Most Read Articles
The right approach to salary negotiations
There are a few times in your career when you can negotiate your salary and compensation packages: on your way in to a job, on your way out, and when you're asking for a raise or a promotion. Obviously, you have the most leverage on the way in and the least on the way out. So it's important to take an especially thoughtful approach to the negotiation process after you have received a new job offer.
Negotiating a salary and compensation package is not like negotiating the price of a car or house. While you should certainly use your persuasion skills to make sure you receive the pay you deserve, negotiations should also reinforce the employer's decision to hire you. Negotiations should be conducted in a constructive and positive atmosphere, with an emphasis on both parties finding a way to make it work. Here are a few tips on how to take that positive approach.
Don't be too quick to discuss specifics when it comes to salary negotiations. The only time you should discuss your salary needs is when the company indicates that it would like to make you an offer.
If you are asked about your salary expectations during the interview process, you should just say that you are looking for a reasonable increase from your current salary with potential for growth. Refrain from giving a fixed number that you would accept unless you truly would be willing to start at that salary. And recognize that if you say you would be interested in a salary between US $110,000 and $120,000, you probably will end up with $110,000.
By the time you reach the negotiations stage, both the candidate and the company need to be serious about making a commitment. If you are not interested in a position or company, you should never let things get to this point.
For professionals in supply chain management, negotiations occur directly between the company and you, the candidate. If you have been working with a recruiter on a position, the recruiter's main role at this point is to assist with negotiations and help both parties come to an agreement that is reasonable.
The numbers game
When it comes to negotiating your compensation package, the size of the company can have a big influence. For large corporations, salary ranges and benefits are determined as part of the approval process for specific positions, so there is limited flexibility. Companies try to ensure that compensation is consistent with similar positions in the department, the corporation, and to some degree, competitors. They employ consultants and use salary surveys to correlate compensation levels.
To change a salary range during the hiring and interviewing process requires approval at many levels, and it lengthens the search process considerably. Rather than go through the procedures required to upgrade a position's salary range, companies tend to reduce the screening requirements for the position. Smaller and/or private companies, on the other hand, have more flexibility to interview candidates without a specific hiring number and can adjust the salary offer within reason when they interview a candidate they like.
It's typical today for new hires to get an offer for 7 percent to 12 percent above their previous salaries. If you will be relocating, be sure to take into consideration any differences in the cost of living when you state your desired salary. Your new company, however, is not obligated to make up for your past low salary, but it will want to be sure your offer is on parity with similar positions in your department. In other words, even if your present salary is significantly below the starting range of the position, the company can't offer you less than the lowest point of the pay range.
Your current employment status will have a big effect on the strength of your negotiating position. Individuals who are happy where they are and see a future with their present company can often count on receiving larger increases. This is because the hiring company understands that the offer needs to be high enough to warrant a candidate's making a career change.
If you are not currently working, you have less leverage for negotiating. Similarly, candidates who show concerns about their present job or company, a takeover or merger, or a corporate move, tend to have fewer bargaining chips. For that reason, do not mention such concerns as the reason why you are looking for a new job, even if the interviewer might already know this information. At the same time, the hiring company should not take unfair advantage of a candidate who is unemployed. Companies that follow this path risk quickly losing new hires to a company that offers them a better package.
While salary may receive the most attention, it's important to also consider the whole compensation package. If you have negotiated the salary to the maximum and it is not quite at the level you deem sufficient, there are other ways to increase your total compensation: a signing bonus, adding stock, an early review, replacing a portion of your lost bonuses (if it is almost time to receive one in your current job), and vacation time.
Additionally, make sure you understand company policies regarding such areas as eligibility for bonuses, company profit sharing, stock options, retirement plans, saving plans, life and health insurance, vacation, and compensation for relocation costs. Speak to those people in Human Resources who have up-to-date knowledge of these benefits. There is nothing wrong with asking for a written explanation of benefits after an offer has been made. You don't want to find out after you've been hired that the benefits changed and the hiring manager was not aware of it.
There are some things that you should not expect the hiring company to offer. Compensation for your spouse's loss of income, for instance, cannot be a factor in negotiations, and you should consider this before you interview.
An employment contract normally will be offered only at the vice president level or above. In essence, employment contracts are really unemployment contracts, as they guarantee you a payout if you are let go without cause during the term of your contract.
Be sure to employ a lawyer who specializes in this area—not a friend or relative who is doing you a favor—to review the contract. At this point, you should worry more about ensuring that the contract provides you with adequate protection rather than about saving money on legal fees.
Finally, if a company makes you a great offer, don't try to squeeze it for more. Some companies do make their best offer up front.
One of the problems we have when it comes to employment negotiations is that we tend to personalize them. Remember that your objective isn't to "win" or prove a point—it's to receive an offer that fits your financial and career needs. If this cannot be accomplished, then you want to walk away from the deal leaving the company feeling that you were a great find but the position was the wrong one for you. Be sure to leave the door open for renegotiation and perhaps other opportunities in the future.
Join the Discussion
After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter 2009: The right approach to salary negotiations"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.