How to Negotiate Your Salary

Salary negotiations are a bit of an enigma.  They have all of the elements of a Hard Bargaining situation:

  1. Limited variables
  2. Price is the main focal point (Salary)
  3. There are usually multiple applicants vying for the same position

Yet a salary negotiation also consists of elements of a High Dependency situation:

  1. Focus is on long-term gain and results
  2. Both parties are dependent upon each other
  3. Trust and relationship play a critical role in the negotiation

There is no ONE way to negotiate a salary; each situation will vary depending upon the circumstance surrounding the negotiation.  I’m going to first look at a situation where the applicant is a new hire from outside the company.   Step one is to determine how much leverage you have in the negotiation.  To assess your leverage you’ll need answers to the following questions:

  1. How many other qualified applicants are in the final stages
  2. What are your alternatives to this position
  3. What is your breakpoint
  4. What is their breakpoint (you’ll have to guess unless you are able to question effectively to unlock this information)

If there aren’t any other applicants and you have multiple options, you have quite a bit of leverage and can effectively set the bar very high.  The most important thing influencing your leverage is going to be your alternate options.  If you want a favorable outcome you need a competing offer from at least one other viable company.  I do not recommend bluffing, while bluffing is very effective in poker, in the job hunt if your bluff is called you lose that opportunity and destroy your credibility in the process.  If you have a competing offer that is your breakpoint and you shouldn’t except any offer less than your breakpoint.  If you don’t have any other offers your breakpoint is going to be based upon things like the going rate for this type of job, your required living expenses, your experience etc.  Be realistic, your breakpoint is the absolute minimum you would accept.  It is the worst case scenario.

Okay, now you understand what kind of leverage you have.  Your leverage will dictate how aggressive you are with the figure you will propose as a starting salary, more leverage the higher the figure.  Let’s get to the actual behaviors in the negotiation.

1.  I cannot stress this enough!!!!  Under no circumstance are you to use the following words – NO, DON’T, CAN’T, or WON’T!!! You need to operate as if this is a high dependency situation; you are responsible for managing the climate and their feelings.  You need to instill trust while fostering a strong relationship, you’re going to have to work with these folks after the negotiation is finished and the last thing you want to do is to start off with hurt feelings and negative undertones.  Now, don’t get me wrong you can reject their offer; you just have to do it in a very diplomatic way.  For instance, instead of saying “That’s not acceptable” try saying “Thanks for that proposal, that’s and interesting offer let me think it over”, followed by “Here’s what I can accept – $XXXXX”.  Notice you have effectively said there offer is unacceptable without using those words.

2.  Don’t become emotional.  Understand where they are coming from.  The hiring manager’s job is to secure your services as cheaply as possible, period.  They have limited resources allocated to that position and there is generally a small range they have to work within.  They have to be careful not to create internal problems with existing employees.  Their breakpoint will be the primary factor in determining their ability to agree.  If they have several viable candidates you may be in a take it or leave it type of situation.  Whatever you do, never argue the merits of the situation.  Arguing will only undermine the trust and relationship needed to close the deal.  If they aren’t willing to move it’s probably because they have other options.

3.  Manage their expectations early in the process.  From the very first interview you should be setting their expectations about how much it’ll take to secure your services.  Don’t be coy, be ready with a figure and find a way to mention it.  By doing so, you start to shift their expectations towards the high end of the range they have in mind.  Also, don’t be ridiculous or unrealistic otherwise that may be your last interview.  If the interviewer says it’s too early to discuss compensation, that’s ok respect their wishes, however be ready with your figure when it is appropriate.  An excellent way to approach this subject is when they ask you how much you are currently making.  Very politely say, “I can tell you how much I expect from this opportunity” or “I’m making $YYYYY and I expect to make $XXXXX”.  Remember, don’t be afraid to tell them what you are worth.  I’m not saying you’ll get that figure but you are effectively beginning the process of anchoring the discussions around your position instead of theirs.  If you allow them to tell you their offer first, they have anchored the discussion around their position.  It’s customary for the company to “make you and offer”, that’s why it’s important for you sow the seed of what you will accept early to influence the offer they are going to make.  You might even make a statement like “I’d accept this position without hesitation with an offer of $XXXXX”.

4.  Ask questions.  Ask questions to determine how much flexibility they have in the hiring process.  Here are some good questions.

  • Do you have any other viable candidates already identified? External or Internal?
  • What is the high end of the salary range for this position?
  • What qualifications are most important to you in your hiring decision?
  • Are there any other components of the compensation package with greater flexibility i.e. insurance, bonus, car allowance, stock options, etc.?
  • Is this a new position?  Or did someone leave?
  • (If someone left) What happened to the previous person?
  • Is their compensation competitive in the marketplace?
  • How our raises handled, what’s the process and what’s the normal annual raise?  What is it based upon?

5.  Give them time to consider your counter offer, but not too much time.  Many times if you are requesting a salary that is beyond their range, they will need to have several discussions with the key decision makers in order to get approval or come back to you with a counter offer.  If you give them too much time they will simply create additional options like testing the waters with another candidate. Two days is generally adequate time for all of the consultation to take place.

Now let’s discuss internal promotions and raises.  The biggest hurdle with internal promotions is the motive of the company.  Most (but not all) companies look at internal promotions as an increment to your current salary regardless of the market rate or what they may have to spend to get an outside candidate.  True you are saving them recruiting costs, training time, and culture fit risks.  But let’s face it they have the goods on you.  They know your salary history, your performance, your personality, etc.  Unless you have a competing offer you’re in a sticky situation.  Remember you still need to preserve the relationship and manage the climate.  If you have no other alternatives, and the company knows this fact, they realize your best financial outcome is to accept their offer regardless of how meager it is.  Typically companies are not willing to negotiate or increase their offer when they feel they have all the information.  The best course of action is to negotiate a performance based increase in six months to a year as a condition of acceptance.  Now, as hard as it seems, DON’T BECOME EMOTIONAL take the money and then work on cultivating additional offers to coincide with that review period.  Once you’ve established yourself through stellar performance you’ll find them willing to loosen the purse strings to retain you.

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