15 Jul How to Negotiate Your Compensation Effectively.
There I was, sitting outside my boss’s office, waiting for his door to open. I was nervous. I’d been planning this day for at least 2 months.
I was underpaid, and today was the day I was going to fix it.
I brought some firepower with me in a brand new manila folder:
- Salary reports from similar jobs showing that I was clearly underpaid
- Calculations of how my work had saved the company money
- Calculations of how my work had made the company money
- Previous ratings which were all excellent or near excellent
The door opened. We exchanged a firm handshake. I sat down and he closed the door behind me. He walked around his desk, sat in his leather chair, looked at me and said “What’s up?”
15 minutes later the door opened. I thanked him for his time. We were both smiling. I walked back to my desk and stared at my laptop screen for 20 minutes with a big smile on my face.
You know all that research that was in the manila folder? I never had to open it.
You know all those prepared and researched statements I was going to make? I never had to say anything.
You know the 30 minutes I booked on his calendar? We only needed 15.
It was a quick and painless meeting. A battle never took place. One side was the clear winner.
The problem was, I didn’t win. I lost in epic fashion. My compensation increase was denied. No further discussions needed. It was an open-and-shut case.
So why was I smiling?
I was smiling because I couldn’t believe I didn’t see this result coming from a mile away. I didn’t have a chance from the moment I walked in that door. In the 15-minute conversation he actually convinced me that I was wrong! It was amazing.
What did he say to convince me I was wrong? Honestly, I have no idea. It was shock and awe. For 13 of the 15 minutes I sat there and nodded my head in agreement. I said things like “Good point,” and “You’re right, I never thought of that before,” and “Oh wow, really? I didn’t know that!” and even the “Yes, I’ll definitely keep what you told me confidential. I won’t tell anyone. I really do appreciate you sharing that information with me. It now makes complete sense.”
I was on his side! How did this happen? Here is what I realized:
I lost before the negotiation even started
For every reason I had to get a pay raise, he had five even better reasons why I shouldn’t get a pay raise or why the company wasn’t in a position to give me a pay raise. Keep in mind, he didn’t even know what this meeting was about before I walked in the door.
He knew my self worth more than I did
He knew what the true value of my work was and how much I could make if I left the company.
Do you think he had to look up what my position was worth on one of those career data websites? He knew exactly what the upper compensation limits were for that position like the back of his hand, purely on his experience alone.
The issue with the websites that tell you salary ranges for positions and companies is that they tell you what the position is worth, not what YOU’REworth.
My boss called my bluff.
In soccer if you get two yellow cards in a match you get kicked out of the game. I was negotiating as if I already had one yellow card. I wanted to present my case, but I also didn’t want to do it where I would get a second yellow card and get kicked out. I played it safe.
I needed the job and had no alternatives and he used this to his advantage.
I was blind and my boss had night vision.
As a teenager, have you ever come home past your curfew and try to walk through the house in complete darkness so your mother doesn’t wake up?
Did it work? Nope.
If your mother was anything like mine, she was up the whole time and her eyes were already adjusted to the darkness of the house. You think you’re invisible and she sees you like it’s daylight.
I didn’t need to tell my boss I was underpaid. He knew all along, but just never told me. He was ready for this meeting all along and was prepared with the right answers.
OK, so let’s get to the good stuff.
How do you negotiate with people more powerful than you?
You do this by increasing your confidence and negotiating power.
Rule #1 – Presenting objective information showing the other person is wrong is NOT a strong tactic.
It’s not a strong tactic because powerful people are VERY good at taking objective information and spinning it in a way to make you believe that this information doesn’t apply to them.
I presented a strong case based on objective information and was quickly dismissed.
Rule #2 – You have to be ready to accept a Best Alternative To a Negotiated Agreement (BATNA)
The Best Alternative to a Negotiated Agreement orBATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator.
I wanted to gain a better compensation, but I didn’t have any alternatives. My BATNA was to stay at my current job. It’s obviously better than losing my job, but I didn’t have any other job offers or opportunities that I could move to after this negotiation failed.
The question you are probably thinking right now: What if you don’t have any other job offers or opportunities you could move to?
I’m going to be the bearer of bad news here. If you don’t have any strong BATNA’s, then unfortunately you have lost most of your negotiation power simply because you know in the back of your mind that you don’t have anything to rely on if this negotiation fails.
There are no magic words you can tell your boss or senior management that will convince them to give you a significant raise if they haven’t budged already. You can try every tactic in the world, but it’s not going to work. I’ve tried.
You have no negotiation power.
OK, Robbie. So how do I increase my negotiation power?
You increase your negotiation power by:
- Increasing your self worth OUTSIDE of your current employer
- Increasing your BATNA’s
The more you know what you are really worth, and are willing to walk away if the negotiation doesn’t go your way – the better the negotiation will go.
Step 1: Stop working so much for your current employer
Read this article I wrote on how to go from working 60 hours a week to 40 hours a week by sending 2 emails a week. I’m serious about this. I was a classic over-worker and it didn’t help me get promoted one bit. I used this tactic and many others have done it too.
The more energy you pump into your current employer, who by the way refuses to give you a significant pay raise based on objective information, the less time you will have on increasing your self worth.
Step 2: Stop relying on your employer to build your experience
Your first goal is to figure out how to build relevant career experience without relying on your employer.
Start a new project outside of work. The project can be anything. It needs a start date, end date and clearly defined goals. If you’re currently unemployed, save some time outside of job searching to start a new project. This will HELP your job search. It is 100x times better than applying for jobs online.
You increase your value by becoming an expert in something that you have no professional experience in. It is possible and it has worked for me. I’ve also seen it work for hundreds of others.
Step 3: Become really good at something
What are you good at? Seriously, what are you good at?
If you don’t have an answer this, you should be a bit worried. If you don’t know what you’re good at, how are other people supposed to know what you’re good at? It’s really a big problem to have.
Spend time asking close friends, close colleagues and family what they think you are good at.
Build a brand around what you are good at. This is extremely important for you to do.
If you can’t tell someone what you’re good at in one sentence you have a problem.
Step 4: Show the world what you created – not what you can create.
I see too many people that are really good at what they do, but since they have been so loyal to their company nobody else knows how good they really are. So what happens is they get underpaid for a large part of their career.
Show the world the new networking group you created. Show the world the new digital tool for lawyers that you created from scratch. Show the world the weekend conference you put on for realtors. Show the world the article you wrote for Huffington Post. Show the world your project that got covered in the local newspaper.
The high-paying jobs go to those who can create.
Employers don’t care if you tell them that you CAN do something. You must show them results.
Step 5: Build confidence by building more backup plans with other employers (AKA Build your BATNA’s)
The more backup plans you have, the more confidently you can negotiate. The more confidently you can negotiate, the higher compensation you will receive.
If you need the money and don’t have any backup plans, you are less willing to push the boundaries of compensation negotiation. You build backup plans by building things, showing them to others and building connections with others in your industry.
How do you convince powerful people that you deserve a significant raise if you don’t have any BATNA’s?
I know you just read an article somewhere that says if you present objective information you can get a significant raise.
I tried. It doesn’t work. These websites tell you what you should be making, not what YOU’RE WORTH.
Will you get a raise? Possibly. Will it be substantial? Absolutely not. It will be just enough to keep you happy for a year or so. It will make you feel good that you negotiated a raise when in reality you sold yourself short.
There is only one way: Know what you’re worth and be prepared to accept an alternative agreement.
The harder you negotiate, the better chance you will get the raise you deserve. You can’t do this if you’re playing with a yellow card because you need to play it safe.
How do I know what my self worth is?
The only indicator to figure out what you’re worth is to get offers from other employers. They will tell you what they believe you are worth. Salary websites are not good indicators of what you are worth. A glass of water in a desert is worth more than the same glass of water at a pool party.
I like my job, I just don’t get paid enough. I don’t want to look for another job. What should I do?
I know this is not what you want to hear right now, but you should ALWAYS be looking for a job even if you love your job. I also don’t think it’s a utopian world where there is only one job that can make you happy. The more BATNA’s you have, the better.
In many cases, some employers such as non-profits can not afford to pay you more even if you are worth much more in the open market. In this case, the only way is to build income through side projects (AKA a “side hustle”).
Robbie, you sound like a greedy bastard who only cares about money. Life is about more than money, you know!
I want to empower others to take charge of their careers, and that includes getting compensated for what they are worth. If they don’t do it, no one else will.
For too long I stood on the sidelines and accepted whatever powerful people gave to me. I was grateful for what they gave me and I didn’t want to come off as greedy.
Then I realized that my extreme case of gratefulness was being taken advantage of and that I needed to turn it around so that I could have more say in who I work for and what I get paid.
How do I negotiate without being viewed as greedy or not grateful to my employer?
This is tricky. No matter what you do, someone will think you are wrong for doing it. When I left my first job my manager hated me. I left for a competitor, and she was not happy.
You know what? She got over it. She knew I did what was best for me. It was in HER best interest to keep me. It was in MY best interest to leave. Her reaction was the same as anyone else’s reaction would have been.
Create a track record of doing good work for your employers and being good to others around you. Should you quit your job because someone wants to pay you $5k more? Of course not.
What happens if the powerful person doesn’t care if you quit?
When this happens you don’t have any negotiation power at all. You can threaten to leave, and their answer could possibly be “OK, go for it.”
How can I learn to be a better negotiator?
This is probably the last post I’ll write on negotiation for a while. The best book on negotiation, hands down, is Negotiation Genius. I have no vested interest in this book except that it teaches everything you need to know related to negotiation tactics.
Negotiating your salary is much more than stating what you want objectively. It can also be done in a way where both parties can benefit. You don’t have to feel greedy for requesting fair compensation.
I hope this article takes your career and compensation to the next level.
PS: Read the only resignation letter template you’ll ever need.