Negotiating for a corporate VP level salary and total compensation package can be undermined at the “get go” if you fall into the trap of answering the question, “What is the number?” So, what is the way to take the high road (not appear greedy) and still negotiate for the increase you want?
I have often said common sense is a lost art. Somehow when a “C” level executive starts the job hunting process, he stops thinking like an executive who has hired over a dozen professionals. If he makes this basic mistake at the “get go” and answers the question, it can haunt him right up until the end of the search when the offer is made.
Think about what it is like to hire a Director or Assistant VP. When your HR people establish a salary range and determine what bonus level and/or signing bonuses are possible, you are relying on them to be current with the market. You have been busy doing your job and have not made a science out of developing competitive compensation packages for your group.
When you create a package, to keep things simple, you end up with a “number” that is what you can offer the new hire, without doing battle with your compensation team. For example, if the range is up to $150,000 and the midpoint is $130,000, you don’t expect the offer to be above $130,000. You intend to be able to “play” with the additional pieces of the compensation program to make the offer attractive.
As you identify candidates, you ask for current base salary and that becomes their “number.” You do a quick mental check to be sure the salary is in the range you think you can afford so you are not wasting your time. That then becomes the number on file and the number your HR team will work with if an offer is made. Changing the number is incredibly difficult once it ripples through the hiring team. Unfortunately, that number is often too low and inaccurate.
What’s wrong with this picture? If you are now in the reverse role as the candidate, how can you sidestep having that number (your current base salary) haunt you when the offer is made?
Here’s what I recommend. Under NO circumstances do you want to put a stake in the ground with a current compensation figure at the start of this process. Once that number is circulated in an email, it travels with your record. Frequently, a senior executive who is not looking and is being contacted by a search executive will share a base compensation figure early in the process to determine if the new opportunity is attractive. I repeat, DO NOT PROVIDE A FIGURE.
Compensation is not one figure, it is a moving target. It is not a “number,” it is a complex group of numbers that can be on the verge of changing. It is your job to present the “story” of your compensation and not take the question literally.
That means if you have not thought about compensation when you receive a call from a “headhunter” and you are possibly interested in the search s/he is conducting, it is time to look at your current and near term estimated earnings. Also, what are you leaving behind? Timing is critical for raises and bonuses and must be considered. This is not as simple a formula as you think.
Once you have those numbers, get back to the search person with a comprehensive set of figures and it should be in writing. If any figure is an approximation, indicate that along with a timeframe to provide more precise data.
Here’s how to do your homework before you provide total compensation information (not base salary). Let’s look at computing compensation using real numbers with the example below.
Current Base Salary: $250,000.00 with raise shortly
Bonus potential: $40,000. This is a conservative estimate based on prior history: It is 15% of base (at the higher level you will be at within a matter of weeks). Of course, you must be currently employed at the company to collect this amount and it is normally awarded in February. (Other components may be added such as stock based upon overall company performance.) This suggests that either the offer makes you whole via a signing bonus if you leave before you can collect the $40,000, or you sit tight until you collect it.
Annual Performance and Salary review: $12,500 increase. The increase is due (let’s assume) in late October in conjunction with your performance review. Stock awards may also be granted for outstanding performance. Prior raises have been in the order of 5% along with restricted shares of stock and options. Your company has a history of counter offers so you can estimate that your normal raise of $12,500 will be accelerated and increased most likely on the order of another 5%.
Stock: what you will leave behind? Like many companies, your stock is vesting on a formula where no matter when you resign; you will lose a portion of the value. Depending upon how well the company is doing, particularly in these times, the value of what you leave behind can be from $25,000-$75,000 or more. (Conversely, the stock could be underwater now with better prospects later if you stay.)
Vacation: four weeks. As a senior officer you have a four week vacation benefit that you will not normally receive in your new position. Generally, you can negotiate for three weeks but you will need to ask for it.
Special Benefits: how to value them? At many companies, there are benefits that are unique to the organization. They may be in the form of health programs, special events, company trips for spouse, etc. Attach a dollar value to them since they will not translate into what the new organization offers.
401K contributions and other company funded benefits: will you lose them? If you leave in the middle of a year, do you lose the company’s contribution? When will your new employer begin contributing to your 401K? Will there be a gap and a loss of benefits? (Hopefully not, but it is worth asking.)
Having done your research, when a potential employer asks about compensation, here is what I would suggest. First, do not presume to ask for a particular figure; you are simply presenting factual information that will help the hiring organization understand what your numbers are. This is a non-threatening, reasonable approach. Second, put the information in writing and simplify the figures.
Base Salary: estimate your new salary and do not give a current figure. Say, “As of late October, I receive a normal raise bringing my salary (that I estimate) to: $262,000.” Promise to provide the precise number as soon as you know what it is. Do not state your base salary of today if you are within weeks of a raise.
Bonus: “My bonus award is conservatively estimated at 15% of base which I will receive in February. I will be notified of the precise amount in December.” (If that is the case or whenever the precise figure is known.) “I estimate the award at approximately $40,000.”
Stock: “I will receive stock awards in conjunction with my bonus and raise. While it is hard to put a precise value on the stock, I will leave behind approximately $xxxxx should I leave the company in February of ’09” (for example).
For you and the hiring organization, these are compensation figures that give a more complete picture and allow for accurate comparisons. Also, right at the beginning of the process, you have set realistic expectations about what the compensation numbers would need to total for it to make any sense to proceed.
Once you know you are a finalist, there is another point to consider depending upon what you require for a base. Some organizations offer a comprehensive compensation package with excellent long-term incentives that over time will be very lucrative. However, they do not offer salaries that are particularly attractive. Their point is if you are loyal and look at the long term, you will make a great deal of money.
It is important during the course of negotiations to indicate what, at a minimum, you would need for a salary that would cover family living expenses while you are earning these longer term benefits. In some instances, once this figure is on the table, the hiring organization provides a signing bonus to close a gap.
This approach should avoid the pitfall of answering the wrong question that has no good answer, which is: “What is THE number?”
By Judith Cushman, The Cushman Report October 2008 To subscribe: Email info@jc-a.com with “SUBSCRIBE” in the Subject line
