I am thrilled to bits that Bayalis Is The Answer has been chosen to be a Plutus Award Finalist. I am grateful to all my readers for making this possible. The Plutus Awards are the Oscars of the financial blogging world. Winners will be announced on the 28th of October at FinCon. Red carpet, here I come. I need to practice smiling in a way that does not remind folks of a shark that hasn’t eaten in a week.
I recently attended the Grace Hopper conference in Orlando, Florida. If you are a woman working in tech, I strongly recommend attending. It was a 3 day emotional roller coaster where I felt inspired and then depressed about what a slacker I am.
In today’s post I’m going to talk about a session that I attended that is relevant to readers of a blog focussed on achieving financial independence. The session was called “Learn to Negotiate And Stop Holding Yourself Back”. The speakers were Karen Caitlin (@kecaitlin) and Poornima Vijayashankar (@poornima) and they did a bang up job.
Long time readers of this blog are aware that Mr. BITA and I both make a healthy amount of money and we’re saving a goodish chunk of it (YTD $248k and change). If this leads you to believe that I must kick ass at salary negotiation, you would be very sadly mistaken. I suck at the art of negotiating for more. How badly do I suck, you ask? I suck giant ostrich eggs. I have been fortunate a few times in my career to have mentors watch out for me and ensure that I got a good deal but I have never, not once, negotiated for myself. Negotiating for money makes me feel icky and I go to great lengths to avoid it.
I suspect that I am part of a silent, frustrated tribe of People Who Mutter Quietly, Grumble And Don’t Get What They Want (PWMQGADGWTW is not the most catchy acronym is it? Apparently negotiating is not the only thing I suck at), and so I wanted to share what I learned at the conference.
Why Bother Negotiating?
First thing’s first – how big a deal is salary negotiation? How are you hurt by your lack of ability to negotiate?
Remember our old friend Compounding? Yes, he of the 8th wonder fame, at whose altar we worship when we talk about growing our wealth? Well good old Compounding comes into play here as well.
Consider Padmini and Peter who both graduate college and get their first job offer. Both are offered a starting salary of $60,000. Padmini is thrilled to bits – she has never seen so much money in her life before. She does a happy dance and accepts the offer. Peter is happy too, but decided to negotiate. He settles for $70,000. Now, let us assume that for the rest of their working careers they never negotiate again and they each get a 3.5% raise every year. If we assume they work for 40 years, what did Padmini’s lack of negotiation cost her?
At the end of the 40 year period, Peter makes $267,776, and Padmini’s salary is $229,522.
Over 40 years Peter makes a whopping $845,543 more than Padmini. That is close to a million dollars more for one single negotiation at the start of their careers!
If You Don’t Negotiate, You Are Not Alone
If you aren’t a negotiator I bet that example made you feel pretty damn crummy. I know I wanted to hop into the nearest time machine and give past me the solid kick in the nethers that she so richly deserves. You and I aren’t alone though. The numbers show that a lot of people are members of our glum little club (PWMQGAD…oh fuck it), with women being worse off than men.
And if you are a member of a racial minority group, you are even more likely be a member of our lame little band of brothers.
Why Do I Suck at Negotiating?
Karen and Poornima made some excellent points about why I go to town on those ol’ ostrich eggs when it comes to negotiating. Take a gander at this list and see if any of these behaviours sound familiar to you:
- We underestimate our own value. We may have an inkling that we are doing a pretty damn good job, but there is this annoying voice in the back of our heads asking us if we really truly believe that we are worth more. I know that this is certainly true of me, and is made worse by the fact that software development commands such high salaries. I know that our companies only pay what the market demands etc., but I can’t help but feel that the numbers are embarrassingly high, and it feels a bit ridiculous to demand more, market notwithstanding.
- We don’t have a clear idea of what our value actually is. Even if we do think we should be paid more, we don’t always know how much more. In the hush-hush don’t-talk-about-it world of corporate salaries, how exactly is one to determine where one lies in the range for one’s skill set and experience?
- Then there is always our good old pal – the Fear of Rejection. Gotta love him.
- And let us not forget his jolly cousin, Fear of Missing Out. What if I negotiate too hard and they simply lose interest?
- Another one of my personal favourites is the feeling that I am inconveniencing the other person by negotiating. It feels impolite.
What Can Be Negotiated?
Before we get to the good bits and figure out how we can all get richer, let’s talk a little about what can be negotiated.
It isn’t always money.
I mean, cold hard cash is wonderful and all, but it isn’t the only thing on the table that is up for negotiation. If you can’t get a salary bump, or you just don’t feel like talking about money, consider what else you could negotiate for that will either increase your wealth or your happiness. Here are some examples.
You could consider negotiating for a part time position, or a sabbatical, or time to work on your own pet project.
Maybe you care more about having another week off every year than you do about an extra 10K?
Don’t be fixated on your salary. There are other things of monetary value out there. Stock options are a great example. Performance-linked bonuses are another.
Even if you can’t get more money, can you perhaps snag a better title that in the future you can parlay into better compensation?
Can you work from home once a week? Could you maybe negotiate the ability to work remotely?
Can you get your company to pay for college courses? Could you get access to a company car? What if you could go to two conferences of your choice every year?
The First Step: Stop Making Excuses
Before you can go out there and negotiate like a boss, you will first need to get out of your own way. And that means that the Excuses Stop Today.
So, tell yourself that there will be no more of:
“Nobody else gets to work part time. Why would they let me do it?”
“It has only been 3 months since my manager came on board. Now really isn’t a good time”.
“If I ask for 3 extra weeks after my kid is born they will definitely believe that I lack drive and ambition”.
“They said that nobody gets more than a 3% raise unless they also get promoted, so what is the point of asking?”.
Does talking about money and value and worth seem icky? Seem like not quite the thing to do? Well fuck Ms. Manners and the horse she rode in on. You aren’t going to tea with the Queen. You are going into battle. Battle is not polite.
Do you hear that faint noise? That is Future You peering back at you down the trousers of time and cheering you on. Don’t let her down.
How To Negotiate Salary
So what concrete, actionable things did I learn?
Don’t Tell Them Your Current Compensation
If you are applying for a new job, this is a Golden Rule if you want a shot at negotiating from a position of strength. The speakers at the conference suggested this polite response instead “I’m hoping to get a great offer from you and to be paid equitably.”
I was interested to learn that it is illegal for an employer to ask for your current compensation while recruiting you in Philadelphia and that by sometime in 2018 it will also be illegal in Massachusetts, NYC and San Francisco. In addition, the states of CA, IL, ME, MD, NJ, NY, PA, RI and VT are considering laws to forbid employers from asking this question.
Do Your Research
You know what is better than those sites though? Friends who work in the same area as you do. Reach out to people you have worked with in the past at the same experience level as you. Ask the folks you went to college with. The more data you have, the more confident you will be that what you are asking for is reasonable and fair.
Responding to a Job Offer
When you receive a job offer from a new company follow these steps:
- Say thank you.
- Say how excited you are to be working there.
- Say that it is a big decision for you and you need to sleep on it. Tell them by when you will get back to them.
- Once you sleep on the offer and decide that you do need to negotiate, come up with what you would like. Then open the negotiations with a very clear “If you can get me X, I will be ready to join”. This gives the recruiter or hiring manager a crystal clear idea of what you want and what it would take to bring you on board. A lot of people just say something open ended like “I’d like to discuss this further” or “I’d like my base salary to be higher”. Don’t be vague.
Negotiating at your current job
Context and Clear Benefits
Don’t assume that your manager can recite every one of your accomplishments from memory. They can’t. So when you make your pitch be clear about what you have accomplished and wherever possible use quantifiable numbers to make your case.
Don’t Assume That Your Manager is a Mind Reader
It isn’t enough to just recite your accomplishments and then sit back and assume that the ball is in their court. Be clear about what you want. If you want to be a team lead, say so. If you are eyeing a move to management, spit it out. If you want more money, ask for exactly what you think you deserve.
Focus on the Future, Not on the Past
When you make your pitch, don’t just focus on what you have accomplished in the last quarter or over the past year. Past performance is crucial, but is not a compelling argument for a raise in the future. So instead of:
“I designed and implemented feature X last year. Feature X helped us make $Y more in revenue, and so I believe that I deserve a $10K raise for my contributions to the company”
Say something like:
“I designed and implemented feature X last year. Feature X helped us make $Y more in revenue. Over the next year I look forward to enhancing X in the following ways, to build on this success. I would like a $10K raise as I believe that this would better reflect the value that I bring to our company”.
In This Context, No Doesn’t Mean No
You might not get what you ask for. It is important to remember that if you get a “no” it just means that you aren’t getting it right now. No is not no forever. Sometimes, once you have been clear with your boss about what you want, when an appropriate opportunity opens up in the future, she will think of you. Keep the conversation going. Ask your manager when you can discuss this again, and what they think you should do to work towards what you want in the interim.
There are only two ways to achieve financial independence. You have to save more or earn more, preferably both at the same time. Saving more has an upper cap. Earning more does not. Earning more also makes for a journey to FIRE that is both faster and easier, involving far fewer sacrifices. So I hope that you will negotiate as hard as you can. I wish you luck, and I know that you will be cheering for me.
Readers, tell me stories of your great negotiation success and failures. Are you a natural negotiator? Have you worked at this skill and are now good at it? Or are you still a member of the prestigious PWMQGADGWTW club?