Best Lesson in Salary Negotiation

I smiled.

“Yes- I think that number is reasonable, given my skill set and what you need.”

The next one who speaks loses- and I didn’t say a word.

Andy, the CEO thought for a minute. He had asked me three times if I was willing to come off (come down) on my salary demand, and I wasn’t willing to. There were a few reasons why:

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• High-risk position: The CEO was “creating a position for me”, which meant that I wasn’t replacing an existing job position. As I find out later, the CEO had come up with this new position idea after meeting me- which made it that much more risky. There was a higher risk that this job might not work out, and I wanted to be paid for taking that risk.

 

• Others in similar roles: I was interviewing in 1997 for a role selling a corporate retirement product to corporations. The product was complex and had a long sales cycle. When I interviewed, I noticed that the people in similar roles were all older than me, and all well-qualified. If the firm had money to pay them, they otta have the resources to pay me.

 

• #1- Willing to walk away: Most importantly, I had other options and was willing to walk away. This attitude is critical for both salary negotiations and if you’re pricing work as a self-employed person (as I am now). Everyone needs to belief that they can find another job or another client. You need the willingness to say: “I appreciate it, but I can’t meet your needs.”

 

I’ve used that phrase a lot over the years- feels good to say it every once in awhile.

 

Ironically, my son has NO hesitation telling people no when the money isn’t right. He’s a recent college graduate and a freelance film and video producer. That skill will serve him well as a self-employed person.

If you’ve had a financial setback and you’re recovering, this article may help.

Using Negotiation Theory

I think everyone can benefit from an overview of negotiation theory. For starters, you need to keep in mind that, in a negotiation, both sides are giving consideration. In your business law class, you have learned that consideration refers to giving something up. In a job offer, the employer gives up salary and benefits, in exchange for the worker’s time and effort.

Here are some negotiation terms you should know:

• Reserve price (reservation price): The minimum dollar amount that a party is willing to accept. Think about the owner of a painting at an auction who won’t take less than $10,000 for the artwork. In my salary negotiation, I had a minimum salary that I was willing to accept.

 

• Small pie bias: Many people in salary negotiations underestimate the size of the bargaining zone– the range of salary that both parties are willing to accept. The concept is referred to a small pie bias. Is it a $5,000 range , or $15,000? If you bring value to the firm, it’s probably $15,000.

 

• Zone of possible agreement (ZOPA): What need to find is the zone of possible agreement, or the range within which a deal can be reached. Think about a company sale, for example. The seller says: “I can’t accept less than $15 million”, but buyer doesn’t want to pay more than $13 million. Maybe the parties can tweak the negotiation and come up with a price range between $14 and $14.5 million.

 

How I got married

I’ve been happily married for over 30 years, but I really blew it on the ZOPA. I graduated and was heading back to St. Louis, but my girlfriend (who I met at college) lived in Kansas City. Here’s how the negotiation went:

Me: “Why don’t you move to St. Louis with me?”

Future Wife: “I’m not moving without some sort of commitment.”

Me: “What do you mean- get married?”

Future Wife: “OK”

Actually, she was willing to move for a “lower commitment”- but marriage was ideal. So, we got married and it all worked out.

Best negotiation I ever had.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

(you tube channel) kenboydstl

This post was originally posted on my Quora page.

Image: Bullseye, Jeff Turner CC by 2.0