NEGOTIATING YOUR COMPENSATION
Presented by Robert Salwen
to the Financial Executives Institute,
New York City and New Jersey Chapters,
at the Regal U.N. Plaza Hotel, New York City
May 2, 2000
1.†††††††† Donít be a deer caught in the headlights. The prospect of option riches shouldnít blind you to the flaws in the company, the management team, the business model, or the compensation package. Do your due diligence, and approach employment offers clinically and critically.†
2.†††††††† Be prepared to walk away from the deal.†Companies are not accustomed to hard bargaining of pay packages -- itís often† countercultural for them and thereís alot of inertia and other forces that work against you -- and they usually donít give something up unless they are made to.† If you are not prepared to stand your ground --- and make the company blink first -- youíre unlikely to get what you want.† Remember, not all deals should be made.† If youíre taking alot of risk by jumping ship, the pay package should be risk adjusted to compensate for the added risk.† If itís not, it may not be a deal worth taking.
3.†††††††† Assess your leverage realistically. Most executives tend to underestimate and underutilize their negotiating leverage; they are reluctant to antagonize their future employers by negotiating hard.† Donít assume you have more leverage than you really do, but donít assume you have less.† If a company is making you an offer, they want you -- and that is the time to negotiate.† Once you sign on, much of your negotiating leverage dissipates.†The time to negotiate is during the courtship stage.
4.†††††††† Donít refrain from negotiating hard out of concern about antagonizing your future employer. Itís unlikely that youíll be able to extract concessions from the company without bargaining hard and standing your ground.† If you have a realistic assessment of your leverage and you negotiate hard, youíll be respected coming into the organization.† Itís better to impress your future employer as a tough and sophisticated negotiator than it is to give the impression of being a pushover.
5.†††††††† Donít be reluctant to address the subject of divorce when youíre in the courtship stage. This is a classic mistake that often comes to haunt executives later.† If things donít work out with the new company, you may not have the leverage at that time to negotiate acceptable departure arrangements.† Your leverage is at its peak during the courtship stage, and thatís when you should hammer out the terms of any later separation.† You donít need an employment contract as long as everything is copacetic.† You do need one when thereís a falling out.† Thatís why I often say that employment contracts really should be called unemployment contracts -- because they are truly significant only when there is a separation.
6.†††††††† Keep your powder dry. †Donít commit prematurely.† Actions speak louder than words. Getting involved with the company, such as by attending meetings or reviewing reports and business plans, before your employment terms are finalized, can undermine your negotiating leverage and send a signal of weakness. Work out the details of your compensation and employment arrangements first, and then dive in to the work.
7.†††††††† Use intermediaries sparingly and cautiously. Most executives are quite proficient at negotiating, and, contrary to popular belief, they donít suddenly lose their effectiveness when negotiating their own arrangements.† The best results are often obtained when the principals negotiate the terms directly, rather than through intermediaries like headhunters and lawyers.† Use headhunters and lawyers as behind-the-scenes advisors, but donít necessarily rely on them to do the direct negotiating.† If you delegate the negotiations to your lawyer, the company will do likewise, and at that point the lawyers, rather than the business people, tend to dictate the terms.† Executives often obtain better results in employment negotiations when they deal directly with their counterparts at the company, and then have the lawyers simply document the deal that the principals have made. †
8.†††††††† Negotiate by rationale. Even if you have negotiating leverage, you usually need to provide a sound rationale to enable the other side to accomodate your demands.† And even when one party to the negotiations lacks leverage, they can often get what they want if they present a sound and compelling rationale.
9.†††††††† Time your negotiations carefully. Try to time your negotiations so that they take place at auspicious times.† If youíre seeking a significant concession from the company, try to have the discussion at a time when the other party will be in a good mood, or when your leverage is at its apex (such as when a large deal is pending for which your services are critical).†
10.†††††† Get it down on paper. Corporations have notoriously poor institutional memories, as many employees who have relied on oral promises have learned to their chagrin.† Donít rely on oral statements or on the good faith of the person you are negotiating with.† S/he may interpret or recall conversations very differently than you do, or s/he may no longer be with the company (or, for that matter, alive) when the time comes for the company to honor the promise.† Get it in writing, and get it allin writing.† Incomplete documentation can be just as troublesome as no documentation at all.