Negotiating Job Offers

Posted by David Wallace on December 4, 2009

When you bring new sales reps on board, you need to negotiate job offers.  To drive a successful outcome, there are a number of principles and strategies to keep in mind as you negotiate.

Negotiation Basics

  • Define the limits of your offer before you begin a negotiation.  Understand what your goals are, the value of each of the elements of your offer and what you are willing to trade.
  • Herb Cohen, author of the best seller You Can Negotiate Anything, says that when negotiating, “You’ve got to care, but not that much!”  Don’t get attached to gaining an agreement.  Sometimes, you’ll gain more if you are willing to walk away from a negotiation.
  • Whenever possible, understand your candidate’s negotiating position.  Keep in mind that what’s valuable to you may be very different than what’s valuable to your candidate. Anticipate his or her negotiating strategy.
  • Rarely are you negotiating a zero-sum game.  Find positions that benefit both you and your candidate.  Avoid winning at the candidate’s expense.  Remember, you want the person you’re negotiating with to work for you, without regret, and to feel good about the deal.
  • Never negotiate on your own behalf.  When negotiating job offers, have your human resources representative or recruiter manage the negotiation for you.  By having an intermediary, you avoid the risk of committing to terms without sufficient review.
  • If you must negotiate on your own behalf, never commit to terms without giving yourself time to fully consider what you are agreeing to.  Defer to a higher authority for approval (even if you own the company!).  The higher authority can be your boss, president, or board of directors.  If there is no higher authority, defer to one anyway.

The Compensation Discussion

  • Don’t bring up compensation during the first interview.  You want to focus on skills, qualifications and cultural fit.  Save the compensation discussion for the second interview when you’ve narrowed your applicant pool.
  • Don’t be the first person to name a compensation number because that becomes the starting point of negotiation.  If the employer speaks first, the number will likely go up.  If the applicant names a number, you can negotiate down from there.
    • If you ask what they are making, the applicant may counter by asking what you are offering.
    • If you then ask what their salary requirements are, they may ask how you value the position.
    • This may go back and forth several times as each party tries to gain an advantageous position.
    • As an employer, I used the “defer to a higher authority” tactic effectively.  It gives you a reason for getting information from the application first.  You can say “I at least need a range to make sure we’re on the same page.”  Or, “The Board won’t allow me to proceed unless we have some numbers.”
  • Recognize the risks and rewards associated with bonuses.  In a weak economy, you’re not likely to pay the full amount.  In a strong economy, you may pay more than the target bonus.
  • Fewer companies offer signing bonuses these days.  If you offer a signing bonus, explain that it covers transition expenses such as foregone commissions, relocation, commuting, etc.

Making the Deal

  • Recognize the value of trade-offs.  You might gain a reduced base salary in exchange for variable compensation, perks or other benefits.  You may opt to increase the base salary if your candidate doesn’t need a health plan, car allowance, or other benefit.
  • Include all perks and benefits in your offer.  Quantify them.
  • Use perks as bargaining chips in the negotiation.  If you can gain a concession by offering a high-value/low-cost perk, do it.  Flexible working hours or a work-from-home option are examples of such perks.  The same can be said for low-value/high-cost perks such as health care insurance for an employee whose spouse has a plan that covers the employee.
  • Companies are offering relocation packages less frequently these days.  If you do offer relocation, keep in mind that packages vary widely.  They can range from total reimbursement (very rare) to flat dollar amount.  Sometimes these packages include moving expenses, temporary living expenses, and commuting expenses. Rarely are mortgage points covered and very rarely is sale of the employee’s house guaranteed.  Many companies manage their risk by capping the relocation expense reimbursement.

Finally, quantify the value of the total compensation package, not just the cash portion.  Include all perks and benefits including vacation, holidays, retirement plan, bonus potential, and business tools (cell phone, computer, and car allowance).  Demonstrate how generous your offer is beyond the base salary.

For more information, contact Wallace Management Group at (203) 834-0143 or email David Wallace.

© 2009, David P. Wallace

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