Salary negotiations with top performers are a pivotal time in the hiring process. As an employer, it’s easy to forget that the candidate is not yet one of your employees. You can create or destroy trust, and set the tone for your entire employment relationship by how skillfully you negotiate salary. Sadly, salary negotiations are also where hiring managers risk snatching defeat from the jaws of victory. Job seekers now have access to credible salary information, so you need to assume they know the market for their skills as well, or better than the hiring manager.
Early in a new search, and again at the offer stage, we talk with hiring mangers about what kind of salary they plan to offer the candidate. In those conversations, it appears that many hiring managers struggle to find a framework to talk strategically about compensation. Fortunately, most experts agree on what factors you should consider in discussing compensation. I’ll share some of those factors below, but remember that salary is not everything–it’s also important to understand how salaries fit into your total reward strategy. See, “Are You Ready to Explain Your Compensation Strategy (Coherently?)”
Before we start with the expert recommendations, let’s first dispense with two common, but really counterproductive salary negotiation tactics:
The weakest logic I hear from hiring managers is when, in generating a job offer, they say, “I just looked at the candidate’s previous compensation and added 10%.” This flawed approach demonstrates that the manager has no compensation strategy of their own. They are simply hoping the candidate’s last company had a smart compensation strategy; otherwise they compound the very mistake that caused that employee to consider leaving.
Another salary negotiation tactic that’s certain to backfire is to low-ball a job offer to a top performer and expect that they are either: a) poorly informed enough to accept it; or b) willing to keep negotiating after a bad-faith move from the hiring manager. Taking this approach overlooks the big picture of compensation–you need to pay fairly because other employers are hotly competing for the very same people. Only desperate people accept a low-ball job offer. Top performers will simply go elsewhere–to find an employer that understands their market value and does not play games with their pay.
You simply can’t wing it in these conversations – money is too much of a hot-button issue. Follow Dan Pink’s advice from his book Drive:
“The best use of money is to take the issue of money off the table . . . Effective organizations compensate people in amounts and in ways that allow individuals to mostly forget about compensation and instead focus on the work itself.”