Successful salary negotiation is a key factor in increasing your earning power, but like a lot of people I’ve struggled with it. So how terrific is it that Michael over at Stretch A Dime offered to write our first ever guest post on it!
While I was finishing up my master’s degree in electrical engineering about sixteen years ago, I started preparing for interviews.
I can’t recall what website I was reading regarding interviews, however, I found that whatever I had read regarding salary negotiation has been extremely useful time and again.
It was useful then and it is useful now. Sound principles are timeless in nature. Like the laws of physics, they work every time with absolute certainty!
The strategy that I am about to share has worked for me. As a people manager, I have hired several people over the past several years. Only very few of those people have actually used this successful salary negotiation strategy.
I would like to set the context before I go into sharing the salary negotiation strategy.
It doesn’t matter if you are an experienced person looking for another job or a fresh college grad looking for your first job. Here is my bottom line assumption: you are hardworking, passionate about your work and field, and consider work as a rewarding experience.
You attended an interview and your perception is that you did really well.
I also presume you wrote a “thank you” note to the potential employer for taking the time to interview you. I always looked for a “thank you” email from a candidate I interviewed. It was part of my checklist.
If all of the above is true, then you are just waiting for the phone to ring!
Now wait a minute! During the interview, you will be asked by someone from human resources or your hiring manager – “What do you expect in terms of salary?”
What Do You Expect in Terms of Salary?
This is the million dollar question – How you answer this question determines your paycheck.
I have hired many people fresh out of college and people who have been in the industry for years.
When I ask, “What do you expect in terms of salary?”, I would get one of the following responses:
The current market rate for my position is blah, blah, or
My friend or peer with similar experience was hired for this much, and hence I am expecting in this range…
or plain here is what I am making now and this is the range I am looking for.
While all of the above responses aren’t necessarily bad answers, there is a better response you could provide and it has worked really well for me.
If you gave any one of the standard responses above, you just made the life of the human resource and hiring manager very easy.
Psychology of A Hiring Manager
As a hiring manager, I look for evidence of trust and competency. If these two requirements are met, that means I needed to have this candidate on my team as of yesterday.
Good people with competency are hard to find! Ask any people manager, they will tell you that!
When I find a good candidate, I want to hire that candidate – it is that plain and simple.
Based on the interview, I have a good understanding of trust and competency based on my conversations with you and the feedback from the team of people that interviewed you.
If you mentioned a target salary or range at the time of interview, my job is super easy.
If you are worth it and meet the job requirements, I will make an offer and just hire you for what you asked for as long as it falls within the HR guidelines.
Now, here is the catch!
Based on how well you did at the interview, I may have wanted to offer you 10% more than what you asked for.
Since you asked for less, the deal was made for less. You are happy because you got what you asked for. However, you didn’t get what you could have gotten.
While expressing the desired salary is not necessarily a bad answer, there is a better response you could provide and it has worked really well for me.
What They Don’t Teach You about Salary Negotiation
What could be the best response to “What do you expect in terms of salary?”
I will go through two scenarios – one as a college graduate with no experience and one as an experienced hire. Let me show you how it worked for me in both scenarios.
The College Graduate
When I was asked this question the first time by HR, my response was a smile and “I am open“.
This response drives HR nuts.
They asked me again – “What do you expect in terms of salary?” –
My response – “You guys are experts, and know the market well, and I am open”.
Believe me, I was asked at least half a dozen times the same question in a different way.
Every single time I gave the same kind of response. I had to train my mind to not spit out a number. It was tough.
Here is the punch – If you did well in the interview, the hiring manager would to want to hire you and put a lot of pressure on HR to get you hired.
HR would work with the hiring manager and come out with the best possible offer – their mission is to hire you within company guidelines and not lose you given that the hiring manager wants you badly!
I used the above approach on my first job – it worked. The offer I received was 20% above my peers who had graduated with the same degree at that time. In addition, I received a sign on bonus and relocation package that my peers didn’t receive.
About fourteen years later, I applied for positions outside my company.
I went through a similar experience – “How much do you expect?”
This time my response was – “I am content and happy in my current job and am pursuing career growth opportunities. You know what I make now, you know the market, and I am open to hear your feedback on what you would like to offer.”
When I received the offer, I said I liked the offer, but maybe I would have expected slightly more. I was very polite.
The next day, I got an offer with a few thousand dollars more with a sign-on bonus and nice relocation package.
When it comes to negotiation, the person who is desperate always makes the first offer. This is almost always true. If you answered the million dollar question, with your desired salary, you spoke first, and are at a weaker point from a negotiation perspective.
Author Bio: K. Michael Srinivasan, author of personal finance blog Stretch A Dime, where he writes about Personal Finance, Investing, and Frugal Living. He is the author of the book “High School Money Hacks”. You can follow him on Twitter @StretchADime.