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Last Updated December 10, 2003

The Art of Effective Salary Negotiation

When is the last time you made $2,000 an hour? If this sounds like an impossible goal, it's not. It's the difference $1.00 an hour makes in your annual income. Negotiating a mere $5 per hour salary increase will yield about $50,000 over a five year period. People spend hours researching  and negotiating the purchase of a house or car, but few even consider taking the time to properly negotiate their own salary. Whether you have a job interview next week or next year, the  tactics and tools in this article will give you the edge you need to make a real impact in your bottom line.

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The lost art
In the western world, few people negotiate for anything anymore. We've become use to the retail sales model and the "take it or leave it" price tag. On the few occasions we do negotiate, it's only for big ticket items such as cars or homes. Even then, most people are at a huge disadvantage because they are not skilled negotiators. To make matters worse, 80% of Americans think that they are good negotiators, and this false sense of confidence is often used against them by people who are.

In other parts of the world, people negotiate for almost everything, and it's expected. In fact, in many of these countries only western tourists pay full price. It's not because the vendor wants to rip them off - it's because the buyer never even asked for a different price. Fair price in these markets is whatever the customer is willing to pay. Our retail market works on the same principal - the fair price is whatever the market will bear. Retailers research customer habits carefully and price their products at the highest price they think they can get. Like retailers, employers do similar research to discover what other companies are paying their employees, and then develop a salary range of their own. The fair market rate is whatever you are willing to accept, and the company's goal is to similar to your consumer goals - to get the best possible quality for the lowest price. The important thing to understand is that a posted salary offer is not a fixed "non-negotiable" price tag, and is rarely a company's best offer. In most cases, the initial offer is a low to mid range figure. For a person that knows how to negotiate effectively, there's always a little room for .  
 

The buck stops with you
Before beginning a negotiation process you need to understand that it is your responsibility to get the highest salary possible. It is your employer's responsibility to find the most qualified person he/she can for the lowest price possible.

It sounds simple enough, but most people never even consider this. They take the initial offer, and never even attempt to negotiate a higher offer. If they find out later that their co-workers are paid a higher wage, they blame everyone but themselves for the discrepancy. The salary negotiation buck stops with you. Employment is a contract. You and your employer agreed to the salary you're being paid. If you didn't do your homework and  actively participate in the process, you can't blame your employer.

"It is your responsibility to get the highest salary possible. It is your employer's responsibility to find the most qualified person they can for the lowest price."

Having the right mind set
As westerners, our negotiation abilities are often hampered by precepts that have been taught to us since childhood. To be effective, you'll need to be aware of the following pitfalls:

  • Winning is everything - The "win at any cost" mentality has contributed to the phenomenon where people get so caught up with the concept of winning, they lose sight of the goal and wind up losing more than they gained. Simply getting a job should not be more important than getting the right job, salary, and work environment. Being turned down for a single job because your salary requirements were too high is not a rejection of you as an individual. It's important to be focused, clear headed and  unemotional during the negotiation process.
  • Fear of the word "No" - To professional negotiators, "No" is not the end of a negotiation but the beginning. As children, we're taught not to ask strangers for things because it's impolite. As an adult, you'll need to get past this if you want to move ahead. If you got through your entire interview and haven't heard a single "No" to a salary/benefits question, you may not be getting the best deal. Seeing "NO" as an opportunity and not a wall is the first step to being an effective negotiator. 
  • Negotiating is a war - You must avoid the appearance of an "us" versus "them" mentality at all costs. An effective negotiation should be a "win-win" for both you and your employer. Your manager knows if he pays you too little you may leave. But if he suspects you're just trying to squeeze as much out of the company as possible, he may retract the job offer entirely. Don't let your ego drive your salary. This isn't a game to see how much you can get. Also keep in mind that if you interview and negotiate successfully, the person you're negotiating with will be your boss. How well you negotiate may set the tone for your career in that company. Be polite. Be firm. Be professional. Leave a good first impression.

Knowing what you're worth
Before you walk into an interview, you need to have a firm understanding of what you are worth. This will require some honesty and objectivity on your part, as well as a bit of research that should span several sources. Many people begin with online salary surveys which are fine for getting a "ball park" idea of what you are worth, but are often too general in regard to job titles and geographic locations to be reliable. The job market (like any real market) works on the principal of supply and demand which can fluctuate faster than an annual survey can reflect. Aim high, but be realistic.

If your skills are rare and in demand, your potential pay rate may exceed the rate reflected in salary surveys. If the market is flooded with other applicants that have your identical skill set, you'll be at a disadvantage. So how do find out what you are worth? One of the best "real time" salary barometers is to check several online job boards for postings in your geographic region. Look for the baseline salary levels, and also for which skill sets are eligible for premium pay. Look for the different rates between skills and experience levels, industry certifications, college degree, etc. If you're not pressed to find a job immediately, you may choose to upgrade your skill set by completing industry certifications or taking a class before getting into the interview process. You should also talk to your peers working in similar positions at other companies to see what their salary ranges are, and what skills are in demand. For additional information on increasing your worth as an employee, check out our "Secrets of successful contractors" article.

The market preys on people in a rush
In the consumer market, people who "can't wait" to buy something almost always pay a premium for what they want. Need an airline ticket last minute? A hotel room? A car? Cold medication? An umbrella when it's raining? You get the picture. If you fail to plan, it will cost you. The same goes for job searches. Don't wait until you're at the end of your rope (or worse, unemployed) before you start your search. If you're unemployed, you've immediately put yourself at a disadvantage because you're less likely to walk away from an offer. You've lost your leverage. Employers know this, and some look for it on your resume. Some may even ask you up front if you're currently working. If you're not, make sure your potential employer doesn't think you are hard up for money. It could cost you several thousands of dollars. Remember, Noah built the Ark before it was raining.

The Job hunt
Once in a while, the perfect job lands in your lap. Great pay, short commute, room for advancement, challenging environment, good benefits, etc., For the rest of your career, there are two ways to look for employment. You can either find a job that meets your needs (responsibilities, location,  schedule, etc.,) and try to adjust your salary during the interview, or you can find a job that meets your salary requirements, and try to adjust you responsibilities to fit your needs. In our experience, it's easier to find the perfect job and negotiate the salary to meet your needs, than to take a job for the money and then try to make it fit. 

Ideally, you want to find a job before it gets posted online or in a newspaper. Employers often prefer to promote employees from within, or hire people referred to them by existing employees. If they come up empty, they may go to a recruiting firm who can prescreen potential employees for a 10% commission of that candidates salary if he/she gets hired. When all that has fizzled out, the company may consider posting the job in a public forum. By the time the job hits the local (or worse, national) newspapers the employer is essentially "bottom feeding" which tends to make the interviewer more skeptical. The higher you start on this "food chain", the more leverage you'll have to negotiate your salary.

When scouring the job ads, there are two things to watch out for: Job postings that don't list a salary range, and job postings that list an abnormally high salary range. Many companies don't like to post salary requirements because it gives the applicant the opportunity to make an offer first, giving them an advantage. Employers immediately sort out the applicants by salary request and interview the low to midrange requests first. If all else fails, they may get around to the other applicants, but their resumes are usually tossed. If you're asked for a salary requirement on an application, write "negotiable" or "competitive." 

The second category of job ads to be wary of are postings that offer abnormally high salaries. This is often used by recruiters as a tactic to collect resumes and build their databases, or as a leverage tool by employers to lure the most talented people than can find and then talk them down in the interview. How do they talk someone down from $80,000 to $65,000 a year? By presenting ridiculously impossible job requirements, followed by grueling technical interviews design to create a checklist of reasons of why you're not good enough. Then they counter with "but we really like you" and think they would like to take a chance on you. The $80,000 salary is dangled as a carrot that you might attain once you've had a chance to prove yourself at the company. So you'll come in at $65,000, and burn yourself out over the next few years trying to get the $80,000 salary before you realize that it doesn't exist. Don't fall for this game. It's more common than you think.

Sizing up the job
The key to any negotiation is information. The more you know about your employers position before you begin negotiating, the better your position will be. You'll be giving your employer a cover letter, a resume, and perhaps even an application that lists your work and salary history. But what do you know about them or the job you're applying for? Wouldn't it be nice if they gave you a list of the salary history of the position being offered? How about a list of the employees hired in the last 10 years, how long they worked there, and why they left? Of course you'll never actually get this information, but the point is to know as much (or more) about your future employer as they know about you.

  • Find out everything you can about the company - A healthy company in a growing market can offer competitive salary and benefits, as well as environment you can grow in. A company on the ropes could be an opportunity to be a star and get promoted, but you could also be laid off, experience bounced paychecks, and generally wind up with the short end of the stick. How long have they been in business? Is there company on the rise or decline? What is the health of the industry they're in? 
  • Find out everything you can about the job - A few descriptive lines in a job posting is not enough to really give you a feel for what a job requires. Do a little digging to find the out the details such as what technology you may be working with, what is the current infrastructure, is this a new or ongoing project, and how crucial is this position to the company's bottom line. This is critical, because it helps you find an edge you may have over other candidates in terms of technical skills or experience. You can use this information to customize your resume, prepare for potential interview questions, and research technical issues in advance. It can also help you discover other information that will be useful to you without tipping your hand to the interviewer. How long has the position been open? Is it a new position or are you replacing someone? How difficult has it been to find qualified candidates. Obviously it helps to have an insider that can give you this information, but sometimes a simple call to the Human Resources Department can provide you with all the information you need.
  • Find out everything you can about the interview process - Every company has a slightly different procedure for their interview process. At one company, I faced a grueling 6 hour marathon of progressive layers of management who grilled me on a variety of technical issues. Another employer invited me to an hour long lunch meeting where 8 of my future co-workers sat in on the interview and were part of the hiring decision. My last interview was a relatively informal one on one meeting with the manager I would be reporting to. Having advance knowledge of the interview process will help you prepare for it and determines your strategy. If you have multiple interviews with successively higher levels of management, you'll want to save the salary negotiations for the top decision maker. In a one on one interview, you may need to address salary issues before you leave. If it's a team interview, you can't negotiate in front of your co-workers and will have to schedule a one on one follow up meeting. 
  • Look for time sensitive positions - Another crucial factor to consider is the number of openings and how long the job has been available. When an employer is in a rush to fill a position that crucial to a time sensitive project, salary becomes less of an issue then availability. This strategy can also backfire when the project is over and management is looking to cut costs again. Unless you've been a top contributor, you may find yourself looking for work again.

Selling Yourself
Before you simply blast off your resume (or fill out an application for a position), stop and think carefully about the position you're applying for. Is this a lateral move for you, or a step up? Think about how the job fits into your long term career strategy. Can you tailor your resume and cover letter to reflect your strengths as they relate to this job opening? Are you a good fit for this job, or is it a stretch? This process is about more than making a good impression in the hopes that you will be hired. Think of this as a sales job. Anyone can sell a great product (your skills) cheap. The trick is to sell it for the best price you can get, and still make the customer think they got a great deal. Every contact you make with your potential employer is actually part of the salary negotiation process, and should be treated as such. This includes: 

  • The Resume - Most companies want to see a one page resume, but if you have a few years of experience, it is almost impossible to have a "one size fits all" version. A general resume may be fine for posting on online job boards and resume banks, but there are always a number of work experiences that simply won't fit. Tailoring your resume to emphasize the skills and experience relevant to the job you're applying for will help you stand apart from the crowd. It's important not to lie, exaggerate, or "pad" your resume in this process. Make sure you keep these "custom" resumes straight and keep track of which copy went where. You don't want 2 different resumes to show up at the same company.
  • The cover letter - The cover letter is your chance to introduce yourself and provide a quick summary of why you're perfect for the job. "I'm a Microsoft Certified Systems Engineer with 10 years of field experience in a number of large enterprise environments. I have extensive experience in ...." You get the picture. Your cover letter should make its point quickly and should take no more than 30 seconds to a minute to read.  
  • Call first - Before sending your resume, call the contact listed in the job posting and introduce yourself. At larger companies this may be someone in Human Resources, at smaller companies it may be your future boss, so think about how you come across on the phone, and strive to make a positive and memorable impression. The goal is to make sure your resume isn't lost in the shuffle and if possible get more information about the position. Be prepared to send your resume and cover letter immediately if requested. If you wind up e-mailing or faxing it, make sure to send a copy by regular mail as well.
  • The application -  Many companies still require you to fill out an application as part of the hiring process even if you've submitted a resume. This application is often used for background checks, to determine salary history, and to verify references. The quality of your penmanship, and accuracy of information (lack of mistakes) may factor into the hiring decision at some companies. Look over the application carefully before filling it out. Consider making a photocopy and fill it out as a "dry run" before writing on the original. 
  • The interview
    Along with the quality of your resume and experience, how well you interview will have a huge bearing on what your potential salary might be. In fact, how well you interview can have more of an impact on the hiring decision than your technical ability. Think of the interview as an audition that starts the minute you set foot on the company's property. This is the first time you'll meet your new boss. The impressions you make here may last for the rest of your career with this company, so pay attention to the crucial first four minutes. You don't need to look at your watch, or be overly self conscious, just be aware that people tend to make their initial impressions and assumptions about a person in the first four minutes of contact. Dress well. Be aware of your body posture and mannerism. Think about every answer. Pace your speech. If you're like most people, you only have a job interview every few years so you'll have a tendency to be nervous. If you have a friend with management and hiring experience, ask them if they'll help you prepare by setting up some practice interviews were they can provide feedback on your skills. Consider videotaping your practice interviews so you can see for yourself how you come across in this process. 

Discussing salary
Somewhere in the interview process the salary topic will come up. Everything you've done up to this point has been preparation for this discussion, so think about it carefully and study this process as much as you can. You always want to appear flexible, enthusiastic, and willing to compromise if necessary. And never stop selling yourself.

  • Set your goals before the interview - If you don't know what you want, you have no hope of ever getting it. Along with a salary goal that reflects what you want to earn, consider what you absolutely need to live on, and what salary you would be willing to settle for. If you walk in expecting $70,000 a year with a goal of $80,000, and they offer $55,000 is there any room for negotiation? Would you accept $60,000 if the benefits were right? What are your "make or break" issues? Are benefits, a good schedule, or extra vacation time more important than salary? Knowing these figures ahead of time will help you negotiate with confidence and know when it's time to walk away.
  • Don't forget the rest of the package - Salary is only one part of the picture. When considering the salary offer and comparing job offers, consider the quality of medical benefits, vacation time, tuition reimbursement, 401k funds, stock options, etc., Look for costs as well. How long is your commute? Do you have to pay for parking? Do you have to move? Do you have to buy a new wardrobe? 
  • Make sure the person you're talking to has the authority to negotiate - Nothing is worse than spinning your wheels negotiating with someone who doesn't have the ability to deal. Make sure the person you're negotiating with has the authority to adjust your salary and compensation. If you're interviewing with multiple layers of management, find out which manager has the final say about salary. 
  • Delay salary discussions as long as possible - The goal here is to buy time. Time to sell yourself to the employer, time to discuss everything the job entails (travel, responsibilities, pager duty, overtime, etc.,) and time for the employer to narrow his choices down to a few candidates. If you're the only candidate left because your employer thinks you're the perfect for the job, you'll be in a much better position to negotiate. In addition, the more time the employer has invested in the interview process, the less likely they'll be to simply cut you loose. This works both ways. If you've survived a strenuous interview process, the employer may be gambling that you won't simply walk away from an offer either.
  • Try to control when the salary question comes up - Ideally, you want the salary question to come up when you're at a high point (or a plateau following a high point) in the interview. This point occurs after you've convinced the employer that you're the perfect person for the job and they've made the decision to hire you. You'll know you've reached it if the interviewer exhibits 3 or more of the following signs:
    • Suddenly becomes more relaxed and informal
    • Asks how much notice you need to give your current employer, or asks "When can you start"
    • Asks specific questions about your references
    • Stops asking about your past work experience
    • Asks if you're interviewing at other companies.
    • Says he has discussed your application with another key person in the company.
    • Starts using "when" instead of 'if", or "we" instead of "you"
    • Introduces you to key people in the office, members of senior management, or your peers.
    • Shows you your new office or workspace.
    • Pre-invites you to an upcoming company picnic or event
  • Let the employer make the first offer - Even if your employer asks you outright what your preferred salary is, it pays to avoid throwing out the first pitch. If the conversation occurs early in the process you need to buy time. Simply state that your salary requirements depend on the rest of the compensation package and job responsibilities. If you're midway through the process, you can't appear indecisive, but you may consider putting the ball back in their court. Say "I'm not sure, what did you have in mind?" If you're near the end of the process and have already discusses benefits, your employer will expect you to know what your salary requirement will be, so you can't stall. Appear confident, don't waffle, and be sure to refer to a range, not a specific number. 
  • Negotiate using an hourly salary scale, and not the yearly salary -  This is all perception. Negotiating for a the difference between a $30/hr and a $35/hr offer is much easier than negotiating a $60,000 offer to $70,000. This is why car dealerships want you to discuss new car deals in terms of monthly payments, and not the final figure. Avoid discussing your salary in terms of a monthly amount for the same reason. 
  • Make sure you are both on the same page - A few years ago, I was interviewing with a company and everything was going well. When it came time for the salary offer, the manager dramatically wrote a number on a piece of paper, folded it, and slid it across the table to me. I opened it, and it read "30". I replied "This is per hour isn't it?" His jaw hit the ground. Obviously, we had two completely different amounts in mind, and we were worlds apart. When discussing salary terms, avoid vague references such as "mid 30's" or "50 to 60" unless it's absolutely clear that you are discussing hourly or yearly figures. Don't assume
  • Don't blindly accept the first offer - The most expensive word in the English language is "Okay" Simply saying "okay" instead of pausing for a minute, or asking for time to think about the offer, costs people thousands of dollars every year. There are a number of ways to politely ask for time to consider an offer without appearing indecisive or impolite. If you are interviewing with other companies, let your manger know that you are interviewing with another firm and need to consider both offers. This will buy you valuable time and leverage in your discussion. Do not try to play two companies off each other in an attempt to get a higher salary. This rarely works out, and you'll probably lose both offers. 
  • Leave a little room for compromise - If you ask for a salary range that is slightly higher than what you're willing to accept, you'll have a little room to negotiate without compromising your true salary goal.  Being able to "give a little" will go a long way to building goodwill between you and your potential employer. 
  • Get the offer in writing - On my very first tech job, I was hired into an entry level position for what I thought was $19/hr. The interviewer and I discussed this figure several times, and I thought it was pretty clear. However, when I got my first paycheck 2 weeks later, it was for $17/hr. I brought it to my boss's attention and was told the range for the position was $17 - $19 per hour based on experience, and since this was my first job with this company (a consulting/staffing firm), it would be $17/hr. This was a salary difference of $4,000 a year, and I was furious. I had already left my old job, so I couldn't just quit. But I never forgot it, and since that incident I make sure to get every salary offer in writing. 

Plan B
If all goes well, the interviewer should be shaking your hand and walking you down to Human Resources to fill out forms. Assuming the company wants to hire you and you're stuck on the salary benefits issue, all is not lost. Here is how to handle some typical rebuttals:

  • You don't have enough experience - Even with a tailored resume, the employer may still feel you're not qualified for the job. Find out what specific issues the company is concerned about, and address them one by one without appearing confrontational. If it's true and you really don't have enough experience, consider lowering your salary requirements a bit and negotiating for training time. 
  • There's no room in the budget - This may or may not be true, but sometimes managers can be creative with other items such as using funds earmarked for moving expenses as a hiring bonus. You may also want to consider negotiating for higher performance bonuses, increased vacation time, or a shorter time frame between performance reviews (and potential raises.) 
  • That's what we pay all employees - Having a fixed payroll structure is common in organizations that are heavy on bureaucracy and short on innovation. Sure it helps hold costs down, prevents favoritism, and avoids potential legal issues. However, if salary levels are tightly controlled, it's likely that pay raises and other performance incentives are tightly controlled as well. You should start by finding out (tactfully) how this company rewards its top performers, and how frequently these incentives are used. You can also inquire about other positions available in your target pay range and re-apply for a different position. If this approach fails, it's time to fall back on your salary surveys and other market research to make your case. 

There are times when you simply won't be able to agree on a salary, and you'll need to keep looking. Don't let a few setbacks destroy your self confidence. Try to learn from your mistakes and evaluate each interview. Think about the questions that surprised you, or that you may have answered differently. Think about your interaction with the interviewer and the reaction to your salary requests. You may have failures, but as long as you are able to use them as learning experiences you're still winning.

Looking forward
Hopefully, your negotiation efforts were successful and you've got the job you wanted at a salary you can be proud of. The higher wage at this job will become part of your salary history and will help you negotiate from an even stronger position in the future. To be really effective, it pays to read a few books on negotiating, take a class or a seminar, and practice as much as you can.
Negotiating your salary is only the beginning. You'll be surprised at how many everyday situations and interactions are negotiable. You just have to ask. And don't be afraid of "no" 


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Original publication date: Oct 11, 2002

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