Negotiating your compensation, part deux

Feb 10, 2015
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rudevc_employee_motivationWhen I first moved to France fourteen years ago, the joke among educated expats was that the best way to get hired for a job in France was to apply for one in which you possessed direct experience in the exact same sector but for lower pay.

This is admittedly a slight exaggeration, but back then it was practically unheard of to change sectors (how could a marketing veteran of Unilever or J&J possibly help a technology company?), let alone even apply for a job without having the ‘right school’ on a résumé. On those rare occasions where an outsider made it through the filters, heaven help them if they expected to enter an established organization at anything but a junior compensation level on probation.

Globalization has forced hiring managers in France to broaden their thinking. Moreover, an increasingly dynamic startup ecosystem has begun to turn conventional French management wisdom on its head. Good startups care less about educational or sectorial pedigree and are more interested in hiring someone with the talent and energy to execute. Of course, startups need to remain capital efficient, possess limited financial resources to dole out huge salaries, and unfortunately still face complexities in granting equity compensation in France.

Yet in startups and large corporations alike, employees should approach every job prepared to periodically request a compensation negotiation. As I’ve written earlier, compensation does not necessarily mean salary, and negotiation does not mean throwing a tantrum.

Set the tone at the hiring stage, then follow through

The first of such negotiation opportunities occurs at the hiring stage. I am astonished to continue to meet candidates who accept the employment terms which they are offered verbatim without any discussion. Less surprising but even more common, once hired, employees rarely revisit the topic of their compensation with their employer on a proactive basis. The evolution of their compensation tends to be more reactive, i.e. they put their heads down and work diligently throughout the year, but then sit back and await their boss’ decision on their bonus and raise, if any, at year-end.

Winning organizations invest in their employees. They recognize that the incremental cost to invest in more training, empowerment, and compensation (monetary or otherwise) of their employees pales in comparison to the opportunity cost of having an uninspired workforce. Accordingly, winning organizations will respond constructively to an employee’s request for a renewed assessment of performance and compensation, for it represents an opportunity to enhance the employee’s motivation and contribution to the company.

Even if you believe that you’re not working in a winning organization (setting aside the suggestion that you should consider a different job), you’re doing yourself a disservice if you do not proactively initiate the occasional discussion about your compensation. Granted, you were hired to help propel your company forward. Prioritizing your own welfare in every single interaction with your boss would be overkill and undermine your legitimacy. However, once a year strikes me as a perfectly reasonable cadence for revisiting your compensation with your employer.

Actionable tips for negotiating better compensation

Here are a handful of wisdoms I’ve collected over the years which hopefully prove helpful to employees at many levels:

  • Admittedly a cliché, but good negotiators find win/win arrangements, not win/lose. They find ways to unlock value that could enlarge the overall pie. If your employer is rationale, they should be receptive to granting you things that are neutral for them but bring you value.
  • Be creative in identifying these other benefits. For example, beyond monetary salary and bonus, perhaps you would value other things that have negligible incremental cost to your employer. More flexible working hours, a new title, more autonomy, the ability to choose your own travel arrangements, some minor expense reimbursements like a new smartphone or laptop, an office upgrade, telecommuting opportunities, etc.
  • Beyond the win/neutral items, think in terms of benefits that will enhance alignment of your and your employer’s interests. Granting you equity in the company, for instance, has a cost to your employer but by improving alignment will likely bring mutual benefits that exceed the costs. Other examples of this nature could be: variable compensation like commissions, a success fee based on a specific achievement, a percentage of quantifiable cost savings generated by you, etc.
  • In addition to reflecting on potential benefits for you and your employer in advance of your discussion, good preparation also entails playing out a few scenarios in your in your mind. Know your reservation price: i.e. below which threshold will you not be happy? And know your BATNA, i.e. what is your best alternative if you do not obtain your reservation price. The first reaction to the concept of BATNA is often along the lines of ‘quit and find another job’, but there’s often a lot of middle ground to explore. Perhaps you could reduce your workload, become a part-time consultant, or at a minimum, accept the status quo for the time being but demand a commitment for another review within 6~12 months.
  • Find the right person with whom to hold this negotiation. Usually protocol dictates that it be your direct manager, but sometimes it might make sense ask their permission to discuss the matter with someone else, such as your boss’ boss, or the HR director. Furthermore, know if your boss has full authority to decide on the matter or rather needs to ‘sell’ your request internally. Find a way to encourage your boss to champion your cause and give them the ammunition to do so.
  • I once hired an employee for my startup that requested we guarantee him in his contract a dedicated, semi-annual lunch with my cofounder and me. I was a bit surprised at this candidate’s request (why would he want to have his two bosses checking up on him every 6 months?). But after a couple years of this, I realized that this new recruit had been incredibly clever: every 6 months he had an opportunity to extoll his achievements to us, and each time he presented his case for a compensation adjustment (which we always ended up granting in some form because his request was justifiable).