Methods for Salary Negotiation

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Salary Negotiation: Another key consideration in setting salary policies is the degree of negotiating that an employee or prospective hire can be allowed. The greater it is, the more the potential impact on pay of individual negotiating skills will be. In general, the degree of negotiability tends to rise with the seniority of the position and the job candidate. Nonetheless, even relatively young and inexperienced job seekers should be prepared, just in case the opportunity arises, to influence what they are offered in terms of pay.

For example, this writer was taken completely by surprise about compensation when he interviewed for an entry-level management consulting position at Touche Ross, a predecessor firm to Deloitte. At the time, he held an MBA but had only 3 years of full-time work experience. The job advertisement had no specifics about pay, and he assumed that starting pay for new consultants would be dictated by the firm pretty much on a take-it-or-leave-it basis. Instead, when the managing partner of the office that he sought to join made him an offer of employment, he asked this writer to name a starting salary. Not knowing the firm's salary policies or salary ranges in advance added to the difficulty of doing so. See our related discussion of salary transparency.

After that, the process would become more formulaic. Part of the first year's pay, and the pay for each subsequent year, would be withheld in the form of a "guaranteed bonus" to be paid at the end of the annual pay cycle (which ended with the fiscal year on June 30).

Then the full guaranteed pay for the next year would include the full bonus for the prior year.

Salary Negotiation Ploys: Management ploys hinge on making the employee feel expendable. It is most effective in high turnover businesses in which employees are indeed treated as interchangeable, or in lines of work where the employee has few, if any, other options.

Two illustrative anecdotes come from the world of professional sports, back in the days when players were bound to their teams for life.

In the late 1940s and early 1950s, future baseball Hall of Fame member Ralph Kiner was one of the most prolific home run hitters in the game. Nonetheless, his team, the Pittsburgh Pirates, was a perennial loser. After Kiner had one particularly outstanding season, he was shocked when the team's general manager, Branch Rickey (another future Hall of Fame member), offered him a cut in pay. "We finished last with you, and we can finish last without you," explained Rickey.

In the early 1960s, future hockey Hall of Fame members Phil Esposito and Tommy Ivan had a similar encounter. Ivan was the general manager of the Chicago Blackhawks (or Black Hawks, as they were then styled). Esposito had just completed an excellent rookie (i.e., first) season in the National Hockey League, and was in Ivan's office to seek a pay increase. Shortly after Esposito sat down, and before he could present his demands, Ivan's phone rang. Ivan started ranting into the phone about another, unnamed, player who also was seeking a raise: "Tell him that we have plenty of equally good guys down in the minor leagues who'll play here for a lot less.

We'll send him down and he can die in the minors."

Ivan slammed down the phone, and a shaken Esposito quickly left the office. In subsequent years, Esposito heard stories from teammates of identical encounters with Ivan, and it became apparent to him that Ivan and a secretary in an outer office had a pre-planned ploy. Decades later, Ivan would confess to Esposito that he indeed had a signaling button hidden under his desktop, which would prompt the secretary to interrupt such meetings with a phone call.