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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How should I ask for an overdue raise?

In the July 24, 2018 Ask The Headhunter Newsletter a high-performing reader is looking for a raise.

Question

raiseNext month I’ll have my three-year performance evaluation, and I feel that I am worth more than my current salary. How do I convey the message that my job is worth more and ask for more money?

As my company has grown, so have my responsibilities. I’ve really stepped up to the plate. I’ve earned recognition, but it’s not reflected in my pay. Through discussion with peers in the industry, I have learned that the average salary is much higher. Could you please advise me how to approach my boss during the evaluation, so I can convince him my request is justified? What should I say and not say? Thank you kindly in advance.

Nick’s Reply

There are entire books written about this topic, and compensation experts will offer negotiating strategies galore. But I’m going to refrain from a long lecture, because I think you can figure this out yourself if you keep some basic ideas in mind.

No more boring performance reviews

What you should not do is walk into a review meeting, show some salary surveys, and expect your employer to cough up more money “because that’s what other people who do my job are being paid.” You must justify what you’re asking for.

Perhaps more important, performance evaluations and reviews are the bastard children of Human Resources. They are increasingly ignored in most companies. This is actually good news for you. If you’re going to have an evaluation at all, it will likely be very canned and scripted — and the manager doing it will be bored and in a rush to get it over with.

That’s your chance to take control and turn it into a useful, meaningful and engaging planning session. No more boring reviews! Stand out by showing your boss that you are 100% focused on doing your job — to make him and the company more successful.

Earn a raise with a business plan

A salary renegotiation is pretty simple conceptually: It’s best done with a business plan. In other words, do an analysis of your role as though your job constitutes an independent business. Don’t talk about your qualities or about what others are being paid. Talk about your company’s business and what you add to the bottom line — and what you will add in the future.

  • How do you contribute to revenue?
  • What does it cost to have you do what you do? (This includes not only your compensation and benefits, but the cost of your tools, the cost of your team and support personnel who help you, and so on.)
  • What’s your history in terms of the profitability you bring to the company? (That’s right: Your contribution to revenue matters, but how you impact profits matters more. Even if you can’t calculate a specific number, you need to outline a defensible case that goes into the profit factors you influence.)
  • What are your profit projections for the next two to three years? That is, make some projections of how you will contribute to profit. You’ll need solid evidence to back these estimates up.

Every job is a business

A job is a business. Managers forget that — so explain it to yours. That’s the key to thinking about this in terms your management will understand and respect. As in any business plan, your goal is to demonstrate how an added investment will pay off. You must show a rising return on the company’s investment in you.

To learn more about how to approach any employer with a business plan, check these 3 books in the Fearless Job Hunting collection:

Book 6: The Interview – Be The Profitable Hire

Book 7: Win The Salary Games (long before you negotiate an offer)

Book 9: Be The Master of Job Offers

See especially the sections “How can I demonstrate my value?” and “The Pool Man Strategy: How to ask for more money.”

The longer you’re working for the company, the more profit you should yield. A lot of this is number crunching, of course, and there’s seat-of-the-pants estimating involved.

Please read that last part again: There’s seat-of-the-pants estimating involved.

Negotiation is a dialogue

This will scare a lot of people off for fear their employer will challenge the estimates. That’s exactly what you want! A dialogue. A debate. A roll-up-your-sleeves talk about your job! That’s what your evaluation should be.

If your boss is worth working for, then your boss will see that you are worth a good raise because you’re thinking about the company’s bottom line and that you are prepared to discuss the future of your work intelligently.

It will help enormously for you to interview people in the company who factor into this plan — before you meet with your boss. In the process, you will not only build your case, you will also influence (and remind) other key players in the company about your worth. Then ask them to join the dialogue by putting in a good word for you with your boss!

How do you ask for a raise? Have you had a performance evaluation in the past year?

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How to negotiate salary through a headhunter

In the July 24, 2012 Ask The Headhunter Newsletter, a job hunter wants to know how to get the best compensation deal through a headhunter:

What can I expect from a recruiter when I’m negotiating salary and compensation? After all, doesn’t he work for the hiring company?

My Advice

This question is so common that I include an entire section about it in the PDF book, How to How to Work with Headhunters … and how to make headhunters work for you. This advice is from Section 4: Talking Money.

To understand a headhunter’s motivations for negotiating your compensation, you must understand the headhunter’s job.

How to help the headhunter help you

Before there’s any chance to negotiate, the headhunter’s real challenge is to get a company and candidate to agree they want to work together. This has nothing to do with money. It’s all about the people, the company, and the job. That’s why it’s crucial for you to decide whether you actually want the job (as long as the terms can be worked out).

Saying you want the job doesn’t mean you’ve accepted the offer, but it sets the headhunter loose to get you a deal you’ll accept. It helps you win the headhunter’s cooperation, because half the battle is won. There’s nothing for the headhunter to negotiate unless you let him know you want the job.

Once your motivation to take the job is settled, the headhunter can get to work on the financial terms. Even though the headhunter works for the employer, he earns no fee unless he can work out terms that are satisfactory to you.

Be ready to express what you want

This is where many job candidates blow it. They don’t want to express what they want. They believe that if they don’t state what they want, they might magically get more. Nothing could be farther from the truth. Take note: If you have an offer, the employer has already put a number on the table. It’s decision time for you. If you can’t decide what you want, you can’t make the headhunter work for you. You must arm him with specific instructions. At this stage the headhunter will advise you what’s reasonable to negotiate with the employer — but he will do the negotiating on your behalf with his client.

So, be frank, but don’t be ridiculous. Tell the headhunter what offer you would accept. If the headhunter thinks your terms are nuts, he’ll tell you, but don’t hold it against him. He won’t go back to his client with an unreasonable request. But he’s not likely to drop-kick you out of the deal, either. He may try to convince you to take the offer as it stands. Or, if he thinks there’s some wiggle room in the offer, he will try to negotiate with you and with his client for a compromise.

Know where you fit in the negotiations

The headhunter’s position as the middleman makes it easier for you to work out the terms without jeopardizing the offer altogether. He wants to get the deal done as much as you do.

The client pays the headhunter, but the headhunter needs your cooperation, so he’ll work with you to set reasonable terms for your acceptance. The client gets the hire. You get a job you want on favorable terms. The headhunter gets his fee. All three parties must work together.

Of course, this all assumes you’re dealing with a good headhunter, but that’s another question, covered in another section of the book, Section 1: Understanding Headhunters. You’ll also learn more in the book about exactly why this approach to negotiating with a headhunter helps him negotiate a better deal for you. (Needless to say, the headhunter could be a she.)

What’s your experience been with headhunters? Did you get the deal you wanted? How did the headhunter handle the negotiations between you and the employer? How did you protect your interests?

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