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Tuesday, December 7, 2010

this is how salary negotiation should work

The always awesome Jamie just posted this comment in response to an earlier post on job candidates disclosing their salary history:

This was absolutely the worst part of the process for me - because I hate salary negotiation.

I hate it because I'm terrible at it - so at least I'm self-aware.

In an ideal world the company would let you know the range for the position, and then making you an offer within that range based on what you bring to the table.

Then you can either accept or not based on your own criteria. Most job hunters have their own realistic ranges - many would accept less for a job if it had a great commute, or perks...whatever.

But I think the company should state the range for the position first. This way it's on the table and the candidate can determine if it's in the ballpark, if not then no one is wasting time.

Personally I would interview for a job if it were within 10,000 of my lower acceptable figure as that's within the realm of possibility for negotiation. Anything lower than that I would know it's not the right level job and move on.

The reason they want salary from applicants is to take advantage of those who were underpaid at their last job - and while I'm all for trimming every bottom line there's something just not right about that.

If you pay market value from the start you don't have to worry about one of your hires being so awesome you need to rectify this later...that's hard to do gracefully. 


Amen. It's complete BS when employers insist on guarding the range they have in mind -- because of course they have a range in mind.

If the employer doesn't want to state the range because it's flexible for the right candidate, then state it anyway and say it's flexible for the right candidate. But if you don't want to state the range because you want to lowball candidates, then you suck.

Pay people what they're worth. Salary history has nothing to do with that if you're good at understanding people's value to you, and game-playing just ensures you'll have a staff that sees you as their adversary.

That is all.

27 comments:

JulieM said...

I don't think this post is entirely fair. As a former recruiter, I rarely disclosed salary information prior to knowing whether the candidate was one of the top 3 or so. The reason for this was because my company had a very broad salary "range." You could have the title of consultant and make anywhere between $55,000 and $120,000, and it truly did depend on the candidate. Generally speaking, more experienced/educated candidates received higher offers, but there were times we'd offer candidates higher or lower salaries based on other information gained after several interviews. So, saying "our range for this position is $55 - 120K" would be detrimental to us, because no matter what their experience/education, if the candidate ends up in the below $90K range, they're going to feel short-changed.

Anonymous said...

And because employers ask for salary history, job-seekers feel the need to lie and say they have earned more so that the recruiter makes a decent offer. It's a horrible process for everyone if not all details are on the table from the beginning.

Jamie said...

I think that's a rare circumstance where a job would have a range that broad.

Most corporate jobs have budgeted amounts for open positions - they know the ballpark. Sure, they can go higher if they find someone awesome who can fill other voids or go lower if they have to settle for someone less than ideal...but in most situations there's a definite range.

And I am honored that my comment has become a post...they grow up so quickly :)

R. J. said...

I agree that the process often goes poorly, due to lack of open communication on both sides. One comment I would make is that candidates typically puts himself or herself on the top end of the range. If a recruiter says 50-70, the candidate hears 70. No one hears 50. Ever. Seems like human nature.

Anonymous said...

Quite honestly, I think recruiters do themselves a disfavor when they don't disclose the possible range. I myself won't bother inquiring. Generally, posts that won't state compensation and actual requirements upfront are posts that are a waste of my time.

Wilton Businessman said...

I don't want to disclose a range because I want the best person for the job. Wonder if the best person is making $20K less than "the range" and thinks "I can't compete at that level" and never applies? Maybe the person I find doesn't check off all the boxes I'm looking for, but would be a good fit. I don't want to exclude her. If I have an absolute top dollar, I'll disclose that so neither of us wastes our time.

KellyK said...

Wilton Businessman, if you are clear about the *qualifications* you want, that should be what tells potential employees that they can or can't compete at that level. If you want someone with my level of experience who can do things I can do, and you're willing to pay 20k more than what I make now, I won't think "Oh, no, I can't compete at that level." I'll think "Ooh, this looks promising."

And if the "boxes" you're looking for are optional, describing them as "desired" rather than "required" should make that distinction clear.

KellyK said...

JulieM, I think you have a point about the same job description having a really broad range. But on the flip side, when you look to fill a position, don't you have an idea where in that range you're looking for? That is, f you're hoping to get the 120,000 person, are you even interviewing the 55,000 person, or have they already been ruled out because of the qualifications you're asking for?

Even in a situation where you could realistically hire someone anywhere in that range, what about saying 55-75 or 55-85, with a note that higher salaries might be considered for candidates with truly exceptional qualifications?

Ask a Manager said...

I agree with Kelly -- the key (as it so often is) is to just be straightforward. If you find yourself thinking, "Well, I can't give my range, because if X, then Y, and if A, then B," then just tell people that. Say there's room for lots of variations, and here's where and why.

I'm not saying you have to do this in the ad (although that makes it way easier on everyone), but at least do it in the phone interview, at least if the candidate asks.

And if you're NOT willing to, then you definitely can't expect candidates to pony up their own information. That's unfair.

Eric said...

Employers hold the high ground in this economy. They can afford to be "unfair". Candidates can hardly afford to create a confrontation so early in the process.

Ask a Manager said...

Right, but we're talking "should."

Anonymous said...

"(Employers) can afford to be unfair."

Yes and no. Being unfair (i.e. demanding that applicants submit pay histories while refusing to disclose upfront a salary range) will likely cut down on costs, but it will also cut down on productivity, because it fosters an adversarial relationship between the employee and the employer, as AAM pointed out.

Charles said...

JulieM;

Your example is not the norm - really, a "range" of 55 to 120? The higher end of the range is more than double the low end?

If you really do have that broad a range for consultants (real consultants - those who give advice; not those doing non-advising contract work with just the title) then professional consultants would understand that the range is meaningless without the scope of a project spelled out. Often, for consultants the project details are tied in with compensation negotiations. (i.e., the consultant delivers X report and receives X money, if the consultant only delivers Y, then only Y money is paid)

But for most jobs, the range is not such a wide gap. It really won't hurt the company or the agency to give a range.

Or, is it a case of your agency/employer using the word consultant instead of temp or contractor?

Job titles are often another way that recruiters and employers play games.

Anonymous said...

@ Julie M:

If I ever saw a posting with a range like yours, I'd just assume that you have multiple positions open for different skill/experience levels, and that the salary was commensurate with experience.

If you truly had only one position open and published a range like that, I'd wonder if you guys had your act together, and further wonder if I could be happy working for you. Again, I would infer that the salary is commensurate with experience, but I would also infer that the guy you'd be willing to pay $55k to is vastly different than the guy you would pay $120k to. That would make me wonder if you guys even knew what you wanted out of that position, and if you can't figure it out now, would you figure it out after you hired me and let me go?

Since I'm already going on this one ;) if you're willing to interview me when I graduated college and had no experience, I wouldn't ever think for one moment that an offer below $90k was short changing me. With a Masters degree and a few years of experience in a quantitative field? Without even looking at your broad range, I'd feel shortchanged with anything below $80k.

Anonymous said...

@Wilton Business man:

With all of the advice out there to apply for anything and everything, you really think people won't apply for something that they're mostly qualified for?

If I can meet the experience and education requirements for a position, I'll apply for it if I think I am more than half qualified on the "required" part and can hit some of the "desired" parts as well.

And if I can nail everything, and the bottom end of the salary range is $20k above what I make, I think what an opportunity...

Anonymous said...

To the person who said candidates only see the top end of a range...

Funny, I interviewed somewhere when I was fresh out of grad school, and I only saw the top end of the range.

At the time, I was also working with a third party recruiter. I asked her what someone with my background is worth on the market (MS in a quantitative discipline) and she said $60k +/- a few grand.

So I applied for a position that was an absolute perfect match for my background. And I mean perfect. However, they also posted the "pay grade" (it was an internal reference that I was able to find hard numbers to correspond with it) which was $45k-$55k. When they asked me what my salary expectations were, I told them I knew the grade and the hard numbers, and told them that the bottom end of my range was commensurate wit the top end of theirs. They then complimented me on my research, and informed me that they weren't intending to pay the high end of the range.

TBH, I had no intention of accepting an offer that began with a "4". No way. But the economy was in the toilet, and it appeared to be my dream job, so I gave them the standard "I think we're reasonably close on the numbers, but let's see if the fit is there before we make any final decisions."

The funny thing is, I got on site, and it sucked. You see, this was pretty much *the* job I went to grad school for, and I was really excited to have that opportunity. But everybody I met that day was rather cold and acted like they would rather be elsewhere. I actually hoped they wouldn't offer me a job, because I didn't want to second guess myself. They didn't.

Their rejection allowed me to find very similar work with a different employer -- making $25k more -- in a much more welcoming environment. Best rejection I ever got.

Shawn said...

Straightforward salary negotiations rely on good behavior from both the company and candidate. We can all spout stories of companies/candidates acting poorly in this area. Companies keep the range hidden to low ball candidates, to avoid confrontation, to avoid having to justify an offer, etc. Candidates can have a hard time dealing with why their offer is at the low end of a set range, feel like they deserve at least the middle, or demand the upper end with no real reasoning. One side isn't more to blame over the other here. Each side is just acting based on the reaction they believe they will get from the other.

Jamie said...

Anonymous 10:26 said, "But everybody I met that day was rather cold and acted like they would rather be elsewhere. I actually hoped they wouldn't offer me a job, because I didn't want to second guess myself. They didn't."

It's off the topic of salary range but this is why temping is such an awesome (but underrated) strategy when you're breaking into a field.

I temped for a while when I entered the work force and I learned to size up the environment quickly. Invariably if I had a bad vibe during the initial tour it just got worse as the assignment went on. I remember one place where the only time anyone smiled was when someone else screwed up or was inconvenienced. Yikes - what a nest of vipers.

A lot of people are temping in this economy and I was surprised to hear some felt bad about that - I was never ashamed. I thought of myself as a hired gun, not a temp, and of the whole process as job shopping.

It also made me really pay attention to any red flags in future interviews. If they can't project a positive image during the tour then how bad will it be once they stop using company manners?

Anonymous said...

Just imagine – making an offer without knowing the candidate’s salary history – sounds scary, right? “Oh my gosh!” you say, “what if we end up offering them way more than they’re making now?” Well here’s how it works: If they’re above average, you’ll actually get MORE out of them, so it’s a good investment. And that’s not all – they’ll also stay longer!

I know, I know – you’re thinking, “I’d rather just offer them a little more than what they’re making now so we don’t risk overpaying someone who’s below average.” The beauty of this system is that it still works – all you have to do is reward people based on their performance!

Now you’re saying to yourself, “This guy’s crazy!” Maybe so, but listen to this: It’s as easy as 1, 2, 3! Just give below average rewards for below average performance, and before you know it, those employees either 1) have improved, 2) are no longer overpaid, or 3) are no longer working there!

“Wait just a minute, isn’t it illegal and unfair to manage like that?” you ask. Don’t believe the hype! Not only is it perfectly legal, it’s also the only fair way to do it! But wait, there’s more – it’s also the only way your top performers will actually stick around!

Now, I bet you’re thinking you’ll get sued by the low performers if you reward the high performers more, right? Well you’re exactly right! You could be the best manager in the world and never do anything wrong, unethical, unfair, or mean, and there will always be someone out there that will sue you for it! However, the great thing about this system is that it’s still less expensive to risk the occasional lawsuit and be able to retain your best people, so act now, before it’s too late!

Anonymous said...

Earlier post read "It's a horrible process for everyone if not all details are on the table from the beginning." I couldn't agree more.

I literally got off the phone with a potential employer 10 minutes ago who offered me the job at $10,000 less than I make now.

The employer posted the job with no salary. I applied and then I got a "qualifying interview call."

During the qualifying call I was asked point blank how much I made. I gave a truthful answer and said I would consider less if it was the right job, commute, etc.

I got a face to face interview with three of my potential bosses a few days later where no salary or benefit information was discussed. I was told that would be handled in later interviews.

So here I am now, feeling contempt for this potential employer. If I knew this job was starting $10,000 less than what I make now, I wouldn't have wasted their or my time.

Am I supposed to come back with $10,000 more than I currently make? Shouldn't there be an obligation to disclose that info. ahead of time? And only now that the job is being offered to me am I being told it's entry-level. I havn't applied for a job in a while...is this normal?

Karl said...

I'm hiring my first employee, for an entry-level client service position at a small ad agency. It's been great so far -- I created my ideal hiring process.

I posted a detailed job description, including the salary range. Because the salary is fairly low ($25-30K), I didn't want to waste my time (or candidates' time) by talking to people who need to earn much more than that.

As to how much money they earned before? I don't need to know that -- I just need to know that they'd consider my hiring range.

Joey said...

Here's some reasons why employers ask for salary and it isn't always to lowball candidates. First, they don't really know what a position (or a candidate) is worth. Yes, they could do some research to determine market value, but that takes time. If you will accept my lower paying position that's a flag. And, the worth of a position is not a specific number, it's a range. And if I can give you a modest raise and get you in my range I'm saving some $$. And for the record, I ask for current salary and I tell candidates the salary range. Large ranges become more common the more impact the position has on the bottom line.

dbkliv said...

In my first job interview out of college, I wound up talking to the hiring manager and two directors. Near the end of the interview, one of them asked me how much I'd like to be paid. "$320,000 per year," I answered wryly. Everyone laughed.

"I'm not joking," I deadpanned. "How close can you come to that?"

After a day I got a phone call: the hiring manager offered me $30,000. I asked for $32,000, "Since it's 10 percent of my ideal number." She laughed and agreed.

Now this all seemed pretty good to me at the time. I was a liberal arts major from the Midwest getting a tech job in the Bay Area.

Within a month of starting, I was outperforming my colleagues. I'd re-written documentation, written tools to make our jobs easier, streamlined our workflow, and was increasingly the go-to guy that my manager came to with last-minute problems. Two months after I joined we hired a new team member, and I trained them in on the job.

In my third month we had another new hire, and again I was doing training. One day I discovered I was getting paid $4,000 less than our two newest hires. I didn't know anything about perceived value, that two workers can negotiate different salaries for the same job. I just felt cheated.

I put together a large binder showing my contributions to the team: emails that colleagues in other departments and customers had sent to me and my manager saying what a good job I'd done on this or that, or thanking me for bailing them out when they were in a bind; printouts of our old documentation, and the new documentation I'd written. I presented the binder to my manager and said, "Three months ago you asked me how much I wanted to earn. I said I wanted $320,000. And I still want that. But I'd be happy if you'd bump me to be equal to our two newest hires." She was amused by my chutzpah and took the binder with her.

A week later my salary increase was approved: I went from $32,000 to $36,000. Another three months went by, and we hit the annual review time for the company. I went up to $40,000.

My manager told me that she hadn't seen anyone do this before: get a salary bump twice within a year. I understood that I had been exceptionally underpaid, and had significantly outperformed the position I had been hired to do. I didn't expect similar salary increases in the subsequent 5 years that I stayed there.

I'm not sure if there's a lesson here, but that one wry joke certainly served me well.

Anonymous said...

Someone told me you should look to increase your salary 20% when applying to new positions and that companies will only hire you in this range. For me that would mean going from 60k to 72k. However, the position I am in now is the first one I took after earning my MBA, and after seeing what other people contribute vs. what I contribute, I'm flabberghasted. My contribution has been leaps and bounds above what anyone else is even capable of doing and I feel my next position should contain tremendously more responsibility. Hence, I'm applying to positions well above the 20%.

Scott Hedrick said...

"But if you don't want to state the range because you want to lowball candidates, then you suck."

Why is stating the range so challenging? The prospective employee should have done some homework; if not, then that person should be lowballed.

The flip side is talking about pay. I make what I make and others make what they make. If someone gets paid more than I do for the same job,it means that either someone is getting undeserved favoritism or, much more likely, I didn't do my homework and need to brush up on my negotiating skills. I see no reason to take offense if I'm not getting paid as much- if they pay what I agreed to accept, then it's my fault if others get paid more. Some people are intimidated by asking, but that is their problem. In an adult world, we need to speak up and look out for ourselves. If we let fear rule, then a lower paycheck is the price.

Let's face it- the true market value of any job is just above the point where no qualified candidate will apply. Anything more is gravy.

lw said...

@dbkliv
Ha! I did the same thing once only it did not work out nearly so well.

Aside from salary negotiations when starting a job, what about during employment? I was once told that I could not get the raise I wanted because then I would be making more than another employee.
So the F what?

Anonymous said...

The rule to follow - DON'T ALLOW YOURSELF TO BE LOW-BALLED INTO A POSITION.

Yes, you might be sold a bill of goods "once you're in here, you can work your way up"... but if you allow yourself to take this treatment, your advancement (if any) will be slow. VERY SLOW.

I once was in a decent position but saw one that was more of a perfect fit. They quoted the range - and I said I think I should come in at around 85 percent of the range. "Why?" One, I was a perfect fit for the position, having been experienced in exactly what they were looking for. Two, unlike other candidates, I will definitely be productive from day one, no doubt. Three, let's be honest, to pry me out of my current situation, it's going to take that.

The HR rep called me, and offered me a salary that matched my current one -- but didn't have all the benefits and bonuses! So it was a sizable pay cut! I refused it, and the HR rep went through a song and dance about how great they were.

I cut her off = I will not come over and work for you at that level. That's it. The question then = "Well, one more thing. If we offered you what you were asking, or close to it, would you reconsider?"

I said - YES - but I will only, and I mean this - ONLY give you one more shot, please don't waste my time and I don't want to waste yours. And I also had another "iron in the fire" with another firm, so I said, get serious or go away.

Fifteen minutes later the phone rang with an offer that was acceptable.

This taught me = the company will attempt to take advantage of you if they can, AND, the next time it comes time for an increase or promotion, these people will only understand the power of a resignation, they will not negotiate.

Which happened. I had to resign, and an overdue promotion was granted immediately. In fact, they had the counter-offer already prepared.

Not a 'red flag', but a 'yellow caution light'.