When negotiating compensation, the common goal most likely to lead to a successful, long-term employment relationship is fairness, not maximization by the employee or minimization by the employer.
The compensation negotiation can set the tone for the relationship and is an early impression of company culture. Both sides want the relationship to be successful. Both sides want to start the relationship working together and accounting for each other’s interests. The employer doesn’t want the employee to feel underpaid and resentful. The prospective employee doesn’t want to raise expectations to a compensation that’s beyond the value they’ll provide.
So, do it right.
You, as the employer, should take the lead and set the tone of the negotiation with three steps:
1. Explain the negotiation process. Tell the prospective employee that your goal in setting the compensation is fairness that leaves both sides satisfied — not to get the prospective employee as cheaply as possible — and that you’d like the prospective employee’s help in achieving that goal.
2. Describe how you arrived at the offer. Explain the compensation surveys you looked at, that you spoke to other companies and investors, and the comparisons you did with the compensation of current employees to ensure employees are treated fairly with respect to each other. Explain that you try to set compensation with the state of mind that if compensation at the company and in the world were public, it would be fair and no one would be surprised.
3. Ask for thoughts and feedback from the potential employee. Ask to be educated on how they’re evaluating the offer. Ask what information they have about the market. The prospective employee probably has relevant information that you don’t: other job offers, previous jobs, and friends in similar roles. That’s information that will help you in this negotiation and future negotiations, and will help ensure that your current employees are being compensated fairly.
You, as the employee, should fully participate in the process:
1. Do your own research on the market. You need data to do your part and ensure you’re treated fairly. Finding data can be difficult, but do as much research as you can about what a fair compensation is. Ask the internet. Ask friends. Ask friends of friends. (Getting competing offers is good, but obviously may be difficult.) Be sure you have the right market: non-profits, startups, and big public companies will have different compensation, but that’s only one factor of many in choosing a job. Share any data that you have to support your position.
2. Ask for what you’re worth! If you get a fair offer, take it. But, don’t be afraid to ask for what you’re worth. You’re valuable! If the employer is making you an offer, they want you to work for them!
If everyone approaches the negotiation with the goal of fairness, with each other’s interests in mind, and with an open mind, the negotiation is much more likely to end with everyone satisfied and a long-term successful relationship.
(This mindset and approach applies to other negotiations that are launching a continuing relationship, such as with investors.)
(File this under quixotic.)