Nine Compensation Negotiation Strategies That Work

Originally published by Forbes.

Once an employer decides they want to hire you, your negotiation power is the greatest—so use it! Your ability to negotiate well will not only affect your livelihood for years to come but will also set the tone for your working relationship. So, it’s important to take good care and do it well. Regardless of your comfort level in negotiating, it is a skill that you can build through practice. It’s a delicate and highly nuanced balance between “you don’t ask, you don’t get,” and “pigs get slaughtered.”

In my work with scores of clients over almost two decades, I find that many people previously haven’t bothered to negotiate or don’t negotiate as well as they can because of either (1) lack of skill, or (2) discomfort and a dire need for closure. Sadly, in doing so, they have cost themselves dearly.

In a study by Linda Babcock at Carnegie Mellon University, MBA students who negotiated their salaries (mostly men), were able to increase their salaries by 7.6% (just over $4,000). While this may not seem like a huge margin, let’s look at the compound effects over time shown in her analysis.

Say Employee A negotiated his salary from $100,000 to $107,600 (a 7.6% increase). Employee B did not negotiate, and her salary remained at $100,000. Assuming they are both the same age and both receive a 5% annual raise, by age 65, how much longer will Employee B need to work to catch up to Employee A?

The answer is nine years.

If Employee A’s annual raises are just half a percent higher, this difference becomes 19 years.

If Employee A’s annual raises are one percent higher, the difference becomes 47 years.

The moral of the story is that if you don’t negotiate, you had better like your job, because you’ll be doing it a lot longer. Otherwise said: ALWAYS negotiate!

Download an excerpt on compensation negotiation strategies from the latest edition of The Career Handbook of Working Professionals.

So how can you optimize the value that you capture in your negotiation? Note that I said “optimize” and not “maximize.” It is not about squeezing out every last dollar at any cost. You want both parties to feel they’ve gotten a good (or at least fair) deal and you want to build the relationship. There are several strategies to accomplish this that you will likely use in some combination before, during, and after you receive a formal offer. The nine listed below are just a fraction of them.

Before the Offer

Discuss the offer before the offer. The recruiter or hiring manager may indicate that they’d like to proceed with making an offer. When this happens, this is your cue to (1) show excitement, and (2) offer broad guidance as to what you value the most. For example, you might say something like, “Terrific news! I’m looking forward to seeing the package you put together. I’d like to share with you what’s most important to me in considering an offer, which is to have most of my compensation weighted in base salary versus bonus, as well as ample vacation time and a relocation package.” Do not give them a salary target unless you feel likely are going to lowball you.

Construct your “yes” package. Before you receive the offer, ask yourself “What is the package to which that I’d be willing to say ‘yes’ on the spot?” You are not actually going to say “yes” on the spot—because you will be negotiating. This will give you a good benchmark against which to compare the offer once you receive it, and will inform where you need to focus the negotiation, and may even give you leverage in the negotiation.

During the Offer

Practice your poker face. Typically, the offer is made orally, followed by a more formal letter (typically after the terms are negotiated and final). When you receive the call with the details of the offer, stay cool. Listen. Take in the information. Express excitement (verbally, not the screaming, jumping up and down kind) but do not comment on the quality of the offer and pay attention to your non-verbal behavior. You might say something like, “I’m really excited to have gotten an offer. I’m going to take some time to digest this. Let me reach back out to you in the next day or two with any follow-up questions.”

Expect to negotiate. As mentioned earlier, always negotiate. One client of mine received an offer where the employer said, “Here’s our offer. We don’t negotiate.” Despite this, he ended up asking for more and getting 50% more equity. Moreover, there are some jobs, such as Sales, Business Development or other deal-driven roles like Venture Capital or Private Equity where it is expected that you negotiate since it is a core part of the job, and you risk losing face if you don’t.

After the Offer

Talk to the right person. I love recruiters. They play an important role in the process—but they are not the decision makers. You want to talk to the hiring manager. This is the person whose job you are going to make easier, who can better understand the value you add, and most important, who can approve your requests. It may be that the recruiter communicates the initial offer to you. If this is the case, you just want to say something like, “Thank you so much for all of this information. I’m going to reach out to Jessica with my questions, since as my hiring manager, she’d be best able to answer them.” However, if the search is being conducted through an external executive recruiter, you will likely need to go through them.

Pay attention to tone. You want to set a collaborative (versus adversarial) tone. This is not a zero-sum situation. You may both receive and offer items of value to the other party in this discussion. You want to convey (1) enthusiasm for the opportunity, and (2) that you are a reasonable (versus entitled) person who is negotiating in good faith. You can say something like, “I’m really excited about this opportunity. I have a few questions that I’m confident we can work through to get to a solution that works for everyone.”

De-personalize the process. We tend to be better advocates for others than for ourselves—this is especially true for women. The negotiation is also not about your value as a person. It’s about the value of your contribution to the organization. A technique that I suggest my clients use to help de-personalize the process is to take a step back from the process and pretend they are negotiating on behalf of their very best client—themselves!

Start with the most important item. Your negotiation should be a multi-variable negotiation, so that there are several possible levers that can be adjusted and used to compensate for other levers that are less flexible. Prioritize your most important and biggest variable, which tends to be base salary, due to the compound interest implications highlighted above. An increase in base salary is likely much more valuable in the long term than virtually any one-time bonus you might be offered today or a year from now. You might start with “The base salary is a bit lower than I was anticipating. What upward flexibility do you have here?” Ask the open-ended question first. They may come back with a bigger increase than you expect. If not, you can communicate a target range, with the bottom of the range being a number you’d feel good about, and the upper limit being the number you’d feel ecstatic about.

Know when to close your mouth. It’s normal to feel nervous when negotiating your compensation. This can cause some people to get chatty and start over-talking an issue. Know when to close your mouth and listen. Something you are asking for might be really easy for them to give you. Knowing when to stop talking and start listening can help you understand any concerns the hiring manager may have, so you can address them more effectively in finding a mutually agreeable solution.

There are many more negotiation strategies that you can use in conjunction with the ones above. As with other high-stakes conversations, practicing is key and working with a coach to role play and give feedback can be extremely helpful. Finally, look at the actual negotiation as practice—because it is. Regardless of how it goes, you will learn from the experience and get even better for the next negotiation.