EXECUTIVE ANGST – COMPENSATION NEGOTIATIONS – PART ONE

“Only 32 percent of American business executives feel comfortable negotiating compensation related matters — either their own or someone else's. Actually, a mere 22 percent do so on a frequent basis!”

Part One - regarding compensation negotiations, part of the challenge involves image-related concerns. A candidate interviewing for an upper-level leadership role may be torn between the view of appearing stubborn or greedy — or is driven by the fear of appearing soft or incapable of driving a deal. After all, the person on the other side of the desk is going to be either a future boss or co-worker. However, more compensation negotiations falter due to lack of current market information. Many prospective candidates for executive positions base compensation expectations on a few and sometimes unrealistic slivers of information gleaned from questionable sources. On the demand side of the equation, almost 90 percent of companies hiring underestimate just what it will take to hire a person fitting their exact skill requirements.

Yet if both sides, the hiring company and the candidate, put in enough time and thought before sitting down at the table, these negotiations will reach a quick, painless, and mutually satisfactory conclusion.

Information is the key to pain-free compensation negotiation. Candidates and companies alike should learn—from a reputable third party (a compensation consulting firm or an executive search firm, for example)—the salary ranges and current value of certain skill sets in their particular market segment. The moment we start a search for a particular client, the research arm of our organization begins pulling together data reflecting the market for particular skill sets at that particular moment. And, as the process continues, as supply and demand fluctuate or the client narrows their focus, we continually feed that real-time information back to the client company. Gathering compensation data points from previous related search assignments, as well as current information prior to beginning the search process is clearly one of the most important steps to setting realistic expectations of what it will take to attract the caliber of candidate the client is looking for.

Acrimonious or unsuccessful negotiations typically lack a solid foundation, a reasonable set of expectations based on accurate and current data. Several issues typically drive a company's executive compensation package: salary surveys compiled by publications or consulting firms, the departing executive's compensation, internal assessments of the value that certain skills bring to the company, the amount they can realistically allocate to salaries, and compression. This last issue—compression—rears up when a hiring company underestimates the going rates of high demand skill sets. In most cases, the hiring company structures a compensation package based on these issues. However, the company will deviate from the original targeted offer on occasion when a strong case can be made that this particular candidate brings an impressive array of skills and experience that will have an immediate and long-term positive impact for the company and it's bottom-line. Interestingly enough, candidates usually enter negotiations believing the company can and will always offer more—wrong! Hence the potential for negotiations to break down. Instead, hiring companies should base expectations on current marketplace realities and develop compensation packages according to these realities and their ability to attract the final candidate with the required skills. However, this is often not the case and becomes a matter of some delicacy to handle when companies must consider the internal parity and salary compression related issues of their existing employees—against the realities of the current market and demand for certain highly sought after skills and leadership talent. Candidates, for their part, should do their homework and determine the current market value of their skills.