Three Salary Negotiation Secrets You Probably Missed
Sep 15, 11 | 12:07 am
By Neil Patel
As your business grows, you will be hiring more employees to scale up your profits and take over tasks that you and your top management would rather not deal with. With employees come a number of additional issues that you'll have to handle, including compensation. You'll have to keep your costs manageable when hiring, so it's important to be able to draw the line on what you'll pay out.
Here are three strategies for salary negotiation that often get left out in books and courses on the subject.
1. A few perks go a very long way
One thing I've noticed in entrepreneurs is that they tend to overestimate how universal their policies and managerial styles are. Do you let some employees come in at 9 a.m. and others at 7 a.m.? A lot of managers think that is outrageously inappropriate, but it might be normal for you.
What about having a beer during work hours every Friday afternoon? Do you let employees work from home? Do you let employees take unpaid days off freely, as long as they give you notice? Can they show up in a T-shirt and shorts during the summer?
Maybe those sound ridiculous to you, or maybe they sound essential for a free-flowing idea-driven office. Unless you're a drill sergeant, I'm betting there's at least some work policies you can bring out that will excite an applicant enough to take a lower salary. There was one marketing executive I know who hated working at 7 a.m. so much that when a job offer came by with a 10 a.m. start time, he was ready to take a sizable pay cut.
Talk to your fellow business owners and see how they run things. Make an inventory of privileges, perks and policies you have that are uncommon your industry. Ask your current employees as well. This will help uncover some gems you may be missing.
Make these perks clear on your job ads, during your interviews and even on the "Careers" page of your company website. If your employee can brag to his friends that his company gives free Starbucks cards, he will be more willing to forgive a decrease in salary.
2. Even if you win the battle, you can lose the war
While we'd all like to think our company is the top choice for every applicant that walks in the door, the truth is that there's a real level of need that has caused someone to offer to spend most of his or her waking hours at your office. If they didn't have this need for steady income, health benefits, etc., then they probably wouldn't be working at all.
A lot of managers take advantage of this by aggressively negotiating salaries down to the lowest amount an employee will take.
If it's an especially hard economy, or the applicant has a major purchase coming up, then you just might get a surprisingly good bargain. Heck, even if you're a great negotiator, you might get someone for $60k annually that your competitors would have paid $80k for.
However, this isn't a one-time business deal. If you were negotiating a car, then I'd say pull out every trick in the toolbox, but with an employee, you have to face that you'll be seeing this person every day, working with them, sharing goals and more.
Now that you've hired a new team member, you want maximize performance. If you've ever gotten "too" good a deal on an employee, you may have noticed that in productivity, you might get your money's worth and not a cent more. Right or wrong, salary affects a person's social standing, confidence and self respect. If your new recruit has to disappoint his wife with the compensation plan and avoid the salary subject with his close friends, then this will of course spill into his workday. There's going to be some resentment and passive aggressive behavior.
Get a great deal for your company on an employee, but you want your newhire to be fully convinced he's getting a fair deal, and preferably one that will excite him into reciprocating with great work.
3. Negotiating employee salary raises gets very messy
In the last point, we were talking about an often missed topic, avoiding employee resentment. This gets much more complicated with current employees than with new hires.
At least with an applicant, if there's no agreement, they will walk away thinking your company wasn't a financial fit at the time. With a current employee asking for a raise, an unsuccessful salary talk has strong chance of making them feeling unappreciated, uncared for, or even blatantly cheated or exploited.
After a failed salary raise request, even if the employee was being unrealistic, he can walk away thinking, "How could they not give me $10,000 more, after everything I've done for them? Do they realize how much money I've made them...how hard I've worked?"
Added to this is the fact that salary negotiations are inherently adversarial, and can feel very win-lose. This is not a healthy attitude for two people to have who are supposed to be united in company goals.
The trick is to make it very clear how raises are calculated from the very beginning. Ninety percent of salary raise disputes would be taken care of if employees knew from day one how the compensation plan worked.
For revenue-driven positions in sales and marketing, let your employees know specifically how much they'd have to wow you to get higher salaries. If you run a company where a marketing specialist gets the same amount of money whether he brings you in $150,000 or $2,000,000, he should not be expecting performance based raises. However, I'd caution you to reconsider any compensation policy that doesn't reward performance.
No matter what your policy is, make it clear in your employee manual and even in your offer letter, if appropriate.
In general, you want your salary negotiations driven by value. You will provide value to your employees in money and a comfortable daily environment, while they provide value to you with superior performance. As long as you make it a point to expect this value from your employees and honestly give great value in return, you'll find that salary decisions become pleasant for all parties involved.
Source: openforum.com; To continue reading 'Click Here'.
