Negotiate Your Job Offer, Step by Step

I went to every negotiation seminar I could find in the nineties. I was running HR for my employer, so you can imagine why I wanted to learn to negotiate. My boss wanted me to learn about negotiation too, because our deals with vendors got bigger as the company got bigger.

The dollars got much larger. Sadly, the negotation workshops left me cold. I hated the way they taught negotiation at those workshops. They turned negotiation into an "If X, then Y" transaction. I thought they missed the most important part.

In all the business negotiations I had been part of, there was a heightened level of tension in the room while the negotiation was happening. Why weren't we talking about that? That's what I really wanted to understand.

Negotiating a job offer can make a job-seeker feel like David fighting Goliath. You have to believe in yourself, but traditional job-search instruction doesn't tell you to value yourself. The conventional wisdom is "If you get a job offer, take it!"

Here's a step-by-step Job Offer Negotiation process. You might want to wait to read this story until you have a few minutes to relax with a cup of coffee or a nice gelato.

As Your Job Search Begins

You're going to start negotiating your job offer long before you receive it. The minute you start a job search, you need to know your market compensation level. Otherwise you won't know what to say when people ask you "What salary level are you looking for?"

You can't say "Whatever you think is fair." That's an invitation for a lowball offer, but it's worse than that. When you say "Pay me what you want," a lot of managers won't take you seriously, and frankly I don't blame them.

This Is Business, Y'all

When you call the plumber because something is leaking under your sink, you don't want the plumber to say "Just pay me what you think is fair." You're going to start wondering about the plumber's experience and credibility as soon as you hear that!

You are a professional. You command a market rate and that's what you should earn. You need to know what your market rate is. Salary and Payscale are two good resources here in North America.

You can also contact a local third-party recruiter and ask him or her to give your resume a quick read and give you a ballpark salary estimate.

What Are You Expecting to Earn?

You have to know your market salary, because when you answer the question "What's your salary target?" with too high or too low a number, that could be the end of your candidacy for a particular job, right there.

If your number is too low they'll think you're too junior for the job. If your number is too high they'll figure you're out of their range.

The best number to give them is a fair number based on your experience, the impact you've had at previous jobs, and your read on the Business Pain behind the job opening.

Brittany Moves Up In the World

Brittany is interviewing for an HR Coordinator job she saw advertised on Craigslist. Brit earned forty-two thousand dollars a year at her last job. She wants to take a step up now that she's changing job. She's learned a lot about HR since she began working in the field two years ago.

Brittany knows she's underpaid now, and apart from that, she wants a higher-level position. She wants to run an HR department in a small company where she'll be the HR equivalent of Chief Cook and Bottle-Washer. She'll wear all the HR hats!

Brittany has been reading about one interesting employer. It's a growing office-cleaning company with 240 employees. They clean offices and schools at night. They placed a job ad for an HR Coordinator on Craigslist.

The name of the company is Overnite Sensation. As far as Brittany can tell, they don't have anyone doing HR in the company right now. That's good!

I Know My Value

Brittany is happy to come in and set up their HR function, but she's not going to do it for forty-two thousand dollars a year. She knows that the company's investment in an HR function will save them a ton of money and also help them grow their revenues.

She wants to be able to make that argument clearly, should her fifty-thousand-dollar salary expectation become a roadblock in the conversation.

Let Me Put On My Research Hat

Wait a second, thinks Brittany. What are Overnite Sensation's revenues, anyway? It would help me understand the cost associated with the lack-of-HR Business Pain if I knew their sales volume.

Sadly, I don't. That's okay! I can estimate.

Overnite Sensation is privately owned, so Brittany can't find their annual revenues online. That's okay. She'll make some assumptions and try to guess at their revenue level. They have 240 employees. The employees work full-time, at night.

What does the average Overnite Sensation employee get paid per hour? Let's say ten dollars. Ten dollars an hour times 240 employees is a total hourly wage of twenty-four hundred dollars for the whole team.

Now we have to multiply that by forty hours, because people work forty hours per week. Twenty-four hundred times forty is ninety-six thousand.

Wait, is that right?

Those Dollars Add Up Fast!

Dang! Mort is spending a hundred grand a week just on payroll. Okay. My last company was smaller. Wow. Now I see why Mort, the owner, is kind of antsy all the time. He's not relaxed. He needs to get some of that stress off his shoulders.

I can help with that, setting up a great HR function and bringing some Team Mojo up in this beehive.

Everybody here could use some stress relief, even though it's a great company. Well, if they're really a great company they'll hire me!

Fun With Math!

Oh wait, what about the office people? They get more than ten dollars an hour. Well, we'll estimate that there are thirty-five folks in the office and that their pay averages twenty bucks an hour.

I'm making assumptions here like crazy, but that's okay - it's better than nothing. Okay, thirty-five people times forty hours times twenty bucks is another twenty-eight thousand bucks a week.

Wow!

Shoot. I have to deduct the office payroll from my original hundred-thousand bucks a week estimate. Oh, for Pete's sake, what difference does it make? As far as Mort is concerned, it's still a lot of cash going out the door on payroll - a million bucks every ten weeks, give or take. I wonder how much profit is left after the employees get paid?

How Much Money is Left Over?

I don't know anything about margins in service businesses, but I can't imagine guys like Mort have huge profits. If they did, everyone and his brother would be in this business. So I imagine margins are thin.

Let's say that Mort has to sell six hundred thousand dollars worth of office cleaning services every month to cover his four hundred thousand or so in payroll per month, plus the building expenses, cleaning supplies, insurance and advertising.

How Can I Help?

How can I make an impact on that six hundred thousand dollars that Mort needs every month? Payroll has to be a gargantuan share of all costs, because the office is tiny and there's just a supply area and garage for the vehicles - no manufacturing or fancy office space, but still. So payroll and supplies, those are the big expenses.

What increases Mort's payroll cost? Turnover, for sure. People calling in sick, so someone else has to work overtime. Okay, I see the movie now! I can make a positive difference on both sides of this business - on the flame that gets people excited and makes them feel valued, and on the crank side where we make money.

I See My Part In This Movie

I can make it easy for the employees to stick around here and bring their friends to work here too. I can help keep turnover down. I can make Overnite Sensation a great place to work. I can help move productivity through the roof!

Brittany is getting excited. She feels like a consultant. That is a great way for a job-seeker to feel. Her brain is still working on the Overnite Sensation case study. She feels like Overnite Sensation is her employer, already!

Brittany thinks, So we've covered the financial side, at least as far as my assumptions can take me. How important is the people side of this business? The people side of a cleaning business is everything!

What If the Employees Need Support?

Employees are the name of the game in a service business. Two hundred and forty employees with no HR support is a high-pain situation.

Brittany has to believe that the absence of an HR person is costing the cleaning company way more than forty-two thousand bucks a year, but it might be hard for Mort to see those costs. They are 'soft' costs. They're costing him money, but not as obviously as a leaky roof would do.

If It's Going to Work, Here's How It Will Work

Brittany thinks about Mort's need and her own needs. If this is going to be a good partnership, she says, then I will be successful showing Mort how the absence of an HR person is costing him a bundle. I'll take the job at fifty thousand bucks a year, no less.

Later, thinks Brittany, when Mort sees the difference my presence makes, he'll boost my pay. Fifty thousand is a good place to start.

If Mort isn't expecting to have to pay someone that much, Brittany will be happy to educate him. If he really won't budge, she doesn't want to work there anyway.

Just as Brittany suspected, the question "What did you earn at your last job?" is the second question Mort asks her at her job interview. Luckily, she's ready for it!

MORT: So, Brittany, what did you earn at your last job?

BRITTANY: In this job search I'm focusing on roles in the fifty-kay range.

MORT: Is that what you were earning before?

BRITTANY: Well, I've looked at your company and researched salaries for one-person HR departments, and I think fifty thousand dollars a year is right in the ballpark.

MORT: You're not going to tell me what you were earning before?

BRITTANY: You know, that's confidential -- I have to believe that your current employees' salary information is confidential, too -- but if we're in the same range, then it makes sense to keep talking

MORT: That's kind of the high end of what I was thinking, but let's see how things shake out.

BRITTANY: Terrific!

Brittany feels that she and Mort could have a lot of fun together and build a great company. Mort says "Fifty big ones, eh? You're kind of young to make that much money."

Brittany lets the age-related comment pass. If she takes this job, she'll have all the time in the world to coach Mort on things like that!

Brittany says "Believe me Mort, I'll save you a lot more than fifty thousand bucks a year.

"You haven't been able to hire people easily because you didn't have a recruiting process. I can't wait to fix that. I have to believe you're losing business because you're short-staffed for bigger projects."

Mort says "Smart cookie."

Brittany says "No offense Mort, but if I come and work here you won't say 'smart cookie' anymore.

Mort says "What will I say instead?"

Brittany says "You'll say 'good point!'"

Mort says "I don't know a thing about HR."

Brittany says "Don't worry -- you've got me!"

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