the red report.

  • 01 31

    The Employment Offer: What You Need to Know

    Larry was excited about the position he had been recruited for. The position was with a bigger company, had more authority, and a global staff. The company was also excited-Larry had impeccable credentials, senior management liked him, and his experience filled an important need. During the offer negotiations, something broke down so that neither party felt comfortable going forward. How could such a great fit not happen? During my nearly 30 years in the search business, I have made offers, negotiated offers, and even rescinded a few (another blog). Some suggestions for both sides:

    1. Be prepared. If you are the company, dig in and understand the components of the candidate's compensation package including vacation time. If the candidate receives 50% in incentive compensation, don't think offering him a 20% base salary increase will work if your company has no incentive compensation. Similarly, if you are the candidate, understand how your peers are compensated at the new employer so that you will be able to assess the total package being offered.
    2. Use the search firm to a point. We have found that it is a good idea for the search firm to float the offer in general terms by the candidate. If there are glaring errors the employer has made in its assumptions, better for the search firm to serve as a buffer. Similarly if the candidate is totally unrealistic in his or her expectations ("I want a 50% base salary increase"), the search firm can be the reality check.
    3. Put yourself in the other party's position. See where they are coming from. If the candidate has been making a healthy base salary and smaller bonus, they might be challenged by having to take a cut in base even if they end up making a lot more at the end of the year. Similarly, if the company does not pay huge bonuses and never has, you, the candidate can't expect them to change their policy just for one person.
    4. At some point, cut the search firm out. Once you get the general idea of the compensation package and just have some refinements to make, lose the search firm. It is time for the company and candidate to get to know each other while addressing a challenge that requires a win-win solution. Look at the negotiation as an indication of how you and the prospective executive will solve problems together in the future. Working with your future manager to come up with a win win compensation package will tell you a lot about each other. Is there flexibility? The willingness to be creative? Rigidity? A give and take? Is there a greediness? Entitlement? An ability to see the longer term? 
    5. Give positive feedback. When responding to your prospective manager about the offer, start by telling him/her what you do like followed by the areas that need tweaking: "I am so pleased to receive an offer and believe I can make a huge difference in the way the company runs its logistics function. The base salary is very fair. What I would like to discuss is whether we can come up with a richer incentive bonus based on what I know I can accomplish?" As an employer, start by telling the candidate why he/she is receiving and offer and how much you are looking forward to having him/her as part of the team. Talk about the long term career path rather than just compensation.
    6. If this is the perfect position/manager, don't sweat the small stuff. If you like the company, position, and your manager, don't let a small amount of money or pride stand in your way. Also, you will look really petty if you are negotiating for a few thousand dollars assuming you will have a career of many years with the company. Similarly, if you are the employer, you want the executive to feel good about joining and don't want to appear cheap over a few thousand dollars. For both sides,you want to come to the table with a spirit of "let's get this done quickly and collegially so that we both look back on this negotiation as an easy beginning to a long term relationship.' As one client characterized it,"it is a shared risk--the candidate has to trust that we will take care of them long term and I have to trust that the candidate will make me look good for hiring them."