Rewrite of salary negotiation tips for executives
If you got my last blog post emailed to you, it’s because I value our relationship and I value exchanging ideas with you. I also value your blog feedback. Some helpful tips I got over the weekend:
Use fewer footnotes.
Use more footnotes.
Go more in depth on the anecdotes you survey.
Don’t go more in depth on the anecdotes you survey.
Your feedback reminds me of my dear friend Matt Wojo and his disinterest in the encumberment of ideological consistency. But seriously, your reception was loving and I appreciate you.
My last piece was my first blog post on my blog, but not the first blog post I’ve written. Over five years ago, I wrote my first and only other blog post for a different blog. It was about salary negotiation tips for executives. Two years later, a woman named Raya that I’d never met sent me a message on LinkedIn thanking me for the piece and citing it as “tremendously helpful for [her] pre-offer negotiation.”1 It’s page three on Google now, aka internet dead, so this rewrite’s for you, Raya.
If you’re reading this article, you’re either curious or at the winning end of a hiring process. Either way, congratulations! Below, I share tips for navigating executive compensation negotiations. I encourage you to read my notes on why compensation before jumping to how to negotiate.
Why compensation?
For employers, the goal of compensation is to buy labor that is more valuable to the employer than the capital expended for the purchase. For employees, the goal of compensation is to sell labor that is less valuable to the employee than the capital acquired from the sale.
I use capital to point beyond financial resources and h/t Max Weber and his intellectual progeny that clocked the valuable moral and identity dimensions of work in the WEIRD tradition. The fancy title, the sense of community, the feel-good nature of flying endangered frogs across a continent to escape a deadly fungus… all that stuff counts, too.
Movies like The Wolf of Wall Street and Parasite, perennial articles about corporate greed, and that one meany you worked for that one time all fill the popular imagination with zero-sum depictions of compensation. You are led to believe that winning for the employer or the employed means getting more or giving less. You are being conditioned to perceive those who describe an exchange as win-win as greasy predators on the dominant side of a win-lose trade. These are lies.
I offer that compensation is best when it’s a win-win, and that a winning compensation package looks the same on either side of the table.
Take an example where an employer extends an offer, n, to a prospective employee. Let’s say the most an employer will pay for a said employee is n + x, and the least the candidate will accept is n - y. It then follows that offer n is acceptable to both parties when it satisfies the two conditions at once, combined as n - y ≤ n ≤ n + x.
At the high end, n + x is a mutually agreeable solution. That may seem ideal for the candidate looking to maximize current and future earnings, but this view isn’t risk-adjusted. What if there’s a market downturn? What if there’s a change of manager? What if there’s a change of control? Special provisions can address each of these, but even the best protections are worse than the upside of continued employment if the alternative is undesired unemployment.
At the low end, n - y is also a mutually agreeable solution. This may seem ideal for the employer looking to maximize current and future earnings, but this view isn’t risk-adjusted. What if the executive receives a competitive offer from a competitor? Or a player in another industry? Or the opportunity to join a board, consult, or become an interim executive at more competitive rates? Special provisions can address each of these, but even the best departure of a valued executive is worse than the upside of retention if the alternative is an undesired vacancy.
Each party’s desire to manage risk through a margin of error drives the ideal compensation package toward convergence. Salary negotiation is the process by which to realize that convergence and create a win-win.
How to negotiate:
Practice your values. Compensation negotiations can be uncomfortable. These are your chance to showcase your values. In the interview process, did you allege candor? Creativity? Transparency? Humility? Put those into action or risk a bigger problem. One dear friend receiving this blog post had an offer rescinded years ago for values misalignment that came up through a failed negotiation.2 It can feel like a bummer.
Research. Companies have the benefit of subscriptions and advisors that give nuanced insights on compensation trends. Candidates typically have less insight. This information asymmetry can drive misaligned expectations. Invest time and effort to learn about the compensation landscape for your function, industry, and geography. It can pay a big dividend.3
Work with advisors. There’s ample opportunity for misunderstanding or signaling of the wrong sentiment. Intermediaries, like executive search consultants, are experts at hand-holding companies from requisition to hire. For candidates, competent friends, career coaches, and executive outplacement consultants can offer helpful advice. You can get an experienced advisor on the phone for a few high-impact hours of guidance that more than pay for themselves when compensation negotiations go right.
Align incentives. We examined the natural incentive alignment that is endemic to compensation packages… employer wants labor, employee wants capital, they trade. Still, you have agency in realizing that incentive alignment. Coming into a company in hypergrowth? Consider involving equity, phantom equity, or revenue-based targets in your package. Managing for profitability? Look for linkages between EBITDA and your take-home pay. Excluding some public and social settings, incentive-based compensation tends to increase as the scope of responsibility increases. A CEO to have a much more incentive-driven compensation package than an entry-level analyst. Realize that you, beloved target audience, are more like a CEO than an entry-level analyst.
Negotiate the total package, from least to most standardized. Compensation is a lot of things. A base salary, sign-on bonus, a short term incentive, a long term incentive, benefits, perks. Attributes like in-office attendance policies, travel requirements, the people with whom you work are all part of total rewards. Not every aspect of the package is equally negotiable. For instance, corporate executives often confront rigid internal equity parameters that make it unlikely for a big company to alter short term incentive targets as a percentage of base compensation. Those same companies usually allow a lot of flexibility around sign-on bonuses. These nuances are organization-specific. Uncover them. Then, get total rewards where you want to be by negotiating the least standardized aspects of your offer.
Attach your requests to your reasoning. What you ask for in negotiations will carry more weight if accompanied by a why. Looking for a bigger equity package? Explain why the deferred upside is more important to you than near-term cash. Hoping to commute for the first year? Give insight into the family situation that makes immediate relocation a nonstarter. It’s a mistake to view context as a compromise of dignity as some executives do. You’re navigating a human process, and you should use all rhetorical appeals to the extent they’re true and helpful.
Focus on the opportunity. You may not get everything you want. That’s ok. It’s your assessment of the uncertain opportunity more than the certain rewards that should guide your decision to accept an offer. You won’t miss the extra $50K your friend said you could have squeezed into your package at Imaginary Alternative Corp when you’re pursuing your goals, living your values, and loving your work life.
Caveat emptor! Raya’s career history doesn’t show any job changes within years of the message she sent me. For all I know, her deployment of my tips could have blown up a good thing.
Tl;dr, the dear friend said hey I’ll accept your offer today at [higher number], else I’ll need to think about it over the weekend to accept [number]. Company was big, corporate, and innovative-in-name-only… They thought his premium on speed maneuver was weird and unprofessional given their allegiance to soulless norms. He also detailed the types of project work he wanted which could have rubbed them the wrong way. The dear friend is super talented and landed at a more innovative company with a better compensation package. God provides and the market solves.
Some research tactics include Googling it, cold LinkedIn DMing people in the same role at a different company and saying “sup dude, I’m in talks for an offer, wanna help a stranger out and tell me what you think the market range is for this gig?,” paying to ask a career coach, posting on Reddit/equivalent and doing a Who Wants to Be a Millionaire-style ask the audience thing, and if you’ve exhausted these and still need help, email me at tony@moral.es