Negotiate your offer, or don't
the third part of a serie I didn't know I was writing
There are a lot of new faces here after my previous post got a lot of attention. So let me reintroduce myself:
I am Stefano, I am an engineer by passion and a manager by trade. I have a lot of shower thoughts and opened this publication because a friend convinced me that it was a good idea to share them.
I try to keep a semi-regular schedule and my writing is a bit rough, my objective here is to give you something to chew on, not wisdom. If you want wisdom there are a lot of other people out there that are happy to take your money.
Hope you enjoy my writings and don’t hesitate to reach out and share your feedback!
Since you all seem to like it when I talk about finding jobs, I thought I’d write one last time about it. Finishing a trilogy I didn’t want to start and that maybe is not over. You can find here Part 1 and Part 2.
In the previous posts of the series, I have looked at hiring and recruitment from the two different, and complementary, points of view of the hiring manager and the job seeker during an interview. What is missing is what happens afterward, when a job offer is extended.
A simple model
A simple way to think about an offer negotiation is to imagine a situation in which:
You want to badly reach an agreement, because you care about closing the deal or you won’t be negotiating to begin with
You are ready to walk away from the deal at any moment, because you can close a better deal somewhere else
You want the best outcome for yourself, obviously
You want your counterparts to be happy about the outcome, because there should be no losers in a negotiation
This is schizophrenic, none of those points can be true at the same time, yet somehow this is exactly what needs to happen.
Now add some chickens
Imagine you are walking on the sidewalk and there is another person walking exactly in front of you, not an inch on the left or on the right.
If you keep walking straight you will crash into each other, you cannot move to the left because of the cars, but if you step on the right you might soil your new shoes.
And why should I move for this stranger? Why don’t they move?
This is a simple example of what in game theory is called a “game of chicken”, a situation in which each person is trying to get their favorite outcome by showing that, if they don’t get what they want, they are ready to accept the worst outcome for both. Essentially gambling that the other person will concede.
It is a common situation and, in many cases, the main reason for not backing down is not an objective impediment.
How do you avoid playing this game without being the chicken?
The game of chicken is a losing game and it’s easy to say that the best way is to avoid playing the game altogether, but sometimes that isn’t possible.
In many business cultures, the idea that you “win” a negotiation is too ingrained, and winning “the game” is too satisfying.
Let’s see how you can try to avoid this situation keeping in mind that sometimes that is just not possible.
The dreadful salary expectations call
The best way I know to avoid playing the game is to get to know each other and care about the outcome. Not in a personal way, you don’t have to like a person or a company to negotiate something, although that helps.
This is why I always find very annoying questions about salary expectations at the very beginning of a recruitment conversation, they are awkward and annoy everybody (as you can read often online).
Now, there are good reasons why a recruiter might ask about salary expectations, for example, to avoid wasting the time of a full process when salary expectations are misaligned.
And there are bad reasons to ask, to put pressure on candidates to name a low figure and then lowball them on the offer.
But this isn’t right! The incentives are a mess! Everybody is optimizing for the worst-case scenario!
Candidates are incentivized to shoot as high as possible to avoid being lowballed and recruitment is incentivized to negotiate offers down to avoid overpaying.
Advice for hiring managers:
Publish your salary bands! There is no need to be opaque, you can publish wide bands of 50k and just say that the exact offer will depend on the candidate’s work experience. Just ask if the candidate is fine with the published salary band before moving to the next stage. I have implemented this strategy first-hand and it works like a charm.
Will this be a problem internally because you underpaid people? Fix your internal processes before your people leave.
The myth that people don’t discuss their salaries is false, in my experience, people disclose salaries more easily than their food allergies.
Advice for candidates:
My go-to strategy is to avoid answering the question altogether with the following answer:
Look, I think is too early to talk about money, I don’t care about the outcome and you don’t care either, why don’t we postpone this discussion for later? Maybe you have a salary band to share so I can tell you if it’s aligned with my expectations.
Sometimes this won’t work, sometimes you are talking with an external agency that has a specific mandate to ask for your salary expectations or collect data that they will sell later. This is a situation in which they want to play the game, so you will require some high-level strategy:
Beforehand, collect information about salaries using sites like levels.fyi and/or ask around, maybe you have contacts in your network with similar jobs. You only need a ballpark.
Don’t give them your salary expectations but craft a “current total compensation” situation (including bonus and stocks). Then just state that this is your current pay and you will want more than that. If you get challenged, never give any copy of your payslip to prove your claims because that is very personal data and is a bad look if a company asks that.
Negotiating the final offer
Let’s say that everything went well and you are ready to make or receive an offer, what’s the best way to close the deal?
For hiring managers:
There are two schools of thought here:
The first one that says that you should never give out your best offer but keep a couple of freebies ready to please the candidate's requests to give them an illusion they “got something” from the negotiation.
The other one, to which I subscribe, says that you should make your best offer and negotiate only if the candidate raises good arguments (i.e. cost of living for their location, one-time sign-on bonuses, etc).
In my experience making offers, this latter method is the best one for a couple of reasons:
It’s the most honest way of dealing with a job offer. You give someone your best offer, explain to them why and how this offer was put together, and state that this is the best offer you can do (and that is true not a trick)
It forces you to have a systematic way of making offers, to make your best offer you need to have a salary range specified, a certain way of deciding the seniority, a structured way to deal with benefits and secondary pay
For candidates:
My thinking here is that you should try to negotiate everything. There are no downsides in asking, my general attitude is to challenge every single part of the offer: base pay, bonus, stocks, sign-on bonuses, job title, vacation days, number of days in the office, etc.
This is a way to check what the other side cares about (they won’t negotiate on that) and what is possible to negotiate by policy. It will also tell you if this is their best offer.
Again, try to get insider information on company policies, in many large companies the leveling you will be hired for decides most of those elements, so it’s crucial to get leveled in the right way.
Not all voices in a job offer are created equal, this is my ranking:
Base pay
Cash bonus
RSUs (public company)
Job title
What about stock options? Those are a bet that the company you are joining will have an exit and you will be very rich in the process. Handle those promises with care.
As usual, YMMV so don’t take my word for it but do your research.
Should you accept the deal?
Remember this?
You are ready to walk away from the deal at any moment, because you can close a better deal somewhere else
None of the advice above works if you are not ready to accept this outcome.
For hiring managers:
Hiring a person is a very expensive process and an imperfect one. If you think you found the right person, especially if this person comes with trusted references (not the ones they provided but people you reached out to independently or internal referrals), it makes no sense to push them too much.
On the other hand, there are very good reasons to just say “no” if paying this person too much would cause grief internally. I witnessed countless times how one expensive hire caused massive internal requests for raises.
For candidates:
There are good reasons to not negotiate an offer to death, for example, an opportunity to work with exceptional people and advance your career (and so your future income), a mission you believe will change the course of history, or just because you like the people there.
On the other hand, if you can’t find anything satisfying about this company that is not money, then maybe you shouldn’t go there to begin with.
Final thoughts
Negotiating an offer is always a privilege, not everybody can do that either because they can’t afford to lose the offer or because they are too inexperienced to do so. Use this post as a starting point and make up your mind independently, there are also plenty of websites that offer salary negotiation coaching for a small fee, and this might be useful, especially with well-known companies for which they might have insider information.
Leverage your network, I have personally helped people reason around their offers and get one that was more in line with their desires.