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Mod Note (Andy): #TBT Throwback Thursday - this was originally posted on 9/22/12

So, this question keeps coming up, "if I negotiate with a prospective employer, will I piss them off or ruin my chances?" I wanted to share the perspective of the person hiring and give you a couple of examples of what happened with people I have hired who were being paid below market wage to begin with. Some of you will probably think I'm a dick for saying some of this, but this is what really happens. Generally, your job is to try to get paid as much as possible and the employer's job is to pay you as little as possible. Getting upset about it won't help. Recognizing how to tilt the odds in your favor will. I consider the compensation negotiation a part of the interview and hopefully, you will understand why in the examples below.

What I write below applies to experienced hires anywhere and to small companies, but does not apply to standardized programs like analyst and associate programs at big firms (you usually can't negotiate those offers).

Anchoring

Don't be afraid to throw out the first number, just make sure it's a number you would be ecstatic to get. The company almost always make you throw out the first number and they make sure it's a number you are absolutely NOT ecstatic about.

How do they do this?

The first thing that the hiring manager will ask you about compensation is how much you are currently making or will get HR to ask you that question or have you fill out a form that asks you how much. I wouldn't answer this question directly and here's why: They ask you this so they can anchor their offer what you currently make. If your market value is $200 and you are earning $100, they can offer you $125 and most people think it's great because they received a 25% increase, not realizing they left $75 on the table or not knowing how to combat it. For any technique to be successful in a negotiation, you have to be willing to walk away. The easiest way to ensure you can walk away is to get competing offers or have a reasonable job now.

Let me give you a couple of examples of people that I interviewed and wanted to hire, that were (in my estimation), significantly underpaid when I interviewed them.

Candidate example #1

One very talented young lady (about 26 y/o) I was interviewing 5-6 years ago impressed me with her polish and technical abilities (she was a salesperson). I think she was making about $150k per year. Before I could make her an offer, she threw out that she should make $350k as that was the going rate. She gave me examples with concrete numbers. Of course, they were cherry picked, but it still made her argument. I respected her infinitely more for doing that and knew that since she would be negotiating contracts for us, including fee rates, she had a valuable skill set. Obviously, she would fight for higher fees. I loved that. I thought she was worth about $200K before we negotiated and about $300K afterwards. I saw her true colors during the negotiations and I loved it. Granted, she wouldn't get $350k from me, but I doubt she ever really expected to.

Notice that I never thought she was a jerk and never did she piss me off. My respect for her increased during the negotiation, significantly.

Candidate example #2

Ok, on to the next candidate for an unrelated position. Early in the process, I asked her how much she made currently and it was a little under $300K. She told me she thought she was underpaid, but never threw out a number and never really pressed the issue too much and certainly never gave any evidence of why she was underpaid. After getting to know her and her responsibilities, I concluded that market on her should have been about $500-600K.

But, because she didn't press me on compensation issues, I focused on the growth opportunities of the position, that I could give her a fancy functional title (Head of XX group), and that I could get her on TV and in print. The reason I told her about these things is because they seemed important to her and I knew I could deliver those things and pay her less than market while having her be excited about the job anyway. I ended up paying her a smidge over $300K. All the stuff I "gave" her didn't cost me a penny. In fact, some of them helped me just as much as they helped her.

She didn't negotiate hard and I knew, despite her seniority, I would have to babysit the people who worked for her. I got a deal on her and she had her strengths, but I knew I couldn't trust her to make tough decisions or negotiate for us. She should have negotiated harder. I definitely lost some respect for her because she didn't.

Both of the examples above were with people who currently had jobs, but did not have another offer in hand to leverage against me.

Try to refocus the discussion

Once you have some wins under your belt in your career and you go to test the job market, ideally, you can refocus the compensation discussion to something like a revenue share. If they ask how much you make, you can tell them, "Let's not worry about how much I cost you. I want to align our incentives and only get paid when I generate sufficient revenue.". Or something that contains that concept. The point is: it's much easier for someone to give you 10% of incremental revenue you generate than to have to write a big check and carry you as a cost. However, you must make sure it's all in writing and get a lawyer to review it for holes. You don't want to be in a spot where you hit an absolute home run and are generating $50 million in revenue and they try to pull the rug out from under you.

Another example is this, let's say you're at a small fund and earn 2% of the carry and get a (relatively) small base. Let's imagine that this comes to a total of $500K in total compensation. If I was interviewing at a larger fund, I would not tell them that I got paid $500K, I would tell them that I got 2% of the carry. They're going to try to negotiate how much carry you get in the new firm, but you have already won. At this point, the only important thing is that you get a piece of the carry. You can come to something reasonable once both parties agree that you should get some of the carry.

Anyway, that's enough for now, but I'm happy to answer any questions you may have (I won't have all the answers, but I can try).

18

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Comments (75)

  • hawkua's picture

    Thanks a lot for the post. Do you have any suggestions for people who negotiate out of an MBA? What would you use for anchoring - industry/position average, school graduates' average in the industry, or previous salary?

  • huanleshalemei's picture

    Thank you SirTradesaLot, very informing post!

    Say one is making industry average but he believes he's underpaid. What are the 'concrete' evidences he can throw out to convince you that you should pay him more? (ok, double-edged sword question)

    The Auto Show

  • In reply to hawkua
    SirTradesaLot's picture

    hawkua:
    Thanks a lot for the post. Do you have any suggestions for people who negotiate out of an MBA? What would you use for anchoring - industry/position average, school graduates' average in the industry, or previous salary?

    Are you asking how to negotiate right after you graduate from an MBA program?

    In general, I would always anchor to something higher than what I'm getting paid now. You have to get creative sometimes. If I was interviewing in Dallas, I would tether to national averages for comp. if I worked in a lower paying industry, I would tether to the average of all industries for MBAs. If I was a first year Associate, I would try to tether to all high performing Associates across all years.

    One issue is that if you are graduating from bschool and are applying to a large bank, none of this matters because you just get what they give you in the Associate program. There isn't much negotiating that takes place.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to huanleshalemei
    SirTradesaLot's picture

    huanleshalemei:
    Thank you SirTradesaLot, very informing post!

    Say one is making industry average but he believes he's underpaid. What are the 'concrete' evidences he can throw out to convince you that you should pay him more? (ok, double-edged sword question)


    First thing is this: almost everyone believes they are underpaid, most aren't.

    So, the first question is: are you an average performer? Because, if that's the case, then there's not much you can do.

    Assume you are an outstanding performer. The first thing you need is to convince the person paying you that you are above average. Assuming they agree with that, the average works in your favor. Then you can just say if the average person makes $100, I should probably make $200 since I'm twice as productive.

    The alternate is to argue for some sort of revenue share or get another offer. It's really impossible to overstate how important getting another offer is in getting leverage to get more money. Also, if you go out and get other offers and they have comp that is in line with what you are making now, then you know you're getting paid fairly.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • huanleshalemei's picture

    Great, thank you so much! Guess should build solid track record first.

    The Auto Show

  • Gray Fox's picture

    Great post, thank you very much.

  • BatMasterson's picture

    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.

    "I like money (as do most females) but love is...great :)"-student
    "Perhaps you've failed to take into account my hidden assets"-007
    Storm: Orig Mix

  • In reply to BatMasterson
    SirTradesaLot's picture

    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.


    I mentioned I thought she was worth $300K, I didn't say I paid her $300K. I definitely paid her a lot more than before though and she was totally worth it. She was a salesperson and was effective at her job. An interview where you negotiate is a very fair representation of how someone will do as a salesperson. She did have a good track record in sales as well, which helps a lot in making a decision like that. Sometimes you have to pay for top talent.

    I think you may be missing the larger point which is, if you don't ask, you won't get. Person 1 squeezed the value out of me almost to my reserve price and person 2 could have received a lot more from me if she pressed me for more money. That's really the point I'm trying to get across.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • Going Concern's picture

    What if someone told you flat out, give me X or I'm not taking the job, and they're being deadly serious. What would you do? Obviously you're going to be a little pissed and probably not gain a ton of respect for their negotiating finesse, but would you admire their tenacity and confidence or be enraged by their supposed rudeness and perceived sense of entitlement? This is assuming you know they can be helpful to your team and you already decided you want to hire them.

  • In reply to Going Concern
    SirTradesaLot's picture

    Going Concern:
    What if someone told you flat out, give me X or I'm not taking the job, and they're being deadly serious. What would you do? Obviously you're going to be a little pissed and probably not gain a ton of respect for their negotiating finesse, but would you admire their tenacity and confidence or be enraged by their supposed rudeness and perceived sense of entitlement? This is assuming you know they can be helpful to your team and you already decided you want to hire them.

    I'm going to assume they are polite and professional about it. If so, I would make a decision as to whether they were worth it or not and either walk away or pay it. I've done both before. It's not uncommon.

    Normally, they say, "I'd love to come work there and you guys are my top choice, but I can't make these numbers work. If you can give me X, I can start in two weeks. Otherwise, unfortunately I will have to take the other offer."

    If they were a dick I would tell them to gtfo. That has never happened to me before.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    brandon st randy's picture

    SirTradesaLot:
    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.


    I mentioned I thought she was worth $300K, I didn't say I paid her $300K. I definitely paid her a lot more than before though and she was totally worth it. She was a salesperson and was effective at her job. An interview where you negotiate is a very fair representation of how someone will do as a salesperson. She did have a good track record in sales as well, which helps a lot in making a decision like that. Sometimes you have to pay for top talent.

    I think you may be missing the larger point which is, if you don't ask, you won't get. Person 1 squeezed the value out of me almost to my reserve price and person 2 could have received a lot more from me if she pressed me for more money. That's really the point I'm trying to get across.

    So what does her compensation structure look like? I thought that people in HF sales and marketing positions typically get paid a more modest base along with a small percentage (around 2%) of the capital they help raise. If she makes $250,000 with you in a year then presumably that is because she brought in some decent amount of money to the fund and you gave her a cut out of that.

    Too late for second-guessing Too late to go back to sleep.

  • In reply to brandon st randy
    SirTradesaLot's picture

    brandon st randy:
    SirTradesaLot:
    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.


    I mentioned I thought she was worth $300K, I didn't say I paid her $300K. I definitely paid her a lot more than before though and she was totally worth it. She was a salesperson and was effective at her job. An interview where you negotiate is a very fair representation of how someone will do as a salesperson. She did have a good track record in sales as well, which helps a lot in making a decision like that. Sometimes you have to pay for top talent.

    I think you may be missing the larger point which is, if you don't ask, you won't get. Person 1 squeezed the value out of me almost to my reserve price and person 2 could have received a lot more from me if she pressed me for more money. That's really the point I'm trying to get across.

    So what does her compensation structure look like? I thought that people in HF sales and marketing positions typically get paid a more modest base along with a small percentage (around 2%) of the capital they help raise. If she makes $250,000 with you in a year then presumably that is because she brought in some decent amount of money to the fund and you gave her a cut out of that.


    She wasn't in hedge fund sales (not my current firm). She was like a product specialist for long-only. She was base and bonus. The one thing she could have done better would have been to argue for revenue share, which she didn't. If she did that, she would have made even more.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • That_Aston's picture

    SirTradesaLot:
    Let's imagine that this comes to a total of $500K in total compensation. If I was interviewing at a larger fund, I would not tell them that I got paid $500K, I would tell them that I got 2% of the carry. They're going to try to negotiate how much carry you get in the new firm, but you have already won.

    This is brilliant and sums up your point well.

    Here to learn and hopefully pass on some knowledge as well. SB if I helped.

  • In reply to BatMasterson
    Art.Vandelay's picture

    Financier4Hire:

    #2. I think creating titles that come with no increases in pay is a good idea.

    Dwight Schrute: Assistant to the Regional Manager

  • Bearearns's picture

    Great post and examples. Made it easier to follow

  • TheSquale's picture

    Nice post.
    I think that hiring is one of the most exciting part in a senior job when you're really doing the ITW and the negociation and not shitty administrative stuff.

  • G Spread's picture

    Thank you for sharing this. What about in IBD, where you're pretty much a commodity as an analyst? Is there any leeway in negotiating your salary there?

  • In reply to G Spread
    SirTradesaLot's picture

    Pancakes:
    Thank you for sharing this. What about in IBD, where you're pretty much a commodity as an analyst? Is there any leeway in negotiating your salary there?

    I haven't seen any negotiating in analyst or associate programs. Ever.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    Mr.Saxman's picture

    SirTradesaLot:
    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.


    I mentioned I thought she was worth $300K, I didn't say I paid her $300K. I definitely paid her a lot more than before though and she was totally worth it. She was a salesperson and was effective at her job. An interview where you negotiate is a very fair representation of how someone will do as a salesperson. She did have a good track record in sales as well, which helps a lot in making a decision like that. Sometimes you have to pay for top talent.

    I think you may be missing the larger point which is, if you don't ask, you won't get. Person 1 squeezed the value out of me almost to my reserve price and person 2 could have received a lot more from me if she pressed me for more money. That's really the point I'm trying to get across.

    When you were creating all these titles for her that add no value, would it be appropriate if she called you out on that?

    What would be a good response for her to say to you if she doesn't want these titles and all of the sudden press you for compensation?

  • In reply to Mr.Saxman
    SirTradesaLot's picture

    Mr.Saxman:
    SirTradesaLot:
    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.


    I mentioned I thought she was worth $300K, I didn't say I paid her $300K. I definitely paid her a lot more than before though and she was totally worth it. She was a salesperson and was effective at her job. An interview where you negotiate is a very fair representation of how someone will do as a salesperson. She did have a good track record in sales as well, which helps a lot in making a decision like that. Sometimes you have to pay for top talent.

    I think you may be missing the larger point which is, if you don't ask, you won't get. Person 1 squeezed the value out of me almost to my reserve price and person 2 could have received a lot more from me if she pressed me for more money. That's really the point I'm trying to get across.

    When you were creating all these titles for her that add no value, would it be appropriate if she called you out on that?

    What would be a good response for her to say to you if she doesn't want these titles and all of the sudden press you for compensation?


    She should have done both. The title would probably have come anyway, because she was hired to be the head of that group. The problem, from my vantage point, was that she was so infatuated with the title that she failed to also go for the money as well. In general, I would go for everything and concede the things you don't care much about to get those things that you do. Of course, I would also make a big deal out of every concession I gave, even if it meant nothing to me. Does that make sense?

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • econcomputingCRE's picture

    Thanks for posting this, SirTradesaLot

  • onepercent's picture

    When moving from an entry level to an associate or similar position at a boutique/mid market, should you ask for something higher than market and assume that they'll counter offer lower? Will going too high hurt your chances of getting the job if they view it as not doing the due dilligence on market pay?

  • In reply to onepercent
    SirTradesaLot's picture

    onepercent:
    When moving from an entry level to an associate or similar position at a boutique/mid market, should you ask for something higher than market and assume that they'll counter offer lower? Will going too high hurt your chances of getting the job if they view it as not doing the due dilligence on market pay?

    I don't know for sure. In my mind, it depends on whether they treat it like an Associate program or not. If they treat it like a program and they have multiple people joining at the same time to do basically the same thing, odds are there won't be any negotiating.

    If it was me, I would ALWAYS ask for higher than market and back it with evidence. Just asking for more will usually increase your odds of getting more. Asking for more and providing evidence as to why you should get more, significantly increases your odds of getting more.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • chrisjr's picture

    Great post, thanks. Where would you find industry compensation comparables?
    I tried to negotiate for a 20% increase in base over my offer and they laughed in my face as I had no hard stats to back it up.

  • shark-monkey's picture

    Great Post, I was going to post a question on this topic.

    Say you are on the buyside where negotiating skills aren't critical to making money (as in the sales role you mentioned in the example) and you are not directly responsible for P&L (yet), also you know that you are paid well below the market at your current role and the new role you are interviewing for is to pay substantially more. When asked by HR in first round how much you make do you tell them?

    Hesitant for 2 reasons: 1)They look at the lower pay as a sign of that I am not qualified/Worth the higher pay 2) They will pay you well below the market rate they would have initially offered.

    Fear is the greatest motivator. Motivation is what it takes to find profit.

  • In reply to chrisjr
    SirTradesaLot's picture

    chrisjr:
    Great post, thanks. Where would you find industry compensation comparables?
    I tried to negotiate for a 20% increase in base over my offer and they laughed in my face as I had no hard stats to back it up.

    Maybe others can help on places to find comparables. You should be able to find what analysts, associates, and VPs are making at the large banks and extrapolate towards your position/experience, at a minimum.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to shark-monkey
    SirTradesaLot's picture

    shark-monkey:
    When asked by HR in first round how much you make do you tell them?

    Hesitant for 2 reasons: 1)They look at the lower pay as a sign of that I am not qualified/Worth the higher pay 2) They will pay you well below the market rate they would have initially offered.


    I agree with your logic. I would avoid telling them what you are currently getting paid, if at all possible. Tell them something like this: let's dance a little before we go to bed OR let's see if there is a match before we start discussing pay OR throw out a number somewhat higher than what you would like to get paid. I prefer the last one. So they say, "how much do you make now?". Then you say, "I am looking to make X this year.". X should be at least 20% higher than you think the most someone would pay you.

    If someone quickly agrees to the number you throw out, you didn't ask for enough. You have to make sure that number is sufficiently high that they will definitely say no to it, but low enough that they don't think you're crazy.

    If they force your hand, you have to make sure you tell them the reason you are on the market is because you believe your compensation does not align with your responsibilities.

    If there is any way to get a revenue share, that would be my strongest preference in most cases.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    huanleshalemei's picture

    SirTradesaLot:
    So they say, "how much do you make now?". Then you say, "I am looking to make X this year.". X should be at least 20% higher than you think the most someone would pay you.

    SirTradesaLot, what happend if the firm conducts background checks for perspective employees? Guess I can say the 20% is expected 'bonus'?

    The Auto Show

  • In reply to SirTradesaLot
    onepercent's picture

    Salary.com or glassdoor both seem to be reasonable sources. However, glassdoor uses salaries volunteered by its users. Caveat emptor

  • In reply to huanleshalemei
    SirTradesaLot's picture

    huanleshalemei:
    SirTradesaLot:
    So they say, "how much do you make now?". Then you say, "I am looking to make X this year.". X should be at least 20% higher than you think the most someone would pay you.

    SirTradesaLot, what happend if the firm conducts background checks for perspective employees? Guess I can say the 20% is expected 'bonus'?


    That's what I expect to make at the new firm in order to leave my current job. Sorry if unclear.

    Also, it goes without saying, but don't lie on an application or to a hiring manager....that can come back to bite you in the ass.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    shark-monkey's picture

    SirTradesaLot:
    shark-monkey:
    When asked by HR in first round how much you make do you tell them?

    Hesitant for 2 reasons: 1)They look at the lower pay as a sign of that I am not qualified/Worth the higher pay 2) They will pay you well below the market rate they would have initially offered.


    I agree with your logic. I would avoid telling them what you are currently getting paid, if at all possible. Tell them something like this: let's dance a little before we go to bed OR let's see if there is a match before we start discussing pay OR throw out a number somewhat higher than what you would like to get paid. I prefer the last one. So they say, "how much do you make now?". Then you say, "I am looking to make X this year.". X should be at least 20% higher than you think the most someone would pay you.

    If someone quickly agrees to the number you throw out, you didn't ask for enough. You have to make sure that number is sufficiently high that they will definitely say no to it, but low enough that they don't think you're crazy.

    If they force your hand, you have to make sure you tell them the reason you are on the market is because you believe your compensation does not align with your responsibilities.

    If there is any way to get a revenue share, that would be my strongest preference in most cases.

    Thanks! Great advice and I agree. Thanks for your time.

    Fear is the greatest motivator. Motivation is what it takes to find profit.

  • WhiteKnightDD's picture

    What positions are #1 and #2 and what exactly do they do that they're worth so much.

  • huanleshalemei's picture

    Got it, thanks for the vivid warning!!

    The Auto Show

  • A2Allegiance's picture

    Have you ever seen a candidate lose the position, because his first number was too high? With the job market as competitive as it is, I've always been afraid to come off as ungrateful by throwing out a huge number and having them hire someone that'll work for cheaper.

  • av8ter's picture

    What do you feel the strength of a case is when it is being based off of a pro forma for living expenses at the lower end of the spectrum (ie sub 100k range) out of school, and requesting a modest (10% or so) bump from opening offer? Not having any comps makes me assume that this is the only way to create any sort of rationale for deserving a higher salary.

  • In reply to A2Allegiance
    SirTradesaLot's picture

    A2Allegiance:
    Have you ever seen a candidate lose the position, because his first number was too high? With the job market as competitive as it is, I've always been afraid to come off as ungrateful by throwing out a huge number and having them hire someone that'll work for cheaper.

    I haven't, but to be fair, the overwhelming majority of hiring I've been involved with was pre-2008 crisis. I have seen plenty of people walk away from offers, but not by the first number thrown out by either side.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to av8ter
    SirTradesaLot's picture

    av8ter:
    What do you feel the strength of a case is when it is being based off of a pro forma for living expenses at the lower end of the spectrum (ie sub 100k range) out of school, and requesting a modest (10% or so) bump from opening offer? Not having any comps makes me assume that this is the only way to create any sort of rationale for deserving a higher salary.

    I wouldn't think that was very effective, to be honest. If you wanted to make an argument that the national average pay for this position is, let's say $100, and the cost of living in your town is 80% higher than the national average, maybe that would work.

    I still think the more effective technique will always be when you can show how much more effective than average you are. Employers really don't care too much about how hard it is for you to make ends meet. They care about how much money you can make or save them. If you show significantly higher output (however they measure it in your role), then you can argue for higher pay. This puts you in a tough spot if you're coming out of school, because everyone thinks they will be better than average and only 1/2 will be correct (and a much smaller percentage for meaningful differences)..

    I would just keep looking for an average that gets you around the number you want to get to, including some of these averages: for your school, for your major, for the city/state you live in, for that position, for that industry, etc.

    Not to beat a dead horse, but the best remedy is to get multiple offers, if possible. Also, if you're applying to larger firms, there is really no negotiating of starting pay. I assume you must have gotten an offer from a smaller firm.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • Rocky Mountain Recruiter's picture

    Tradesalot - awesome article man. I'm going to be following up with an article Thursday on Offers/Counter-Offers from the recruiter angle that should really compliment this well...

    One thing i touched on in a prior article that Tradesalot hit here that is really the best weapon to have in your arsenal is MULTIPLE OFFERS/INTERVIEWS... You are never married to a process and something i unfortunately see sometimes is a candidate will get tunnel vision for one opportunity and instead of having multiple horses in the race they elect to get all monogamous about their interview prospects and never have any leverage or a plan B (if you are searching and not a direct recruit).

    Also, the rule of thumb in recruiting is that time kills all deals and nothing gives someone a sense of urgency to make their decision about you more than knowing that you might be working for a competitor across the street. It helps supplement the confidence of a hiring manager in their pursuit when they know that others are as well...

    Robert Shaw
    Recruiting Consultant
    Lakeshore
    Denver, CO

  • In reply to SirTradesaLot
    Rocky Mountain Recruiter's picture

    SirTradesaLot:
    A2Allegiance:
    Have you ever seen a candidate lose the position, because his first number was too high? With the job market as competitive as it is, I've always been afraid to come off as ungrateful by throwing out a huge number and having them hire someone that'll work for cheaper.

    I haven't, but to be fair, the overwhelming majority of hiring I've been involved with was pre-2008 crisis. I have seen plenty of people walk away from offers, but not by the first number thrown out by either side.

    A2Allegiance - one thing i wanted to put out there in regards to ur comment - through a recruiter like myself sometimes the 'high number' will get you taken out of the running ... While i know there is a different dynamic to it, one thing you should be aware of is that a recruiter might not feel comfortable repping you for something that will not align at the offer stage. When I work with people i never talk about the top number bc it's a given we are going negotiate for the most we can get. What I am most interested in is actually the bottom number it would take so i can shoot down any client lowballing you before the offer even gets out if that makes sense. Not to say the bottom number need be low - but if you are an associate that needs $160k base + $120 guaranteed I need to know that because if I know i can't get it we will save everyones time.

    But you know i'll be pushin' for $175 + 125 guaranteed ;)

    Robert Shaw
    Recruiting Consultant
    Lakeshore
    Denver, CO

  • In reply to SirTradesaLot
    Rocky Mountain Recruiter's picture

    SirTradesaLot:
    onepercent:
    When moving from an entry level to an associate or similar position at a boutique/mid market, should you ask for something higher than market and assume that they'll counter offer lower? Will going too high hurt your chances of getting the job if they view it as not doing the due dilligence on market pay?

    I don't know for sure. In my mind, it depends on whether they treat it like an Associate program or not. If they treat it like a program and they have multiple people joining at the same time to do basically the same thing, odds are there won't be any negotiating.

    If it was me, I would ALWAYS ask for higher than market and back it with evidence. Just asking for more will usually increase your odds of getting more. Asking for more and providing evidence as to why you should get more, significantly increases your odds of getting more.

    The only thing i would recommend here in terms of wiggle room for negotiating is if you are a late contender in a drawn out race... If you find out they have been struggling for awhile to fill the role or the time of year is not fruitful for candidates (like the next few months for associate ibankers getting bonuses in feb) you can make a case for yourself... I would not use their own 'pain' against them but rather go the route of looking for "added value" which is a polite way to ask for more money without overtly saying it and putting yourself in a sling... You might get more cash or some other incentive but if you dont it doesnt make you seem like you are demanding anything and still gives you the room to accept the offer if they dont do anything more for you and you still want the job

    Robert Shaw
    Recruiting Consultant
    Lakeshore
    Denver, CO

  • illiniPride's picture

    Awesome post Trades. Will have to keep in mind for the future.

    Leadership can be defined in two words: "Follow Me"

  • Effy_G's picture
  • In reply to BatMasterson
    International Pymp's picture

    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.

    I disagree that just because she's 26 means she's not worth the dough. 26 years olds in PE//HF are regularly paid that much and good performers are well worth it... sales people I would imagine could be also, though no experience there... 26 year olds (i.e. 4 years exp. as analyst/associate) are the glue that holds together a small but strong PE firm, real estate shop, or HF - they have a solid base of knowledge, highly refined and up to date technical skills, can still work 18 hour days when called upon, have the necessary relationships and experience to guide execution etc... analysts can't work independently with important counter parties and once you get to VP you aren't grinding out docs / models constantly and getting that close to the deals (at least in REPE / PE)... the high talent senior associate is an extremely critical piece of the machine, and paying a few of them 250-400k per year does not hurt the bottom line in any successful PE firm.

    I accept your point that paying her double seems steep - but sometimes that's what you need to do to attract top talent. Because this site is about breaking in/ getting a job / getting paid etc / I think sometimes people forget that really good people, even at the relatively junior levels, are not a dime a dozen at all... in fact, very reliable/skilled ones can be hard to find for everyone aside from the very top echelon firms who don't need to recruit

  • In reply to International Pymp
    huanleshalemei's picture

    .

    The Auto Show

  • In reply to International Pymp
    blastoise's picture

    International Pymp:
    Financier4Hire:
    #1 Case. She was making 150 and ended up with double that, and you think you didn't overpay ? for a 26-year old ? At that age, her track record was how much she had spend at Bloomingdale's or how many cups of coffee she could drink at Starbucks. Her "competing" offers were probably joining the Army or something like that. -Hey, women are equal to men.

    Age, my friend, has everything to do with pay scale. If you like throwing money at a skirt, of course you can do that.

    #2. I think creating titles that come with no increases in pay is a good idea. Also I agree with performance/rev. based bonuses, many funds make up to 50% of total compensation that way.

    I disagree that just because she's 26 means she's not worth the dough. 26 years olds in PE//HF are regularly paid that much and good performers are well worth it... sales people I would imagine could be also, though no experience there... 26 year olds (i.e. 4 years exp. as analyst/associate) are the glue that holds together a small but strong PE firm, real estate shop, or HF - they have a solid base of knowledge, highly refined and up to date technical skills, can still work 18 hour days when called upon, have the necessary relationships and experience to guide execution etc... analysts can't work independently with important counter parties and once you get to VP you aren't grinding out docs / models constantly and getting that close to the deals (at least in REPE / PE)... the high talent senior associate is an extremely critical piece of the machine, and paying a few of them 250-400k per year does not hurt the bottom line in any successful PE firm.

    I accept your point that paying her double seems steep - but sometimes that's what you need to do to attract top talent. Because this site is about breaking in/ getting a job / getting paid etc / I think sometimes people forget that really good people, even at the relatively junior levels, are not a dime a dozen at all... in fact, very reliable/skilled ones can be hard to find for everyone aside from the very top echelon firms who don't need to recruit

    What is top talent?

  • In reply to huanleshalemei
    Bankn's picture

    huanleshalemei:
    Thank you SirTradesaLot, very informing post!

    Say one is making industry average but he believes he's underpaid. What are the 'concrete' evidences he can throw out to convince you that you should pay him more? (ok, double-edged sword question)

    It's all got to do with how much they value you and what the market for your skills is like. You can play hardball by having another offer, or you can just ask. If they want to keep you happy, they will likely be willing to pay you more so long as it is possible (HR often gets in the way).

  • Bankn's picture

    For SirTradesaLot:

    Would recommend, even out of college or junior positions, to negotiate slightly above whatever the offer is?

    Even if your market price is 60k and they offer you 70k, would you say that asking for 73-75k would be in order? Simply noting your strengths, and seeing if they can do the bump so that as little as possible money is left on the table. Then if they don't bite, just accept the original offer. I can't imagine that this would hurt (lose the offer) but it seems like there is a good chance it will often work if they really want you.

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