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Negotiating Your Salary

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Phase I Preparation

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Accredit Your Job Worth. • Resume

– Functional AND Chronological– Specific, vivid adjectives– Concrete Examples

• Portfolio– Executive Briefings– Code Samples– Planning Documents– Class Report

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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 follow-up analysis to develop customized stimulators

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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)

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Conduct a Job Worth Benchmarking Audit

• Determine organization’s pay policy

• Determine fair market pay for job

• Compare market pay to organizational pay

$ $ $$ $ $ $

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Find Relevant Salary Surveys• Sources:

– Internet, – Library, – Employment Security Office,

– Professional Associations

• Match Job Titles AND content• Update (Age) survey data

• Wages Increases per year!

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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/sal-

surv.cfm– Clayton Wallis Company

www.claytonwallis.com

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Go Up to Bat Prepared!

Understand

Pay Policies

And

Structure

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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.

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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?

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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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Point Value of the Jobs

Pay Rate

LEAD PAY POLICY

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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

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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

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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

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Match Policy: Average Rate of Pay Is Approximately Equal to The Average For The Relevant Labor Market.

External MarketInternal Market

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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

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Point Value of the Jobs

Pay Rate

Firm's Pay Policy Line

Market Pay Policy Line

Lag-Lead Pay Policy

Pay is higher than market rate (lead) at key recruiting times and lower (lag) at other times

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Other Questions

To Ask Yourself

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Are Pay

Grades

Used?

Pay PolicyMidpoint

Graph 1Traditional Pay GradesEqual Width

$$$In Pay

Low Job Value High

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If So…What Pay

GradeIs The Job In?

ANATOMY OF A PAY GRADE

Pay Grade Minimum

Pay Grade Maximum

Pay Grade Midpoint

Pay Grade Spread For Professionals Is Typically 30-100% Of The Midpoint

Serves As A Control Point. Specifies the Pay Objective for a Fully Trained, Satisfactory Performing Employee. Typically Matches The Market

A Pay Grade Is A Grouping of Different Jobs Considered To Be Substantially Equal For Pay Purposes

1. Salaries Below Pay Grade Minimum Are Called Blue Circled Jobs. Base pay should be raised to pay grade minimum -- unless employee is not meeting minimum standards 2. Salaries Above Pay Grade Maximum Are Called Red Circled Jobs. No raises should be given until the market rate of pay catches up.

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Are Pay BandsUsed?

Support

Executive

Technical/Professional

Managerial

Graph 2Wide Pay BandsFor Job Clusters

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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.

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Are Truncated

Pay Grades Used?

Graph 5 Truncated Pay Grades Fully Competent Employee Receives Market Pay Bonuses For Above Average Performance

Performance-Based Pay Added

Graph 3Trancated Pay

Grades

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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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Incentive Pay Added

External Pay Line

Base Pay Is Below the Market

Graph 6 Pay At Risk Plan Base Pay Below The Market. No Limits On Incentive Earnings

Is A Pay-At-Risk Plan Used?

Graph 4 Pay-At-Risk Plan

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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?

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Core Compensation Elements

• Base Salary

• Discretionary & Targeted Bonus

• Golden Carrots

• Golden Parachutes

• Silver Handcuffs

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Short Term Compensation

• Merit Pay

• Bonuses

• Gainsharing

• Profitsharing

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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

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Know What YOU Want... And Go Get It!

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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?

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Phase II The

NegotiationProper

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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.”

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What You Don’t Ask For…You Don’t Get

Asking for More Increases YOUR

Perceived Value!

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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

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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.

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Get Your Base Salary HighYear Low

StartingSalary

Raise HighStartingSalary

Raise

1 $50,000.00 $55,000.00

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

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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

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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.”

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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.”

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Silence Is GoldenYou 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

The language of motion and the language of emotion are important avenues of communication

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Ask The $2,000 - $5,000 Question!!!!

•Is That the Best You Can Do?

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Phase III Closing The Deal

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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 facet of the problem.

– Get a more appealing fringe benefits package or perks

– To check out your other job offers to see if counter offers are forthcoming.