Maximizing Negotiating Power in Employment Compensation Discussions

The purpose of this article is to provide job seekers with relevant information about the last step in the job search process. Specifically, what to expect when HR or the hiring manager starts compensation discussions. The conversation will typically begin with one of the following scenarios: 1) the manager asks the candidate to share their compensation expectations or 2) the manager suggests a compensation package for the open position, or a variation occurs when the manager proceeds directly to making a verbal job offer to the candidate, complete with details of the compensation package.

The Dynamics of Negotiating Leverage

The logic for each of the two examples should be obvious. In the first example, by having the candidate express their compensation expectations, the hiring manager will learn what the candidate is expecting to earn, thus giving the hiring manager a definite advantage (leverage) in negotiations. When the candidate is the first to voice a desired compensation, the candidate has no way of knowing if the number given is higher or lower than the hiring manager’s planned compensation offer. There is a good chance upon hearing the candidate’s thoughts on compensation, the manager will adjust the planned negotiating strategy in ways to bring the final compensation package into alignment with the employer’s budget for the position.?

In the second example, the hiring manager is transparent by telling the candidate the intended starting salary, bonuses, and benefits for the position. This strategy is commonly used to see how a candidate reacts to the proposed compensation. It is really a trial balloon. A variation of this example is when the hiring manager goes directly to making the candidate a verbal job offer. Each of these examples are meant to start compensation discussions.?

The candidate may never know what prompted the hiring manager to start a compensation discussion with one of the three approaches. If you were the candidate and presented with the above examples, which example do you believe gives the best negotiating advantage to the candidate? Before you answer, the conventional wisdom for job seekers who make the first offer goes something like this: never put the number on the table first. If you give the exact or lower number than what the employer was planning to offer you, you may have missed an opportunity to go higher, and if you lowball yourself, then you will not be able to recover. Therefore, if that wisdom is true, then the candidate must not give the hiring manager a negotiating advantage by offering the compensation amount that the candidate is expecting for the job.

Time is up. How did you answer the question, example one or two? Based on the information supplied above, the negotiating advantage should be a clear shift to the candidate if the hiring manager either directly suggests compensation or goes ahead and makes a complete job offer to the candidate. Therefore, the answer must be two, with both examples of the second choice should give the candidate the negotiating advantage.?

Later in this article I will explain in detail how to deal with both the first and second examples. There are tried-and-true ways that should give the candidate increased ability to negotiate, which if correctly presented and if the manager yields to the candidate, there is a high probability the candidate will have negotiating leverage.

Before we jump to discussing how the candidate should try to gain leverage at the start of negotiations, let us first look back at how the now candidate transitioned from being a job seeker after what may have been a long and challenging job search, is now after many interviews, the final candidate in position to land the job.

As previously mentioned, the purpose of this article is not to discuss all the steps of the job search process, nor is the purpose to discuss how to manage protracted negotiations. The primary purpose is to supply information about the last step of the employment process. Specifically, what a candidate should expect to happen when compensation is the final topic for discussion.

Preparing for Compensation Negotiations

To effectively prepare for compensation discussions, the initial preparations should have previously taken place back when the candidate was planning to start a job search. It was at that point, the first step in all job searches, the job seeker should have performed a self-evaluation of their education, experience, skills, values, and passions to help identify the specific jobs/positions, companies, industries, and geographic areas to conduct their job search. The next step was for the candidate to undertake detailed due diligence of the market for the targeted positions based on the results of the candidate’s self-evaluation and finally the candidate should have prepared a Job Search Plan to find similar jobs based on their previously defined job specifics.

It was while doing their job market due diligence that the job seeker should have tracked the compensation data that they found in job postings for each of the jobs they planned to pursue during their job search. It is by tracking specific compensation data, the job seeker can compile enough knowledge to create a specific compensation data file of observed pay ranges for similar positions, in similar industries, and more importantly, when the job seeker reaches the time to have compensation discussions (negotiations) with a potential employer, the job seeker will be well prepared to negotiate their starting compensation.

Once the hiring process finally reaches the compensation discussion phase, and the job seeker becomes the final candidate for the job and given the previous upfront planning and market due diligence conducted, the candidate will be in a strong position to negotiate their compensation. However, for whatever reason, the candidate does not consider negotiating to be one of their core competencies, then I strongly urge the candidate to read books or articles that address the art of negotiating.

There is much written about how to develop negotiating skills. It will be well worth doing a Google search to find articles or books about how to negotiate, specifically understanding the nuances of negotiating compensation. Another way to increase negotiating knowledge is by spending time speaking with trusted colleagues or friends that went through a successful job search and consider themselves good negotiators.?

If after reading articles and/or speaking with colleagues about negotiating, the job seeker still believes their confidence level has not increased, then the job seeker should consider engaging a career transition expert who will provide guidance throughout the job search process, including help with interviewing skills, evaluating job offers, and coaching the candidate throughout the negotiating process.

When the time arrives to discuss compensation, the candidate must understand it is rare for the hiring manager to make their best compensation offer straight away. Assuming this to be true, and if a hesitant candidate does not try to negotiate something better than the employer’s first offer, there is a good possibility that due to the candidate’s eagerness to land the job or their lack of patience to negotiate may result in total compensation falling short of the candidate’s going in expectations.

As an aside, all professionals are expected to have strong negotiating skills, not only to negotiate their own compensation, but also to negotiate a myriad of other business transactions facing every professional every day. As with all core business skills, the art of negotiating needs to continue developing throughout one’s career.

When considering all the work that goes into looking for that perfect job, which includes researching specific jobs, planning the job search, networking, researching potential employers prior to submitting applications, and even including interviewing for some jobs that may not go anywhere, but when the candidate finally reaches that second, third or even the fourth interview with a potential employer, it’s at that point when a candidate comes to realize they are actually the finalist for that particular job.??

It is that very moment in the job search process when the candidate must be prepared to respond when the hiring manager asks the candidate, “what are you looking for in compensation?”? When a candidate hears that direct question, the hiring manager is signaling they want the candidate to be the first to express their compensation expectations.

The Power of Starting Strong

When the candidate is asked any question regarding their compensation expectations, I strongly advise candidates to avoid providing an expected or target compensation number. Instead, a candidate should consider saying to the hiring manager something like, “You are in the best position to decide the compensation for this job. I would prefer, if you believe I am the best candidate for this job, to make me a job offer.”?

This is usually the point in the job search process that discussions turn into negotiations. When this happens, candidates must be prepared to listen, evaluate, and consider negotiating for the job. Whether it is the hiring manager asking what the candidate is looking to earn or when the hiring manager proceeds to make a verbal job offer that is below the candidate’s expectations. In that instance, my suggestion, to all candidates that I have mentored, is to respond, “Thank you very much for your thoughtful offer. It will be helpful if you email me the details of your offer. That way I can carefully read and think about it overnight. Will it work if I get back to you tomorrow?”?

Here is where a candidate needs to have an elevated level of confidence and patience. It is best not to accept the first compensation offer. Even if a candidate believes, based on their compensation research, the offer meets their expectations, they should still wait to see the offer in writing, that way the candidate can take the needed time to carefully evaluate all details of the offer, thus relieving the candidate of the pressure to accept a job offer on the spot.? Besides, the written offer may not agree with the verbal offer. Mistakes do happen, so it is always best to verify and understand the job offer details before accepting the job or making a counteroffer.

To reiterate, it is always wise not to accept a verbal employment offer. It is best to be patient and wait until there is a written offer in hand. Then always ask for time to evaluate all the details contained in the offer letter. When received, the candidate should carefully evaluate the positives and negatives of the entire job offer. Keep in mind, no job is perfect, and the candidate may not get everything they expected. But that does not mean it is not an excellent job offer.

After evaluating the job offer details, and if the candidate only finds minor details that need clarification, the candidate should bring any questions to the hiring manager and if there is agreement on your requested revisions.?The candidate needs to request an updated offer letter.?At this point, the negotiations are complete, and the candidate should consider accepting the job. If that happens, the only thing left to do is to sign the offer letter and agree on your start date.

But, if the employment offer continues to not meet the candidate’s expectations (either responsibilities and/or compensation), and based on the candidate’s research of market compensation, the offer is clearly below the compensation for similar jobs/responsibilities paid by comparable size companies in similar industries in the same market where the candidate will be employed, there is more work to do.? In this case, candidates should ask the hiring manager to consider adjusting the employment terms, (responsibilities and/or compensation) to something that more closely aligns with the candidate’s expectations and is also comparable with the market compensation based on the candidate’s previous due diligence.?

Based on my experience, both as a job seeker and career consultant, once the hiring manager makes the decision that the candidate is the person they want to hire and a job offer has been made, this is when the candidate will have the greatest negotiating leverage. But the candidate needs to proceed carefully and without delay to make a counteroffer.

It is important to understand, if a candidate accepts a position without trying to negotiate, they will never know what salary, bonuses, and other benefits they may have left on the table.

This is the time for the candidate to try to take a strong, but reasonable lead, in negotiations. If there are extended negotiations, try to keep discussions verbal, and when there is agreement on the details, the candidate needs to confirm with the hiring manager to document those changes. Verbal employment negotiations are typically more productive since differences can be ironed out without protracted email exchanges. Plus, verbal negotiations provide an excellent opportunity for the candidate and the hiring manager to begin bonding.

Components of Compensation

When negotiating, candidates need to be aware there may be space available to negotiate a variety of add-ons to cash compensation. To educate the job seeker/candidate, please refer to List A and B in the Appendix at the end of this article. Each list delineates various compensation components that candidates might want to consider requesting one or more components to be included in their total compensation package. List A are common compensation components that US employers may provide. List B are additional compensation components that may be available for negotiation by very senior level candidates (Key Executives) in the US. But do not assume every employer will even consider discussing the components on either list.

Finally, the two lists should only be considered suggestions when negotiating with a potential employer. Candidates should review the two lists and carefully evaluate any benefit(s) they want to ask to have included in their compensation package. Keep in mind, as previously mentioned, the employer may not be receptive to include any additional benefit(s) a candidate would like. If this occurs, the candidate should carefully consider if the added benefit(s) is worth continued discussion. But do not be surprised if the employer wants to conclude compensation discussions or there may be the possibility the employer may suggest exchanging the added benefit the candidate requested for another available benefit. One warning at this point, when negotiating, the candidate must be careful not to appear overly aggressive or greedy. If the candidate comes across as demanding, there is a risk the employer may view a candidate as excessively strong and withdraw their offer. Unfortunately, if this happens, the candidate will need to restart their job search.

Navigating Administrative Hurdles

A word of caution to the reader of this article, be aware as you negotiate, not all benefits in the below lists will be something the employer is willing to provide for any employee. The available compensation and benefits listed below may vary depending on the geographic location, size of the organization, the industry, your specific job and finally, the company’s financial ability to meet your compensation needs.

Another caveat, the candidate should never be the first to raise the subject of compensation during any job interview. From my experience, it is not unusual for job posts to include a range for starting salary and benefits; therefore, there should be no need for a candidate to even ask what the compensation will be, unless of course the candidate’s expectations are above the range, but then it will appear to the hiring manager you did not completely read the job post. Candidates must be patient during all interviews and wait for the hiring manager to start compensation discussions. This is an unwritten rule when interviewing for a very senior level position. Compensation discussions will typically happen extremely late in the interview process, so do not be overly anxious to rush the compensation topic.?

Keep in mind, when the hiring manager decides the candidate is the best fit for the job, they will normally want to quickly move to complete the hiring process. When this occurs, the pace will typically work in the candidate's favor.

One last point, when dealing with a job posting that included compensation and the hiring manager makes a job offer that is within the range, or at the top of the posted compensation level, it may be a challenge to get the hiring manager to go above the posted compensation level. But it does not hurt to give a persuasive presentation, e.g., higher education, greater experience, or skills, to justify a higher starting compensation than what was in the job posting. If you can get the hiring manager to agree to an increased starting compensation or even moving forward the timing of a salary increase, it is well worth your request, but do not expect the increase to be materially above the compensation amount detailed in the job posting or even an accelerated salary increase may still not bridge the gap.

Something to watch out for, if the written employment offer is late in arriving, do not hesitate to call, and ask for the document so you can sign it prior to starting the job. At this stage of the employment process, there can be delays, so be gracious and consider it a minor administrative snafu. But until you receive the written offer, do not hesitate to hold off on discussing a start date. If at any time during the process, the potential employer tells you they do not give written (email) employment offers, consider it a red flag, and you should only continue based on your own good judgment.

Summary of Job Seeker Requirements:

The Job Seeker/Candidate should…

1.? initiate self-evaluation of education, experience, and skills to identify potential jobs to target during a job search.

2.? determine compensation expectations based on market due diligence for similar targeted job(s)

3.? possess high negotiating confidence and if not, the job seeker must find ways to increase negotiating skills prior to commencing a job search

4.? never be the first to start a compensation discussion

5.? always defer to the hiring manager to be first to communicate compensation details

6.? never accept a verbal job offer. Always request a job offer to be in writing. Always ask for time to evaluate the details of a job offer prior to accepting. Always compare the job offer details with the information gathered from the due diligence and compensation components delineated in the below Appendix.

7.? always be prepared to negotiate compensation

8.? always be patient when negotiating compensation

9.? never be overly aggressive when negotiating compensation

10. always understand the final compensation package may not completely meet candidate’s expectations

11.?be prepared to walk away if the hiring manager will not put a verbal job offer in writing.

?To conclude, wherever the job search may take you, I wish you enormous success!

Appendix

List A

Common Compensation Components that United States employers may provide to full-time employees:

1.? Base Salary and benefits, including family health and dental coverage, life insurance, Long-term disability coverage (LTD), minimum two weeks of vacation.

2.? Various bonus opportunities

3.? Profit Sharing

4.? Accelerated salary reviews

5.? In certain situations, a Sign-On Bonus for critical positions

6.? Pension Plan and/or 401(k) retirement plan

7.? Employee Stock Ownership Plan (ESOP)

8.? Flexible work schedule

9.? In a Covid-19 world, there may be a possibility to work remotely

10.? Severance package, including benefits and limited career transition assistance

11.? Depending on the job, companies may provide an auto, including operating expenses and fuel reimbursement

12.? For a recruited candidate, the employer may reimburse temporary housing and moving expenses, mortgage rate differential, home closing costs and in certain situations, reimburse current home when sold below appraised value

13.? Childcare assistance

14.? Commuting to work allowance

15.? High-speed home internet connection

16.? Company-provided laptop computer

17.? Company-provided cellular phone

18.? Company-provided coach/mentor to help with employee’s assimilation into the company and future investment in developing employee’s management/leadership skills

19.? Always ask for a detailed position description, which details responsibilities and decision-making authority

List B

Additional Compensation Components that United States employers may provide to Key Executives:

1.? Multiple year employment agreement

2.? Minimum three - four weeks of vacation

3.? Stock Options/Grants

4.? Performance stock awards

5.? Customized incentive plan

6.? Deferred compensation plan

7.? Private membership, e.g., golf or lunch club

8.? Guaranteed severance, including salary and other benefits, along with enhanced career transition assistance

9. ? Tax, legal and investment counseling

10.? Annual physical examination

11.? Reimbursement for living and travel expenses for “long distance commuting” if required of employee to do job??

12.? Permission to sit on Boards of other companies when there is no conflict of interest

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