Negotiating
Your Salary
1
Phase I
Preparation
2
Accredit Your Job Worth.
• Resume
– Functional AND Chronological
– Specific, vivid adjectives
– Concrete Examples
• Portfolio
–
–
–
–
Executive Briefings
Code Samples
Planning Documents
Class Report
3
Samples: Key Competencies
• Medical
– 15 years of medical sales experience in the managed care, hospital,
physician group and pharmaceutical markets
• Sales Prospecting
.
– Positioned Oliver to win two prestigious contracts worth $16
million in revenue for Northwest branch office.
– Successfully led roll-out of Collastate Hemostatic Sponge and led
entire region in total sales ($5.5 million)
• Customer Relations
– Excellent client relations skill leading to broad-based and long term
relationships.
– Teamed with physicians to conducted client assessment and followup analysis to develop customized stimulators
4
Samples: Employment
• 1992-1997 Oliver Health Services (Oliver Corporation)
– Generated $5 million in annual revenue for Northwest
branch.
– Positioned Oliver to win new contracts worth $16 million in
annual revenue.
– Sold high tech home health care services including disease
management and early discharge programs, acute and
chronic infusion therapies, high risk women and pediatric
health programs. Client domain included managed care
organizations, hospitals and physicians
Success Award Winner for exceeding performance
targets
– 1996 President's Club Award Winner (Top 20% of sales
personnel)
–
5
Conduct a Job Worth
Benchmarking Audit
• Determine organization’s pay policy
• Determine fair market pay for job
• Compare market pay to $ $ $
organizational pay
$ $ $
$
6
Find Relevant Salary Surveys
• Sources:
– Internet,
– Library,
– Employment Security Office,
– Professional Associations
• Match Job Titles AND content
• Update (Age) survey data
• Wages Increases @ 3.5% per year!
7
Find Relevant Salary Surveys
• Sources:
–
–
–
–
–
Salary.com
www.Salary.com
Wage Web
www.wageweb.com
Department of Labor
State DOL
www.wa.gov/esd/lmea/
Job Star Central
jobstar.org/tools/salary/salsurv.cfm
– Clayton Wallis Company www.claytonwallis.com
8
Go Up to Bat Prepared!
Understand
Pay Policies
And
Structure
9
Understand The
Organization’s Pay Plan
• Evaluation of job worth
• Determination of Total Pay
– Base Pay Balance
– Short and long term incentives
– Determination of performance
contributions
– Level of Aggregation
– Focus -- short or long
– Gainsharing or Incentives.
10
Key Questions
• What is your company's pay policy?
(e.g. lead, match, lag)
• What firms do you compare yourself to?
(e.g. Mayflower group, all software
companies)
• What pay grade does job X fall into?
• What is the pay range for that pay grade
• When was the last time your pay structure was
updated
• What is the maximum raise given?
11
External Equity -Critical Questions
• What is the relevant Labor Market
– How is pay defined (i.e., does it include
indirect pay)?
– Local, regional, national, global
• What pay policy is consistent with
organization objectives?
– Lead
– Lag
– Match.
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LEAD PAY POLICY
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Point Value of the Jobs
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Consequences:
Lead Policy
• Signals external environment that company is an
industry leader
• Enhances a firm's ability to attract MORE key
contributors
– Still must screen and select to find and hire the best!
• High labor fixed costs
• Reduces the likelihood of turnover of key
contributors
• Lower competitive advantage
14
Lag Policy:
Average Rate of Pay is Below The Average
For The Relevant Labor Market.
Significant Problems Develop When Pay Lags
or Is Perceived to Lag Market by > 15%
External Market
Internal Market
15
Consequences:
Lag Policy
• Signals that the firm may not be an employer
of choice.
• Reduces perceived competitive advantage
• Hinders ability to attract key contributors
• Increases employee dissatisfaction
• Increases likelihood of turnover
• Short term term labor cost savings but may
increase long-term costs
16
Match Policy:
Average Rate of Pay Is Approximately Equal to
The Average For The Relevant Labor Market.
External Market
Internal Market
17
Consequences:
Match Policy
• Signals external environment that company
is competitively positioned
• Enhances a firm's ability to attract key
contributors
• Minimizes employee dissatisfaction
• Reduces the likelihood of key contributor
turnover
• Enhances perceived fairness
18
Lag-Lead
Pay Policy
Market Pay
Policy Line
Pay
Rate
Firm's Pay
Policy Line
Pay is higher than market rate (lead) at key recruiting
Point(lag)
Value of
Jobs times
times and lower
attheother
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Other
Questions
To Ask
Yourself
20
Are
Pay
Grades
Used?
Graph 1
Traditional Pay Grades
Equal Width
Pay Policy
Midpoint
$$$
In
Pay
Low
Job Value
High
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If So…
What Pay
Grade
Is The
Job In?
ANATOMY OF A PAY GRADE
A Pay Grade Is A Grouping of Different Jobs
Considered To Be Substantially Equal For Pay
Purposes
Pay Grade
Maximum
Pay Grade Spread
For Professionals
Is Typically 30-100%
Of The Midpoint
Serves As
A Control Point.
Pay Grade
Midpoint
Specifies the Pay
Objective for a
Fully Trained,
Satisfactory
Performing
Employee.
Typically Matche
The Market
Pay Grade
Minimum
22
1. Salaries Below Pay Grade Minimum Are Called Blue Circled Jobs . Base pay
Are Pay Bands
Used?
Graph 2
Wide Pay Bands
For Job Clusters
Executive
Managerial
Technical/
Professional
Support
23
Broadbanding
• Collapses the number of pay
grades in a structure into a few bands.
• 3-8 times as wide as previous salary grades.
• No midpoints
• Popular in "boundary-less organizations”
• Encourage lateral rather than vertical job growth.
• Major concern -- may escalate compensation
costs.
24
Are
Truncated
Pay Grades
Used?
Fully Competent Employee
Receives Market Pay
Bonuses
For Above Average
Performance
Performance-Based
Pay Added
Graph 3
Trancated Pay
Grades
25
Truncated Pay Grades
• Useful with variable pay plans
• Base pay linked to external market.
• Fully competent employee guaranteed market competitive
pay
•
No permanent adjustments to base pay (unless market goes
up)
• Bonuses, gain sharing plans reward performance above
average performance
Benefit --Lowers Fixed Wage Costs!!.
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Is A Pay-At-Risk Plan Used?
Graph 6
Pay At Risk Plan
Base Pay Below
The Market.
No Limits
On Incentive
Earnings
Incentive
Pay Added
External Pay Line
Graph 4
Pay-At-Risk Plan
Base Pay Is
Below the Market
27
Pay At Risk Grades
• Base pay at a below market level (usually at about
the 80th percentile).
• Additional compensation earned by attaining
productivity targets or specific objectives.
• Most Sales compensation plans are pay at risk
plans
• Unpopular choice for risk adverse and lower level
employees
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How Will Performance
Be Rewarded?
29
Core Compensation
Elements
• Base Salary
• Discretionary & Targeted Bonus
• Golden Carrots
• Golden Parachutes
• Silver Handcuffs
30
Short Term Compensation
• Merit Pay
• Bonuses
• Gainsharing
• Profitsharing
31
Long Term Compensation
• Stock Grants. Awarding of stock at no cost to
employee.
• Stock Options. Right to purchase stock at a
stipulated price over a fixed period of time (up to
10 years).
• Phantom Stock. No stock actually held and thus
no voting rights but dividends are often paid.
Once the employment conditions have been
fulfilled, the award can be paid in cash, stock or a
combination.
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What will be the pay
mix?
23% base salary,
23% annual incentive,
54% long-term incentive
Average CEO Pay
All Companies
$2,040,000
33
Know What
And
YOU Want...
Go Get It!
34
Key Questions
• What is your reservation wage?
• What would you take in lieu of salary?
• What accomplishments make you worth a higher salary?
• What is the market rate of pay for comparative others?
– How can you justify these numbers?
• How can you justify a higher salary.
• What objections might the employer have to your offer?
How can you overcome these objections?
35
Phase II
The
Negotiation
Proper
36
Delay Salary Talk
• "I'm more interested right now in
the job and whether we have a
good match than I am interested in
salary.
• "I'll consider any reasonable
offer"
• You've indicated that it's your
company 's policy to pay at the
80th percentile. Given that, I'm
sure we can work something out.”
37
What You Don’t Ask For…
You Don’t Get
Asking for More
Increases YOUR
Perceived Value!
38
High Aspirations
• Always open with a figure higher
than you expect to get.
• Asking the potential employer for a
range protects you from the biggest
mistake possible -- naming too low
a figure.
• Hold your opening position as long
as possible
39
Focus On
The Future
• Negotiations are future directed.
• You bargain for compensation in exchange
for services yet to be performed.
• Emphasize your accomplishments, not your
personal needs.
• The employer doesn't care what you need.
40
Get Your
Base Salary High
Year
Low
Starting
Salary
Raise
High
Starting
Salary
Raise
1
$50,000.00
2
$52,500.00
$2,250.00
$57,750.00
$2,750
3
$55,125.00
$2,625.00
$60,637.50
$2,887.5
4
57,881.25
$2,756.25
$63,669.38
$3031.88
5
$60,775.31
$2,894.00
$66,852.84
$3,183.46
Total Raise
$10,775,31
Total Raise
$11,852.84
$55,000.00
41
Create Added Value
 Signing bonus A salary review in six months
 Stock options rich!
 Equipment (fax, car phone, computers)
 Flexible work site (home versus office)
 Cost of accreditation examinations
 Student loan payoff
 Child or elder care.
 Airfare/ time off to see family
 Starting date
 Credit cards
 Low interest loans
42
Negotiate In Stages
• Start with “Yesable” propositions
• Repeatedly reaffirm your interest in the
company and the position
• Restate what’s been settled
• Nibble
• Use Positive Phrases
“We’re only $100 a week apart.”
43
If You Get Tense…
Go To Your Balcony
•“I always allow 48
hours to think things
over.”
•“Let’s both think
about the offer and talk
again tomorrow.”
44
Silence Is Golden
The language of motion
and the language of emotion
are important avenues of
communication
You never lose a
negotiation when the
other party is talking
• The average person only retains
half of what is heard.
• You must listen to employer's
concerns so you can demonstrate
how you can meet them.
• Use reflective listening
45
Ask The
$2,000 - $5,000 Question!!!!
•Is That the Best
You Can Do?
46
Phase III
Closing
The Deal
47
Delay a Final Decision
• Asking for a day or two to think about the offer
allows you:
– Ask some of your peers if you have considered ever face
of the problem.
– Get a more appealing fringe benefits package or perks
– To check out your other job offers to see if counter offer
are forthcoming.
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