Negotiating_a_Job_Offer

LeighThompson.com Negotiating a Job Offer Appendix 4 from: The Mind and Heart of the Negotiator (Second Edition) When negotiating a job, you need all of the essential skills covered in Part I of the book (chapters 1,2,3, and 4). In addition, you should be comfortable with your own bargaining style (and know its limits; see chapter 5). You should be well versed in building trust and rapport (chapter 6) and know the ins and outs of power (chapter 7) and how to kindle creativity (chapter 8). This appendix is designed to provide you with even more skills for this all-important negotiation that will reoccur throughout your life. We have organized the appendix into three phases: Preparation, in-vivo process, and postoffer. PREPARATION What follows is a preparation worksheet for an MBA student who is preparing for salary negotiations with potential employers. This is an extremely important negotiation because it will affect one’s livelihood and welfare for years to come. A misassumption at this point can have dramatic effects on one’s personal and professional well-being. STEP 1: FIGURE OUT WHAT YOU REALLY WANT This sounds easy enough, but for a 28-year-old, this means an ability to project forward in time and to be concerned with things like retirement and benefits. Karen Cates of the Kellogg School (1997) recommends working through a checklist of needs and wants (see Box A4-1). Cates further suggests a practical, step-by-step approach to compensation and benefits (see Table A4-1). STEP 2: DO YOUR HOMEWORK This means really researching the company and the industry. Fortunately, the Internet is dramatically changing the ability of people to get information quickly and easily, especially when it comes to salaries. Several Web sites offer salary surveys, job listings with specified pay levels, and even customized compensation analyses. For example, JobSmart, run by a regional public library agency in San Mateo, California, offers links to 150 free salary surveys on the Web that draw about 4,000 visitors each day. Exec-U-Net, a for-profit job search network, divulges free information about the salary, bonus, and stock options offered for about 650 upper-management positions, entirely updated every two weeks. However, for many jobs, cyberspace pay information represents only a starting point. In other words, these Web sites can only tell you if you are in the ballpark and can stop you from under-bidding yourself (see Sidebar A4-1) |Box A4-1 CHECKLIST OF NEEDS AND WANTS (CATES, 1997) | |Necessary Living Expenses |Additional Living Expenses | |[pic] |[pic] | |Housing (including utilities) |Recreation and entertainment (vacations, events, activities, books, etc.) | | | | |[pic] |[pic] | |Auto |Services (professional and household) | | | | |[pic] |[pic] | |Computer/ telecom |Continuing education | | | | |[pic] |[pic] | |Childcare |Children’s expenses (lessons, schooling) | | | | |[pic] |[pic] | |Insurance (auto, home, life,    professional) |Gifts, charity | | | | |[pic] | | |Personal (food, medical, clothing, household) | | | | | |[pic] | | |Student loan debt service | | | | | |[pic] | | |Taxes (income, property, etc.) | | | | | |Table A4-1: Compensation and benefits (Cates, 1997) | |Compensation |Retirement |Paid Leave |Protection | |[pic] |[pic] |[pic] |[pic] | |Salary |Pension/401K |Vacation, sick, and personal days |Insurance (life, disability, health, | | | | |other) | |[pic] |[pic] |[pic] | | |Bonus |Guaranteed pay plans (supplemental |Training time |[pic] | | |unemployment) | |Care plans (child, elder) | |[pic] | |[pic] | | |Other variable pay |[pic] |Holidays and special travel |[pic] | | |Savings plans |considerations |Wellness programs | |[pic] | | | | |Stock/equity interest | | | | | | | | | STEP 3: DETERMINE YOUR BATNA AND YOUR ASPIRATION A negotiator always has a BATNA. Some students who are beginning to negotiate with firms will agitatedly claim that they do not have a BATNA because they do not have any job offers in hand. What they are saying is that they do not have what they consider to be an attractive BATNA, but they inevitably have a plan for what they will do if they do not get a job offer. Perhaps they will travel to Europe; perhaps they will do freelance or volunteer work, take a research assistantship at a university, or search for a nonprofessional job while they continue their career search. All of these are possible BATNAs; they should be thought about and the best one focused upon and evaluated carefully. Our BATNAs are never as attractive as we would like them to be. The rare times when we have two or more fabulous job offers in hand, two bids on our house, and lucrative investment opportunities, we can afford to push for a lot more in negotiations. Obviously, you are in a much better position to successfully negotiate an attractive compensation package if your BATNA is attractive. It is important to think about how we might improve upon our BATNA. Most negotiators do not spend adequate time attempting to improve their current situation. As a result, they approach negotiations feeling more desperate than they need to be. Improving your BATNA is often difficult because it seems to be at odds with what you are trying to negotiate. Consider Tom, a second-year student who, in May, does not have a job lined up. Tom has an interview scheduled on Friday of next week with a telecommunications company. Feeling somewhat desperate, Tom discussed his upcoming interview with a friend, Lisa, who is practiced in negotiation. Lisa suggested that Tom attempt to line up a position as a research assistant in the marketing department of the business school. At first Tom resisted: "Why should I do that' Shouldn’t I do that if I strike out at the company'" Lisa then explained, "No, that is precisely the point; you will have a better interview (and subsequent negotiation) if you have alternative options" It took about three days of Tom’s time to talk with two professors who were interested in hiring a research intern to work on a marketing project at a local company. They were delighted to have Tom’s expertise and offered him a job that he was able to use as a BATNA in his negotiations with the telecommunications company, which eventually did offer him a position. |SIDEBAR A4-1. HOW THE INTERNET CAN HELP YOU OBTAIN A BETTER SALARY | |Executive recruiter Korn/Ferry International unexpectedly got a firsthand lesson in salary information on cyberspace when they created an electronic | |job-search venture called Futurestep with The Wall Street Journal. To compile an internal database of possible applicants for midlevel managerial | |vacancies, Futurestep offers people a free analysis of their salary and bonus potential, among other things. Unexpectedly, several Korn/Ferry | |recruiters signed up for Futurestep and found that they were underpaid. For example, Peter Reed, a 28-year-old recruiter in Korn/Ferry’s Chicago | |office, says that he found out he was 18 percent below prevailing rates. Reed says that Futurestep analysis will be part of his action plan when it | |comes to review time. The result: Korn/Ferry increased his base salary 10 percent (Lublin 1998). | STEP 4: RESEARCH THE EMPLOYER’S BATNA Developing your BATNA is only half of the work that needs to be done before the negotiation. The next step is to determine the other party’s BATNA, which requires tapping into multiple sources of information. Consider Sal, who recently received an offer from a small progressive software firm that had been in operation for only two years. She was reasonably happy with the offer but wondered what would happen if she attempted to negotiate some of the terms, specifically the salary. As a first step, Sal visited the career placement center and got all the printed information she could about the firm, which was not much because the company was so new. Next, Sal contacted some of the employees she had met while on her interview at the firm and suggested that they have a casual lunch. At the lunch, Sal was careful not to grill them for information but made inquiries into where the company was going and what problems there were to solve. This meeting revealed some important information about the firm’s current situation. Sal then went to the World Wide Web and did a search on the company, which revealed a lot of information about the company’s current prospects The Web sites turned up the names of some individuals who, although not employed by the company, seemed to have an insider view. Sal contacted these people through the Internet. Finally, Sal had a friend contact the personnel department of the company. The friend explained he was considering going to business school someday and wanted to find out about the company and its salary structure (all of this was true). Through her search process, Sal was able to better determine the following important information about the company: the wage structure of the company, where the company falls in the distribution of players in its industry, its standard package, insurance, which elements were variable (e.g., bonus, vacation), recent staff problems and needs, and what candidate qualities were considered most important. STEP 5: DETERMINE THE ISSUE MIX You have made your best assessment of the employer’s BATNA. ‘The negotiation is fast approaching Now what' The next step is to determine the issues that are important to you in this negotiation. Do not make the mistake of letting the employer define the issues for you. Be ready to talk about your concerns and priorities. After you have determined which issues are important from your perspective, go back through your list and attempt to create an even more detailed list, breaking down each of the issues into smaller and smaller subsets. For example, Andrew, in his negotiations with a Chicago firm, initially listed salary, signing bonus, vacation, and moving expenses as his key issues On a second pass through his list, Andrew listed base salary, fringe benefits, commissions, vacation duration, paid vacation, and flextime opportunities as issues to discuss with the employer. Breaking up the issues into smaller and smaller subsets does two things. First, it allows the negotiator to be much more specific about what is important (e.g., the paid aspect of a vacation or the number of days allowed off). Second, it provides much greater opportunity for creative agreements. In addition to focusing on the issues and concerns of importance to you, anticipate the other party’s perspective. Again, information and research can help here. STEP 6: PREPARE SEVERAL SCENARIOS Most likely, the negotiations will not go at all as planned. Rather than being caught off guard, prepare your response to several different scenarios, including the following: |[pi|The employer agrees immediately to your counteroffer. | |c] | | |[pi|The employer makes a low-ball offer (in your eyes) and flatly states, "This is our final offer." | |c] | | |[pi|The employer makes one small concession. | |c] | | |[pi|The employer asks you to make a reasonable offer. | |c] | | IN VIVO: DURING THE NEGOTIATION ITSELF You have done your preparation. Now it is time for the actual negotiation. THINK ABOUT THE BEST WAY TO POSITION AND PRESENT YOUR OPENING OFFER Remember to couch your offer in terms of a clear rationale. Use objective standards Focus and select those standards that are favorable to you, and be prepared to indicate why standards unfavorable to you are inappropriate. Consider Marie, who landed a job offer in a consulting firm. Marie is rather young for a senior management position and was offered a starting salary that was on the low side for senior management personnel. Marie did not have a particularly strong BATNA. In her next meeting with the employer, Marie carefully pointed out that she was indeed younger than most of the other senior management but that this was a great advantage for the company because she was young and energetic and on the up-slope of what was sure to be a long and productive career. In short, Marie sold herself as having more to offer; rather than as having a lot of experience. The strategy worked. ASSUME THAT THEIR OFFER IS NEGOTIABLE A survey conducted by the Society for Human Resource Management found that eight out of 10 recruiters were willing to negotiate pay and benefits with job applicants, but only one-third of the job applicants surveyed said they felt comfortable negotiating (Clark 1999). Most job applicants do not push employers at the negotiating table. The failure to negotiate a first offer from an employer can cost workers a lot of money. "A 22-year-old who secures a $2,000 increase in annual salary at his or her first job will, because of the compounding effects of years of raises to follow, most likely generate roughly $150,000 in extra income over the course of a 40-year career" (Clark 1999). The effect is even more dramatic for an MBA student negotiating a job offer of a $90,000. What’s more, if you do not negotiate for what you want in that brief window between your receipt of a job offer and your acceptance of it, you may never get it. You are never more powerful than when you are responding to "their offer" because it is the one time that the employer may want you more than you want him (Clark 1999). What are some things to ask for in your negotiation' (For a list of possibilities, see Sidebar A4-2.) Do not ask, "Can we negotiate this offer you have made'" because a negative response can put you in a weak position. Rather, assume that the offer is negotiable and begin by articulating your needs and interests Cates (1997) advises saying the following: "I have some questions about the insurance coverage that I would like to talk about if we can," or "I have some concerns about your moving allowance, and I need to talk to you about it." IMMEDIATELY REANCHOR THEM BY REVIEWING YOUR NEEDS AND YOUR RATIONALE Indicate your interest in working for their company, and tell them how your needs (and wants) can be met in a variety of ways. Many candidates have reached impasse because employers have falsely assumed that the candidates did not want the job when they did. Thus, keep reiterating your heartfelt interest in their company. Cates (1997) advises to "get your requests on the table and keep them there." According to Cates, salary negotiations are really about candidates helping recruiters to solve their problems. In other words, let the employer know what they can do to make their offer more appealing. This even comes to sharing your own prioritization and MAUT analysis of the issues. DO NOT REVEAL YOUR BATNA UNLESS YOU WANT TO RECEIVE IT Negotiators have a million ways of asking people about their BATNAs Asking a potential job recruit about his or her current salary and wage package is one of them. Remember that this is your business, not the recruiter’s. If you are currently employed, redirect the discussion by indicating what it is going to take to move you (e.g., a more exciting job and a wage package commensurate with the job). If you are not employed, respond by explaining what it will take to hire you. Again, ward off direct attacks about previous wages by explaining that whether or not you will accept a position depends on the nature of the job offer and wage package. You should be prepared to take the initiative in the conversation, especially for less-structured interviews further along in the process of negotiation. It is often helpful to practice by role-playing. If the employer attempts to get you to talk about why you are leaving a former job or why you are interested in leaving, avoid falling into the trap of trashing a former employer, even if you did have a miserable experience. It is a small world, and there could be a relationship involved that you do not immediately see. Even more important, the employer will probably get the wrong impression about you (e.g., regard you as a troublemaker or as overly critical). If you have not yet been offered the job but sense that the employer wants to find out what you desire in a job offer, avoid talking about salary or specific terms until you have a job offer. You are in a much weaker position to negotiate before you have a job offer than after you are offered a position. If you have been told that "things will work out" or that "a job offer is coming," express appreciation and inquire when you will receive formal notice. After that, schedule a meeting to talk about the terms. While you are negotiating, you should assume that everything is negotiable. If you are told that some aspect of the job is "not negotiable," ask questions, such as whether everyone (new hires and veterans) receives the same treatment. REHEARSE AND PRACTICE It is important to plan for negotiation. According to Michael Chaffers, a senior consultant with CMI, a negotiation group in Cambridge, Massachusetts, "A pitch for a raise is no different than making a presentation on any subject: It helps to practice before-hand and even do some role playing. Tell an empty chair what you plan to say to your boss (though you might want to make sure no one’s around to see you). If you can find a willing participant, have them play the boss, while acting cantankerous and giving you flack" (Anonymous 1999,96). |SIDEBAR A4-2. THINGS TO ASK FOR WHEN NEGOTIATING AN OFFER (CLARK, 1999) | |Some things to ask for when negotiating an offer (other than a higher salary, which is always worth asking for): | |[pic] | |Free parking | | | |[pic] | |Seasons passes (ski lift, opera, whatever your fancy) | | | |[pic] | |Money to move your hobbies (horses, motorcycles) to the new location | | | |[pic] | |Right to hire an assistant | | | |[pic] | |Right to take three-hour lunches (as long as the work gets done) | | | |[pic] | |Right to take off work if the wind is blowing at a certain speed (if your hobby is windsurfing) | | | |[pic] | |Car | | | |[pic] | |Signing bonus (or bonus for achieving certain milestones) | | | |[pic] | |Severance pay | | | |[pic] | |Stock options or profit sharing | | | |[pic] | |Accelerated performance review (if you are confident that you need only 6 months to prove you deserve a raise) | | | |[pic] | |Clothing allowance (typical only in the fashion and entertainment industries) | | | |[pic] | |Computer, cell phone, laptop or other home-office equipment (especially common at technology companies, but spreading quickly) | | | |[pic] | |Flexible scheduling (does not cost real cash) | | | |[pic] | |Memberships: dues for professional associations and athletic clubs | | | |[pic] | |Telecommuting: ask for this ahead of time, since most companies still handle this worker by worker | | | |[pic] | |Tuition reimbursement and coverage of books, fees, non-core courses | | | |[pic] | |Vacation: extra days and scheduling | | | POST-OFFER: YOU HAVE THE OFFER, NOW WHAT' DO NOT IMMEDIATELY AGREE TO THE OFFER Do not start negotiating until you have a firm job offer and a salary figure from the employer. Do not prolong things, however, this only frustrates the employer. Instead, give the employer positive reinforcement. Cates (1997) suggests something like, "This looks great. I need to go over everything one last time before we make this official. I will call you at [a specific time]." GET THE OFFER IN WRITING If the employer says that it is not standard to make written offers, be sure to consult with others who would know this (e.g., the company’s human resources division). At the very least, inform them that you will type up what your understanding is and put it in a letter or memo to them. It is a good idea to keep notes for yourself regarding the points agreed to during each meeting. Further, you can offer to type up your notes and send them to the employer for clarification. BE ENTHUSIASTIC AND GRACIOUS Someone has just made you an offer. Thank them and show your appreciation, but do not accept immediately. Say, instead, "Let me go home and think about it." Make an appointment to return the following day and state your negotiating position in person. ASSESS THEIR POWER TO NEGOTIATE WITH YOU Before you begin negotiating or contemplating a counteroffer, determine who in the company has the ability to negotiate. Generally, those persons higher up in the organization are the ones who negotiate and the ones who care most about hiring good people. You should be well-versed about the advantages and disadvantages of negotiating with an intermediary, such as a human resources manager (see chapter 9 on multiple parties). If you sense that things are not going well in the negotiation, try to bring someone else into the loop. However, do this in a gracious way, so as not to antagonize the person with whom you are dealing. TELL THEM EXACTLY WHAT NEEDS TO BE DONE FOR YOU TO AGREE A very powerful negotiating strategy is to let the employer know exactly what it will take for you to agree. This is an effective technique because the employer can put aside any fears about the negotiation dragging on forever and being nickel-and-dimed to death. When you make your demands, though, ground them in logic and clear rationale. Requesting something too far out of whack may lose you the job. Ross Gibson, vice president for human resources at American Superconductor in Boston, says he judges applicants by the way they negotiate-and withdraws offers from those who come across as immature or greedy (Clark 1999). DO NOT NEGOTIATE IF YOU ARE NOT OR COULD NOT BE INTERESTED Suppose that you are the lucky person sitting on four job offers, all from consulting firms (A, B, C, and D). You have done enough research, cost-benefit analysis, and soul-searching to determine that, in your mind, firms A and B are superior in all ways to firms C and D. The question is: Should you let firms C and D off the hook, or string them along so as to potentially improve your power position when negotiating with firms A and B' Our advice is to politely inform firms C and D that you will not be accepting their offers at this time. You still have a wonderful BATNA, and this saves everyone a lot of time. EXPLODING OFFERS Exploding offers are ones that have a "time bomb" element to them (e.g., "Our offer is only good for the next week"). The question is how to deal with exploding offers. Consider the case of Carla, who has no less than six interviews scheduled, including one interview at company A. Company A interviews Carla and makes her an exploding offer, with a deadline of the following week. Carla’s interviews extend into the next four weeks. What should she do' This is obviously a gambling decision (see appendix 1 on risky decision making). In our experience, firms usually do not rescind exploding offers once they have made them (unless it is for family, medical, and emergency reasons, as a matter of courtesy). Generally, we advise that job candidates who receive an exploding offer above their BATNA seriously consider the offer. It certainly cannot hurt to inform your other companies that you have an exploding offer and move up the time of the interview, if at all possible. DO NOT TRY TO CREATE A BIDDING WAR Bidding wars regularly occur on Wall Street, in professional athletics, and in the business world. We do not advise, however, that job candidates attempt to create bidding wars between companies. Rather, we advise that job candidates signal to potential employers that they have attractive BATNAs, that they do not want to start a bidding war, and that they tell their top-rated company what it would take to get them to work at the company. KNOW WHEN TO STOP PUSHING According to Cates (1997), it is important to know when to stop negotiating. Cates suggests that negotiators stop when they see one or more of the following signals. |[pi|The other side is not responsive. | |c] | | |[pi|Reciprocal concessions are becoming miniscule. | |c] | | |[pi|After some back and forth, they say "enough!" | |c] | | USE A RATIONAL STRATEGY FOR CHOOSING AMONG JOB OFFERS If you find yourself in the lucky position of having multiple offers, you are then faced with a choice. First, you should recognize this enviable position as an approach-approach conflict. How should you weigh the choices' The simplest way is to use MAUT by constructing a grid listing the choices along a row (e.g., firm A, firm B) and the relevant attributes along a column underneath (e.g., salary, fringe benefits, travel, vacation, bonus, etc.). Then, fill in the grid with the details of the offer and how they "stack up" compared to the others (on a 1 to 5 or 1 to 10 scale in your mind). Next, you can simply add the columns to find a quick "winner." A more sophisticated version of this strategy is to multiply each grid value by how important it is before adding columns (with importance defined on a 1 to 5 scale). For example, for most people, salary is highly important (maybe a 5) whereas moving expenses are less important (maybe a 1 or 2). This gives a more fine-gained assessment (see appendix 1 for a step-by-step approach to the MAUT).