Negotiating Your C-Suite Contract
The latest issue of Shields Meneley Partners’ newsletter Executive Leadership Insights was written by Hugh Shields, a partner from the firm.
Ninety percent of the executives we work with are initially quite poor at talking about themselves and their own value proposition. They are great at talking about their companies, products, services, and the benefits that the company brings, but when they start to talk about themselves, it is much more difficult for them to articulate their differentiation in the marketplace. That is why having a seasoned career coach/career transition expert who only focuses on top executive matters as part of his or her team is critical when it comes to negotiating their next contract with their new employer.
Helping our clients negotiate their contract is one of the most exhilarating, fun, tense and rewarding parts of my career as a transition expert. We love to help clients on the front end of the process by defining why they are different, how they are different, and articulating the accomplishments that have delivered incredible value in their career. Frankly, the clients are just too close to it and there are many emotional triggers creating barriers that can get in the way.
On the back end, when it gets to the negotiation of the contract, it is really fascinating to see how these same executives, who in their operating roles are very assertive and very strong in how they negotiate on behalf of the company, are often far more timid and they back off when it comes to negotiating their own contracts for themselves. They do not want to push too hard for fear they will essentially pollute the well that they're about to drink from. These very smart people tend to be not very good at knowing where to push in their contracts and how much to push to get them there, and that is where we can be of great help. We bring in an employment attorney as part of our negotiating team to make sure our executive is getting full value out of his or her contracts, and oftentimes, we are able to help the employer recognize the value of our clients and accept a much more robust and valuable counteroffer. So much so, that the new agreement often more than pays for our fee by what we generate in increased income to these executives.
When a client has gone through the interviewing process, they have probably had four to eight interviews at different levels of the company with various executives to try and understand the company. Once the firm gets comfortable and says: "Okay, we're going to focus on you as the executive that we want to hire and to extend an offer," a critical point has been reached because what the employer is really saying is that they are essentially stopping their search. Even though they are likely keeping Nos. 2, 3, and 4 warm in the background, their intention is to finalize the search with this lead candidate.
This is where an experienced career transition coach comes in - one who knows the world of executive comp intimately.
A lot of executives at that point will pull back and say, "OK, this is great! I've got it. I want to get this thing closed quickly and I want to get in the seat and go." Executives at this level are highly driven people who crave an operational challenge and just want to get to work. That is good for getting the job done; but equally as detrimental to negotiating their own work agreements. As a result, their negotiating skills are not as assertive as they normally would be, and they are not as likely to be thinking about how they can improve their own positions. When it comes to sizing up his or her own true value to the marketplace and to the new employer, most executives will simply look at the offer relative to what they made most recently in their last or current job, and that is not always a very good way to consider it. The circumstances in the new company may be very different (e.g., greater responsibilities, broader scope of authority, greater business model risk, poor geographic location, etc.) and may warrant greater compensation.
When the offer comes in, we put a negotiating team together comprised of one of our advisors, an employment attorney, and our research department who will look at what the market value is for that position. We usually look at a dozen peer companies of similar size and similar industry that will supply us with a robust understanding for the market value of that offer. Understanding market value is critical to a successful negotiation, but it's hard to get there without that research. Once you understand your market value, then you can understand whether that offer is above or below what the firm is offering you. Obviously, if the offer is above market value and there aren’t any other considerations, then we just say "Good" and see if there are other non-compensation-related areas that we can look at to enhance.
While most execs focus on the most visible and tangible elements of an offer – base salary, annual bonus and the various forms of equity - there other non-comp benefits can also be critical. For example, these can include relocation allowance, signing bonus, indemnification, automobile, and an array of other benefits. There are a lot of things that we can look at, but once we determine where we are relative to market value, then that sets the tone of how aggressively we push and where in that offer we will push.
The executive has to be out in front as the public profile for this negotiation. When those negotiations are going on, our team is behind the executive constantly providing him or her the framework of where to push and where not to push. We never get out in front of the executive with the company because management wants to negotiate with the executive directly, not through a third party. We always respect the process.
We also help our clients take note about how their likely new employer behaves during these final negotiations because what I've found over the years is how a company acts at this critical junction is indicative of the culture of the organization. Cultural fit is THE most important predictor of success and fulfillment in a new role. If management handles itself in a very professional way, that certainly tells a good story, but if they start becoming aggressive and almost combative, which I've seen in some negotiations, that is a big red flag that should cause the executive to be more circumspect about the company.
Anytime our client has negotiated an offer, it is done so with an informed point of view that is difficult to refute. Nearly all of our clients’ new employers accept a rebuttal. After more than 1,000 contract negotiations only one time in my career do I recall when an executive started negotiating his contract and the company suddenly withdrew and said, "Well, if you're going to negotiate this then you're not the person for us." That was a very strong indication of the very rigid thinking on the management team and their decision making style. It was such non-normative behavior with a potentially disastrous outcome that he learned this was probably not the right place for him. But firms expect that you will negotiate the terms of their offer. The key is HOW you conduct your negotiations. You want to pick just three or four items to firmly but cordially negotiate, explain why these are important to you and your family, and reassure them that if these items are met, you’ll be ready to sign the employment contract (or letter of agreement).
As a savvy executive, having the right team behind you can make all the difference between getting a good offer and the best offer.
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