smart little community you are, you already know which industries are the problem…

If you need help assessing specific employers, these Fearless Job Hunting books will help you with these specific issues:

FJH-5Book 5: Get The Right Employer’s Full Attention

+ How to pick worthy companies (pp. 10-12)
+ Is this a Mickey Mouse operation? (pp. 13-15)
+ Scuttlebutt: Get the truth about private companies (pp. 22-24)

.

FJH-8Book 8: Play Hardball With Employers

+ Avoid Disaster: Check out the employer (pp. 11-12)
+ Due Diligence: Don’t take a job without it (pp. 23-25)
+ Judge the manager (pp. 26-28)

.

How can you tip the balance back towards making your work more profitable to you — when your work is profitable for your employer? Or has our economy shifted so far that it’s going to tip over? In your experience, which industries share the wealth — and which of them pocket the profits you help produce?

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Only naive wusses are afraid to bring up money

On October 26, 2015

In the October 27, 2015 Ask The Headhunter Newsletter, a reader is living in la-la land.

Question

I recently had three great interviews with an organization that I would be proud to work for. Afterwards they asked me for samples of my work and references, but they never brought up salary. I asked them if they had a salary range in mind for the role, and I learned it was $20k lower than what I am currently earning. ? I politely said that I had a higher number in mind, based on my background and experience. I said I hoped there might be some flexibility if I ended up being their finalist. I left them samples of my work and left the interview with no further discussion of remuneration.

la-laWhen I got home there was an e-mail asking me for references, so I took the opportunity to mention my salary expectations prior to moving forward. The CEO responded that they could not match my request, but explained she would go to the board to see if she could increase the pay since the position played an important role in their growth strategy.

A couple of weeks later, the CEO got back to me and said she could not get any more money from the board and thanked me for my interest.

Since then they have re-posted twice for the job under a more junior title. I suspect that other applicants for the original posting of Chief Strategy Officer were also expecting a higher salary. They have now changed the posting to Senior Development Officer.

I realize now that I should have waited for a job offer, and then negotiated. But, live and learn, right? I am still very interested in the position but would need them to come up at least $10k.

Do you think I can still approach them or has that ship sailed? Being experienced in recruiting, I would never have taken a candidate that far without knowing where I stood on salary. Do I stand a chance?

Nick’s Reply

No, I don’t think you stand a chance at all. What surprises me is your wishful thinking and rationalizing, since you said you’re experienced in recruiting. The CEO told you it’s over. What I see is you putting your hands over your ears: “La-la-la I can’t hear you!”

But this is incredibly common. Employers will make it clear how much they’re willing to pay, and it just goes in a job applicant’s one ear and out the other. It’s one of the most puzzling phenomena — otherwise smart, savvy job seekers just refuse to believe what they’re told about salary.

Or, is it that some job seekers really, really want to believe an employer will pay more, even when it said it won’t? Then — when no more money is forthcoming — the applicant either (1) gets angry and blames the employer for wasting their time, or (2) blames themselves for not wishing hard enough.

Stop wishing

Consider: The CEO knows what you want. She went to her board, which refused more money. The CEO told you. Yet you still harbor a belief that the CEO will come up with another ten grand.

la-la-2But your rationalizing doesn’t end there.

You’ve seen that the title was downgraded from Chief Strategy Officer to Senior Development Officer — and you even seem to understand why. Applicants like you were expecting higher salaries that the company can’t pay. So the company adjusted the title to reflect the lower salary.

Nonetheless, you’re telling me you should have gone through the rest of the hiring process, gotten an offer, and then negotiated — after the CEO already told you there’s no room to negotiate!

And it still doesn’t end there. You seem to think that because you’re “still very interested in the position,” they’re going to come up with another ten grand! Stop pretending! It doesn’t matter how interested you are!

Having said all that, I can understand why you’re bothered. The CEO never should have taken you through three rounds of interviews without knowing where you stood on salary. You’re right about that. She never asked you about salary, and never told you about the salary range — making her just as guilty as you of wasting everyone’s time!

Are we all on the same planet??

I don’t think so.

  • Wishful thinking about salary is a stupid, dangerous waste of time.
  • Hiding a job’s salary range is a stupid, dangerous waste of time.
  • Hiding your desired salary range is a stupid, dangerous waste of time. (See How to decide how much you want.)

The conventional wisdom — which is proclaimed by “negotiation experts” — is that whoever mentions money first loses! And it’s pure nonsense!

Who wins?

Who wins is the person or employer who knows what they want, expresses it candidly, and establishes common ground before investing time in a hiring process. Only a naive wuss starts talking about doing business without first talking money.

I say naive because most people have no idea how to negotiate, so they pretend instead. Do you pretend? Are you afraid? Try this:

How to Say It

“Look, I have no idea whether we can come to agreement on money, but I’d like us to establish a framework about the money before we start talking turkey — so that we won’t both feel like a couple of turkeys after we invest hours talking, only to realize we’re not even in the same ballpark about money. So, what kind of money are we talking about?” (See “How can I avoid a salary cut?” in Fearless Job Hunting, Book 7: Win The Salary Games (long before you negotiate an offer), pp. 7-10.)

I say wuss because most people are afraid or embarrassed to talk about money until the other person does — hence the silly excuse, “It’s best not to be the first to bring up money!” Whew.

People who know what they’re worth, and what they want, are the ones who are best prepared — both to do the job, and to justify how much they want. They’re the people who are ready to demonstrate their value and to engage in a candid dialogue about it. (See The New Interview and The New Interview Instruction Book.)

When you’re going to do a deal — any deal — negotiating about money starts immediately. Whoever controls this discussion sets the anchor on the outcome. That’s who wins.

The anchor effect

There’s a phenomenon in the science of pricing called the anchor effect. The idea is simple: Whoever brings up money first influences which direction the negotiation will take. If you start talking high numbers, the final negotiation will probably end on a higher number. If someone starts by putting smaller numbers on the table, the final number will likely be lower. That is, the first number that hits the table is said to anchor the negotiation — pulling the rest of the discussion toward that point, higher or lower. (For more on this, see William Poundstone’s excellent and very readable book, Priceless: The myth of fair value and how to take advantage of it.)

Of course, if your number and their number are way off, either try to make your case, or shake hands respectfully and move on. Don’t pretend!

Grow up

Everyone needs to get over their hesitation to talk about salary before interviews proceed. Employers need to disclose — even advertise — a job’s salary range. Job seekers need to disclose how much money they’re looking for. At the very least, both parties should establish an honest ballpark for salary — or stop screwing around with interviews, rationalizations, sneaky tactics, and hemming and hawing.

I know what you’re thinking: “If I say what I want, what if the other guy is actually willing to pay me twice that? I’ll lose out!”

Unless you just fell off a hay wagon, you can’t possibly believe that what the employer was planning to spend is double what you want. Grow up. You’re not going to hit the lottery in a salary negotiation. More likely, playing coy is going to lead you right into a brick wall — when honest mutual disclosure is more likely to result in a healthy discussion.

Where did you go wrong?

When you agreed to the first interview, you failed to ask what the salary was for the job — so you could decide whether it was a match.

Worse, you avoided this because you thought you might be able to play the CEO along, and “convince” her to spend more than her board permitted. This is the old foot-in-the-door tactic of the inept salesman: “If I can get the sucker to invite me in, I’ll just brute-force my way to a deal!”

That’s naive. It’s also — pardon me, because I sense you’re actually smart and capable — stupid. I’ll bet you think it’s professional to not bring up money, and unprofessional to expect the employer to bring it up.

You’re wrong on both counts. What’s unprofessional is two people leading one another on. There’s nothing professional about being afraid or embarrassed to talk money. The CEO is just as guilty. She should have asked you how much you wanted — a range — at the same time she expressed the salary range for the job.

Please: Consider these basic guidelines when applying for jobs:

  • Know what salary range you want, and be ready to express it. (Don’t confuse this with disclosing your salary history. See Keep Your Salary Under Wraps.)
  • Don’t agree to an interview if the employer won’t disclose the salary range for a job.
  • Be prepared to justify the money you ask for, in terms of how you’ll produce more value for the employer than the next candidate will.
  • Pay more attention to what the employer is saying, than to what you’re wishing.

The key to negotiating

Do you know what is the biggest mistake you made, even after you invested time in three interviews without knowing the salary? You let the CEO ask the board for more money without arming her with the justification.

The CEO was willing to go to bat for you — but you sent her to negotiate without a bat!

If you’d given the CEO evidence of why you’re worth $20,000 more than she was planning to spend, she might have gotten more money from the board. Your mistake is that you asked for more money just because you want it. The key is to show what the board gets in return for $20,000. The key to successful negotiating is being able to deliver more value than the other guy expects.

The CEO has struck out. She told you to go home. Sorry — get over it. There is no job for more money. Please don’t make a fool of yourself.

I don’t care what negotiating experts say. Don’t be naive, or afraid, or a wuss about bringing up money first. Winners are prepared to justify what they want, and to show how it will pay off for the other guy. (See “What’s your business plan for doing this job?”, Fearless Job Hunting, Book 6: Be The Profitable Hire, pp. 30-32.) If there’s no match on the money, they move on early and quickly.

Do you talk money? Or are you terrified to bring it up? Do you wait until you’ve invested hours of time before you find out what the salary is? What’s the best way to ensure everyone is on the same page regarding salary?

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My boss won’t deliver a promised raise

On March 9, 2015

In the March 10, 2015 Ask The Headhunter Newsletter, a reader complains that the boss laughs off a “small” raise.

Question

underpaid-crumbI work for the CFO of a huge company and I am grossly underpaid. When I brought this to his attention (several times) he finally thanked me and laughed it off, saying that I was slightly underpaid. He promised to work with HR to get me the small difference. That was in January. We are now in March. He even pointed out it wouldn’t really affect the budget for the year. It’s so small — yet he has no time to follow up on the paper work. I’ve been in contact with the compensation manager, who said they are waiting on my boss to make the next move. My boss keeps saying “it’s in process.” A “slight increase” to me is enough to cover gas for the week. I’m sure if he’s measuring it up to his $500k salary, it would be considered slight. What should I do?

Nick’s Reply

I’ve been in your situation myself, and I rationalized that “these things take time.” They do, but it’s incumbent on your boss to keep you apprised of progress — and to get it done. Or why is he the boss?

It sounds to me like he’s not on the same page about this, no matter what he says.

I see two disconnects:

  • You think you’re grossly underpaid, but he thinks the difference is slight.
  • He says he’s taking care of it, but the comp manager says that’s not true.

These are not good signs. You must decide whether these are signals that you need to be working for a company and boss that value you the way you think you should be valued.

I’m not suggesting you should stir up trouble. If you press this, you could get under your boss’s skin. Because this seems to be a trifling matter to a man who’s paid handsomely, it might be more of an irritation than he thinks you’re worth. In other words, it might cost you your job — and I don’t want to contribute to that if it’s not worth it to you.

But if your boss doesn’t come through with a reasonable increase, you should perhaps hedge your bet by having other options ready to go.

When I went through this once, I waited and negotiated for months. Nothing came out of it. But I finally lined up another job elsewhere. When my boss once again delayed a resolution, thinking he’d just keep me hanging, I submitted my resignation — and I let him figure out what happened.

Nothing makes you more powerful; nothing lets you make intelligent choices; and nothing keeps your spirits up — like having a good option B when option A doesn’t work out.

Because my option B was ready to go, I didn’t even vent my spleen on my jerk of a boss when I quit. I just smiled and moved on. It wasn’t worth explaining it to him because, thanks to the existence of option B, I really didn’t care and mentally I had already moved on! If I wasn’t worth an honest effort at correcting my salary, then my employer wasn’t worth a worry on my way out the door.

We came across a more extreme example of your problem last year: What to say to a stingy boss. While your boss doesn’t sound as bad, you’re still stuck without a raise after a lot of talk. Three months is plenty of time to be patient.

My advice: Even if you don’t need to use it, get yourself an option B. It will free you to look at this in an entirely different way. It’s not good to be under someone else’s thumb with nowhere to go.

For your next job, try this approach to compensation: How to decide how much you want.

How long would you wait for your boss to do what he promised? What else could this reader do?

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Smart Hiring: How a savvy manager finds great hires (Part 2)

On June 2, 2014

In the June 3, 2014 Ask The Headhunter Newsletter, a manager tells how she finds great hires.

Last week we heard from Annie, a manager whose approach to interviewing and hiring reflects how she likes to be treated as a job applicant. She doesn’t rely on job boards. She treats applicants respectfully and always gets back to them. She explains interviewing procedures clearly in advance. She doesn’t waste applicants’ time. And she doesn’t demand their salary history.

find-hiresSo far, so good — but does this work? Does it help her hire great people?

Annie and I have kept up an e-mail conversation, and she has generously shared the process and outcome of her hiring efforts. You can review the story to date — and we’ll pick up where we left off last week.

From Annie

I don’t ask for salary history

Hi, Nick! It’s exciting to see the story up and people engaging with it. Our top candidate just accepted our offer today, so I’m able (and delighted) to say that our search process has been a success.

We suspected (but didn’t confirm) that the candidate was probably under-paid at his current position. I had to campaign pretty vigorously to pay him what he’s worth instead of some calculation based on his current number. He was such a promising candidate that he likely wouldn’t take less, and I wouldn’t feel right offering it to him. After we had finished our internal budget negotiations and arrived at a range, I simply asked him what he was hoping to make. Luckily, the numbers worked out!

Nick Replies

Annie, good for you for making the case to pay the candidate what you think he’s worth. Asking what he wanted to make is the honest way to come to terms on salary. A good alternative would have been to quote your budget range for the job. Kudos to you for not falling back on a request for his salary history. Job applicants should keep their salary under wraps.

Someone on the blog (Eddie) asked this question:

It is good to hear that hiring managers are attending networking events. But how do I find these?

Can you share with us how you network to recruit?

From Annie

Where I network to find great job candidates

Your commenter Dave is spot-on: Meetup groups are the way to go. The position I was hiring for is a technical one (and I’m in a technical role myself), so most of my networking was at groups focused on programming languages, technology stacks, etc. These aren’t (on the surface) career/hiring events. These are places where people in the industry get together and discuss their craft. So, if you are deliberate about hiring, it’s the sweet spot: places to form relationships with people who already have good jobs in the area, who know their stuff, and who might want a job someday. [Don’t say, “I don’t know anybody!” -Nick]

Making friends at meetups

The tricky thing about relying on a network is, you have to start building it before you need it. I’ve been going to most of these groups for years. They give me the opportunity to make friends, pair-code with people, toss around project ideas, and share answers to problems. In other words, to demonstrate my interest and involvement in our field, and get enough face time that people can safely conclude I’m probably not a terrible, awful person to work with.

Really, I can’t stress enough how important this kind of interaction (again, on your advice) has been in my career. I’ve gotten jobs based on the recommendation of people I’ve pair-coded with at meetups. I’ve got job leads in my pocket because of it. And I found the young man that we eventually hired the same way: a personal recommendation from someone I trust, who knows both of us through meetup groups.

Diversity in recruiting

Following on the recent news of Google releasing their demographics data, I think this is also the perfect (and possibly only?) way to go about recruiting a diverse staff. I make sure to contribute in groups targeting women and other minorities in engineering, in part so that I can be sure to know diverse candidates in order to include them in my hiring process. You know, everybody says, “We need more women / African Americans / Latinos / etc. in computers,” but it seems like companies make next to no effort to go out and recruit them. Unfortunately, they won’t just fall into your lap. As with everything, it takes work.

Nick Replies

Annie: You’ve made an eloquent case for real networking. Your method of making friends to find great hires is the flip-side of making friends to get referred to great jobs. (I cover this in detail in How Can I Change Careers?, in the section titled “A Good Network Is a Circle of Friends.”)

Thanks for acknowledging that “networking” — as some people practice it — can be “icky.” By investing the time to demonstrate your genuine interest in talking shop, you help people judge that you’re a good person to talk with and get to know. This is the essence of making friends and getting introduced to jobs.

Thanks again for showing us how you actually recruit and hire using the ideas we discuss here every day. Some managers respect job applicants and go out of their way to make good hires intelligently and with care. My advice to job seekers: A manager like Annie doesn’t need many great applicants, and you don’t need more than just one good manager to hire you. Don’t lower your standards. Go where managers like Annie will find you.

Where do you find great managers? How do you network effectively to find great jobs? There is nothing easy or quick about investing time in your professional community to get ahead. If it were easy, everyone would be doing it. Since they’re not, it means you have less competition. Does this shake up your world?

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They promised a raise but won’t deliver

On October 29, 2012

In the October 30, 2012 Ask The Headhunter Newsletter, a successful manager complains a promise about higher pay hasn’t been kept:

When I was hired almost two years ago as a manager, it was with the promise that if I achieved certain milestones and met the company’s expectations my compensation would increase dramatically. I’ve met all the requirements and more, and no one disputes that. But when I approached top management about this recently, they said there’s no way they could pay me that much money.

These are basically honest people, and I like working with them. They created the expectation, and I have worked exceptionally hard to earn exceptional money. I’m willing to stick it out, but I’m wondering if I was too trusting. I did not get all these promises in writing as you recommend. I decided to take a chance. (I just bought Keep Your Salary Under Wraps. I figured I owed it to you. Your first book basically got me my current job!) I’d appreciate your thoughts.

Nick’s Reply

There’s no law against employers promising things they later decide they just “can’t” deliver — unless they put it in writing. I learned this the hard way, too. Many years ago I took over a sales group, and the VP offered me one of two deals: A decent salary and a pretty good commission plan, or no salary and a phenomenal commission plan. I quickly decided that if I couldn’t blow the quotas away, I just shouldn’t take the job. But I did, and the VP used to crow that he and I were the only ones that put their money where their mouths are and worked on 100% commission.

I made a lot of money. And, as I anticipated, I blew away the plan. Again and again. Until they brought me in and said, “We can’t keep paying you this much money.”

It took a while for me to leave. But I’ve seen this happen many times to others, and the caution I offer is, get it in writing when you accept the offer.

The criteria for more money must be:

  • Written
  • Objective
  • Achievable, and
  • Measurable.

The agreement must also guarantee the plan throughout your employment, or they’ll reduce it. Few employers will put it in writing because the deal they offer isn’t real to them. That is, they really don’t know what to do with exceptional performers, except promise that they’ll take good care of them… until time comes to pay off. And here’s the serious problem: They can’t accept the idea that paying you a big chunk of a lot of money is better than paying a small percentage of a lot less money. So they lose managers like you.

For some of the very best advice about how to protect yourself when accepting a job offer, see Bernie Dietz’s excellent article, Employment Contracts: Everyone needs promise protection.

None of this helps you now, but it might help you next time. If your boss doesn’t understand that the best way to lose the best employees is to welsh on compensation, then either you adjust your expectations, or you find an employer that is willing to pay for exceptional performance. They’re out there. But you won’t find them by applying for jobs. You pick the sweetest companies, then research the management team — and when you find such a company, you go after it. But once you’ve got the deal you want, get it in writing. It’s not real (as you’ve learned) if they won’t sign it.

But you can still try to fix this now. Try to “renew your wedding vows.” Is the company willing to sign a friendly letter of intent that re-states your original agreement with a firm timeline based on your performance? It’s not too late to amend the employment deal you took.

In Keep Your Salary Under Wraps I recommend William Poundstone’s excellent book, Priceless: The myth of fair value. This book explains how a salary is “anchored” to a low point. Don’t let it happen to you. The book also explains how to pull a negotiation upwards by understanding the parameters of the anchoring effect. Contrary to the conventional wisdom (“Whoever states a number first, loses.”) it turns out that you can control negotiations about money if you know what number to state and how to state it.

Thanks for your kind words. I wish you the best.

Did you get paid what you were promised? Or, did you get suckered into delivering exceptional performance without exceptional compensation? Is it reasonable for employers to avoid big payouts? Let’s talk about how to protect yourself.

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