Avoid These Mistakes In Negotiation Talks

By Perri Capell

CareerJournal.com spoke with David Moyer at Moyer, Sherwood Associates Inc., a New York executive-search firm, about mistakes executives make when negotiating pay with prospective employers, and how to avoid them.

Where do recruited executives make the most mistakes when negotiating pay?

Around clarity. About where they are and about where they want to go. Often, they're not clear enough at the outset about what they're currently making. They don't know what they earn and how they earn it. If you get a salary of $80,000 or $90,000 a year plus a bonus, you have a pretty good idea of what you make. But suppose you have a base salary of $250,000 and you're entitled to a bonus of 30% to 40% of salary, plus you have stock options and other benefits. If I stopped you on the street and asked you what you earn, you probably wouldn't remember it all.

But as you get close to an offer, you need to know. There's nothing worse than saying you're making, for example, a $220,000 base, a 45% bonus and $5,000 in other perks a year and then a few days later remembering you also get financial planning...and oh wait, there's free tuition for an M.B.A., ...and oh, I forgot, a company car...and oh yes, there's one more thing, a gym membership.

It doesn't look right. You're not being deceptive, you just forgot one element of a complicated set of financial incentives. But it can still strike the company as deceptive or that you're trying to nickel-and-dime them. You need to get it all out on the table at the outset. So know the numbers and the components that matter. That also means excluding the silly stuff. Free parking is a huge benefit in midtown Manhattan, but everybody gets it in a suburban office park in Albuquerque.

Spend some quiet undistracted time getting to know the numbers. Write it out, and sleep on it before sending it to the search consultant or the company. That way, if you remember something additional the next day, you can add it before it gets in front of the employer.

You also need to resolve 'the hypothetical' in advance. It used to be that candidates considering new jobs would take their spouse out to dinner after about the second interview, and they'd carefully consider what they would do if the offer came through. Then they'd know, and they'd be ready to act. Today, it's not unheard of for someone to go to the third interview, receive and discuss the offer, dot every 'i' and cross every 't' and then reject it. That's damaging to the candidate, embarrassing for the search person, painful for the company and a waste of time for a lot of people.

No one will hold it against you if you drop out after first interview, but if you keep going, you must get serious and decide what you want to do. Are you really ready to enter a controversial industry, relocate to a different city or work for a troubled company? If so, you should accept the offer -- unless there's some big surprise to the package. If not, you withdraw early on and no one gets miffed.

What's the best way to determine how much you can ask for when negotiating?

You should come up with three numbers, the bottom line, your target and your 'wow' amount. The target is what you think it would be nice to make, and the wow is your stretch number. Don't necessarily tell the recruiter your bottom line, or the minimum you will take, but you need to know what it is. If you pick up signals that the job will pay only $300,000, and you won't move unless it's $325,000, you'll save a lot of time if you state that clearly. You'll either get it, or you'll avoid wasting a lot of time in fruitless interviews.

But if you're making $250,000 now, you should know if $300,000 is what you'll take. Or maybe you really like the company or you're having difficulties in your current job that make you willing to make a lateral move. You need to know the 'no' number where you will walk away from the deal, because you can't have an intelligent conversation otherwise.

Real salary negotiations -- as opposed to 'Here is our offer' -- don't happen until you get up there in the ranks. Unless you're senior level, you don't get a lot of back and forth with an employer, so you really need to be clear about what you want. We generally say that someone who's relatively secure in a job, being actively recruited, but not changing their cost of living because of a relocation should expect a 15% to 20% increase. So you can work out the numbers. If you make $200,000 now, and $240,000 wouldn't make you leave, you need to say that up front.

What sours a negotiation most often?

It's overreaching or when companies start seeing the candidate as too grasping, which is different from being too greedy. I recall a candidate who kept talking about his financial adviser and ran every little detail past him during the negotiation. It's one thing to say, 'I need to talk to my spouse' -- or 'my accountant.' But he kept going on about it in a way that was inappropriate for this level job. At some point, you have to say, 'I'm being offered a lot of dough, so I'm willing to pay for the draperies myself.' You aren't going to spell everything out.

What are most important things to remember in a negotiation?

Be open and forthright early enough in the game to set the stage for what you want. If you're working with a search consultant, go over your compensation numbers with him or her, and they'll do the same with the client. That's a good system for you, because you'll appear to be above the fray and focusing on the company's challenges.

Then find out if the company can pay what you need to move [to the new job], and how they are paying it. If the package is over six figures, most likely you will be comparing apples with oranges, because nothing will match up perfectly. You might get fewer stock options, but a bigger outright grant; you may not get the financial-planning assistance you have now, but maybe you'll receive a company car.

-- Ms. Capell is a senior correspondent for CareerJournal.com. She can be reached at frances.capell@dowjones.com

Article from CareerJournal Today – February 2005