The Art of Compensation Negotiation in 2017
By: Catherine Conlan
Perhaps you’ve noticed the trend. Competition for highly skilled candidates is driving compensation up.
According to the Bureau of Labor Statistics, compensation costs were up 2.4 percent for the 12-month period ending June 2017. Millennials are driving the trend. With education loans to pay, they sometimes have out-sized expectations for compensation.
Employers, for their part, want to hire the right people without having to participate in a compensation arms race.
“Some companies want people to come to them because they love the job, not because it’s the highest paid one,” says Michael Wheeler, a professor at the Harvard Business School and its online learning platform HBX, and an expert on negotiation theory and practice. “But for people who have heavy student debt, it may not be easy to say yes to something $10,000 less than a competitor is offering.”
Staying on top of the latest salary trends can help you remain competitive, says Brad Stultz, human resources coordinator at Totally Promotional, which custom prints promotional products and is based in Coldwater, Ohio. Be sure to research salaries in comparable fields and businesses in your geographic area to determine what the market will bear.
“The goal is to be able to provide a competitive salary that makes sense for the business and the potential employee,” says Stultz.
Look for salary reports compiled by recruiters and industry associations that dig into salary benchmarks for different positions and industries. Stultz says he participates in a monthly meeting of HR professionals that also conducts a benchmarking survey that includes salaries, benefits and other information.
“This can be an invaluable resource as a professional looks to get feedback from their geographical area,” he says.
Know Your Firm Limits
As you interview candidates, you may find someone who comes as close to a perfect candidate as you could hope for. Beware: these top candidates don’t come cheap. You might find yourself offering the moon to get that highly qualified candidate on your team.
Some are cautionary with this approach. “People are very reluctant to make hard decisions going into negotiations, but as you’re negotiating, you’ve got to have some kind of ceiling of how high you’re willing to go,” Wheeler says.
Above that point you have to be willing to walk away. You need to come in with a credible offer and the arguments for it, says Wheeler; economic constraints and other pressing issues are perfectly legitimate reasons to set a limit on your offer and stick to it.
Get Them to Name a Number
Negotiating a job offer can feel a little like a game where the person who throws out a number first is the one who loses. But getting the candidate to give you a ballpark figure can help determine how close they are to your own internal numbers and whether you can narrow that salary gap.
“During the interview process, if you’d like the applicant to suggest the salary range they were first thinking, you can ask what they were paid at their last job as a way to begin the discussion,” says Dana Case, director of operations at MyCorporation.com, a business consulting firm in Calabasas, California. “Learning what your potential employee feels they should be paid can tell you a lot about the type of worker they think they are as well as their aspirations,” adds Case.
Beware as well that today’s candidates are likely to have done some of their own homework on competitive pay levels.
Use Perks as a Bargaining Chip
You may hit an impasse on a salary number during negotiations. At that point the candidate may come back to you and say something along the lines of, “How can we make this work for both of us?” If so, it’s time to remind the candidate this is a negotiation about overall compensation, not just about salary.
“Think about other factors,” Wheeler says. Can you offer equity in the company? Is there a better job title you could offer? Things like a clear path to growth , paid or unpaid vacation days and flexible scheduling can help sweeten the pot for candidates who are looking for a larger package. Discussing these options could make it possible for a candidate to accept a lower salary, Wheeler says.
Embrace a Little Silence
Be sure to give the candidate a little time to consider things once you’ve made your job offer. Many candidates will likely come back the next day or after a weekend with an answer; in the meantime, don’t assume that a lack of questions them means they’re not satisfied with your offer.
Wheeler tells the story of Derek Sanderson, a professional hockey player who was wooed by a team in a new league. He had been making about $70,000 a year; he was then offered $1 million to play in the new league. He was stunned but didn’t respond -- and the offer rose.
“He ended up getting the highest pro sports salary at the time, because the person on the other side kept adding when he said nothing at all,” Wheeler says. “They thought he was stonewalling, when he was just overwhelmed. So make sure they put an offer on the table.”