Several years ago I wrote a blog post on salary negotiation for engineers.
This probably created more value than anything else I’ve ever written — I have a folder in Gmail with thank-you messages from people, and my running total is something north of $2.3 million in added salary per year, mostly in $15k to $25k chunks.
A buddy of mine, Josh Doody, has decided to thoroughly own this area, and published a book (Amazon link) on the topic.
I rather enjoyed the book, and thought I would have him on the podcast to talk about the topic in more detail.
[Patrick notes: As always, the below transcript occasionally has my thoughts inserted in this format.]
What you’ll learn in this podcast:
How to avoid the “What is your desired salary?” question
How to trade off across multiple axes when doing a salary negotiation (salary, vacation days, equity, etc)
How to get raises after being hired
A brief announcement: Keith Perhac and I have parted ways with regards to the podcast, amicably, largely due to scheduling issues.
Both he and I have been quite busy with business and life, and we’ve moved to different countries, so we’ll be running our podcasts independently in the future.
We’re still great friends and will probably appear on each others’ programs occasionally.
MP3 Download (~49 minutes, ~42MB): right click here and select Save As.
Podcast format: either subscribe to http://www.kalzumeus.com/category/podcasts/feed in your podcast reader of choice or you can search for Kalzumeus Podcast in iTunes, Overcast, or another aggregator of your choice.
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Salary Negotiation with Josh Doody
Patrick McKenzie: Hideho everybody. My name is Patrick McKenzie, but I’m known as Patio11 on the Internet. This is the 12th episode of the Kalzumeus Podcast.
Things are going to be changing a little bit. Keith Perhac and I have been co-hosting this podcast for the last couple of years, but we’ve moved in different directions in our personal and professional lives. Both of us have young daughters. We’re now living in different countries. It’s difficult for us to make the time to do this on a weekly basis as you might notice because we’ve only done 12 episodes in something like four years now.
We’re going to be podcasting independently. We’ll probably still be guests on each other’s programs in the future as is now, I guess, just the “me” podcast for the moment. I’ll have a variety of guests on.
Today, I’ve brought Josh Doody. John is a buddy of mine. We came up in the MicroConf community together. We play poker occasionally in Vegas. Josh is actually good at it. I’m not.
Josh has written a book called “Fearless Salary Negotiation” [Patrick notes: if you prefer Amazon it’s here]
That’s what we’re going to be talking about today. Salary negotiation pitfalls before getting hired and after getting hired, specific mostly to software people, because if you’re listening in this podcast, you’re probably a software person, but widely applicable to folks from all walks of life.
Josh, thanks for coming on the podcast.
Josh Doody: Thanks for having me Patrick, it’s great to be here, can’t wait to chat.
(Not) Answering The Dreaded Salary Question
Patrick: Thanks so much for talking to me today, Josh, about this. One of the things that I hear a lot from people when we’re discussing the question about their job searches, specifically how the job search that relates to their final salary offer. Somewhere early in the process, they get asked a very terrifying question, you want to talk a little bit about that?
Josh: Yeah, I call it the dreaded salary question. It’s something that when you hear it, it will immediately sound very familiar, but the question is something like, “Where are you right now in terms of salary and what are you hoping for if you make this change?”
I think that particular question catches a lot of people off guard and makes them very nervous. They don’t know how to respond to it and also I think they feel like it’s a gatekeeper question.
They’re thinking, “I’m interviewing right now and I want to keep interviewing, and I want to do well in the interview, so I should just tell them the answer to this question, so we can move on.” I think you and I both agree that’s a pretty big mistake.
Patrick: The reason this question is dangerous, for those of you who haven’t experienced it before, or aren’t familiar with this line of conversation is that if you actually give a number in response to this question, that’s going to immediately cap your negotiator range.
If you say for example, “My current salary is 90,” then they know that anything above 90 is an improvement to you, and it would be too grave for you to say that. Even if they would have been willing to pay, let’s say 110 to the right candidate for this position, they’re probably going to offer you 95 and then walk it up to 98, 100.
Then you lose out on $10,000 right off the bat, plus the benefits that are tied to salary, say your 401K matching, plus the compounded growth of that salary over your next three years with the company, plus the anchor to your next salary, and every other salary for the rest of your career.
This question doesn’t sound like, “Hey, I’m trying to cheat you out of $100,000” but they’re trying to cheat you out of $100,000 when they ask this, and they know this. Every hiring officer knows this. This is covered in books, literally, you can you buy them on Amazon, but they’re going to ask it anyhow, with a smile on their face, just to see.
A lot of people, even a lot of very smart, smart engineers, folks who do hiring for a living even, will just straight up answer this question, and then face palm, but then it’s too late. How do we get out of answering this question?
Josh: That’s a good question. I think you did a great job, by the way, of summarizing why you don’t want to disclose it because you’re forced to, more or less, throw a number out, and guess that you’re in their range, and you’re probably not. How do you answer it? First of all, I am not a proponent of lying on these questions.
I think some people want to know, you know, “Should I just name a really high salary?” or something like that, and I think that’s not the way to go. The best way is to be honest. I mentioned, when I summarized the question, that there are really two components, your current salary, and then your desired salary.
I think the best way to answer the current salary part is to say something, like that you’re not comfortable sharing that information, and you prefer to focus on the value that you can add to the company, and not what you’re paid at your current job. I think that’s a very honest answer, I think it helps you demonstrate that you want to add value to the company that you’re talking to, and that’s a good sign, and it’s a good signal to send to them.
In terms of the desired salary part of it, I prefer to focus on, again, the value that you can add. My kind of pat answer to this that I like to suggest is, “I want this move to be a big step forward for me in terms of both responsibility, and compensation,” and I think you’re signaling a lot of good things there. “I want to do more than I was doing before, I want to get paid more than I was doing before, and I want this to be a big step forward,” by not giving that juicy nugget of information, which is your desired salary.
Patrick: I like both of these tacks for answers, both because they avoid the tactical trap of giving a number, and calculating your negotiating range, but they also advance you in the negotiation in a way that might not be totally obvious. In both interviews and negotiations, everything that you say is bits of evidence that the company is going to use for the decision to give you an offer, and to craft that offer to you, so you want these bits of evidence that you’re giving someone to resound in your favor, across all sort of axes.
Obviously, just like when you’re answering interview questions in a technical interview, you want to say, “Yes, I know my stuff cold, stuff that I don’t know I can learn easily, yada, yada,” and when you’re answering these softer questions, you want to come across like a competent, confident professional that will be easy to work with.
Often, the people that you are going to be having this conversation with are either business people or have this self-conception of themselves as business people as opposed to, say, techies. The ability to look someone in the eye and negotiate confidently is something that they associate with high performers, with people that they want to be working with. It’s probably something they see in their self-image.
If you perform wishy-washy in the negotiation, they count it as a strike against you. If you whine about it like, “Aw man, I don’t know,” then they might count that against you.
If you can say, “Look, I’m not comfortable with giving that information,” or, “Let’s circle back to that later,” or something which demonstrates you’re in control of this part of the interview, even when you’re not, they will read that as better than you might expect.
One of my favorite ways to get around the, “What’s your current salary?” question is, “I’ve been entrusted with a variety of information by my current firm. I intend to keep their confidences on that sort of thing. They consider their salary compensation private.
I think you can appreciate this because after I start working with you, I’m also going to be entrusted with confidences of your firm, and I intend to keep those confidences in the exact same way.”
It’s almost impossible for that statement to be actually be a lie. With Josh, always give true answers to questions but give tactically optimal true answers. It’s highly likely that your current firm considers compensation to be a very, very private thing, so just say that and add a quick, professional refusal.
Then, you’ve got to stick to the refusal when they poke you on it, and they’re going to poke you on it. Josh, what do you say when they say, “Yeah, but, I need a number to go forward.”?
Josh: I think, by the way, everything you just said is fantastic. If they keep pressing you, you can continue to stonewall. One answer that I like to give, especially on the desired salary side is something like, “It sounds like you’re trying to qualify me for a range, and if that’s the case, then I’m happy to let you know if your range is in the ballpark.”
You’re still not committing to the range, but you’re basically giving them an out if they are trying to qualify you for a range. You can say, “Basically, why don’t you tell me the range?” You’re trying to gather information while withholding information. I think that’s the bigger picture here. You alluded to this.
You only have so many pieces of information at your disposal when you begin a negotiation with a new company, really maybe two or three. One of them is current salary, one of them is desired salary, maybe another one might be how desperate you are to take the job.
On the other hand, they have an infinite, almost, amount of information relevant to what you have including what they’re willing to pay the position, which you generally don’t have a clue about.
If they continue to press, it may be effective to say, “Well, if you’re trying to qualify me for a range, why don’t you tell me the range, and I’ll tell you if I’m in the ballpark?” You’re still not committing, but you are saying, “I’ll entertain your range, and I’ll let you know if you’re way out of bounds,” which could be good information for you, as well.
Patrick: If they refuse to answer with the range question, that’s something that regards in your favor, as well, although you don’t get a bit of useful information. It gives you a socially acceptable out to say, “OK, no. We’ll both keep our cards close to our vest. That’s fine.” That’s probably not the first thing I would say about that.
I might say, “We’re both in this industry. We probably have a range of numbers that would work for us depending on the specifics of the offer, but I think the most important thing at this stage is to make sure we’re a great fit for each other.
Clearly, your company only hires people who are capable of performing at the highest levels, and I only want to go into a position which will be a meaningful step up in my career and where I can do work that really matters, so let’s make sure that we’re the right fit for each other.
If we’re the right fit, we can figure out a way to make the numbers, the vacation time, the package work. If we’re not the right fit, then we shouldn’t spend time worrying about the numbers, because we’ll never go forward with this anyhow.”
It’s a good way to kick the can down the road to a later meeting.
Josh: Yeah, I agree. It’s also a great way, again, to emphasize the value that you believe that you bring to the table for the company. It’s another opportunity to ring that bell while still not giving them the information that they’re asking for, so I like that answer a lot, too, quite a bit.
Patrick: This is another reason, by the way, to kick this can down the road. You often get asked the salary question very, very early in the process. In some cases, before you’ve had the opportunity to demonstrate much value at all. It’s highly disadvantageous for you to be coming out of the blue and saying, “I want 150, and you don’t know me from Adam.”
If you’re in a position where you have to say a number, you want to be saying that from a position of relative strength where they know about your accomplishments, they’ve seen your performance in the interview, they’re already thinking, “Yes, I definitely want to hire this person if we can come to a deal.”
Then when you say a number, that’s a number that can be worked with rather than naming a number which they might perceive as high, which would cause them to mentally check out from the conversation earlier, or even there’s high numbers and there’s high numbers.
Someone prior to having a good understanding of what your level of skill is, they might think that they’re unwilling to pay 150, but if they were aware of how good you are, they might be totally willing to pay 150.
If they think they’re unwilling to pay it and they don’t have any information to, to use a poker term, level you about where you are on the skill ladder for them, you might never get the chance to demonstrate how good you are. They will just select you out of the process early to save everyone some time.
You definitely don’t want to be getting into a deep conversation about salary, benefits, etc. until you’re at a point in the negotiation with them where they’re sure they want you if they can come to a deal.
I describe that as “yes if” rather than “no buts.” Yes, we’ll hire you, if we can come to a deal, rather than no, we don’t want to hire you, but we might be able to hire you if you’re really, really cheap. You never want to be coming in under that set of circumstances.
Josh: Yeah, I totally agree. I love the idea of thinking of it as kicking the can down the road as you continue to provide more information to the company that you’re talking to in terms of demonstrating competency and ability to them and the value that you’ll bring. Obviously, the longer you have to do that before they make their offer, the better.
That’s my overarching interview strategy is that you just continue to pound them with how much value you can bring to them and how you’re uniquely qualified to do the things that they need you to do, which then, in their eyes, raises your value to their firm. Obviously, the longer you have to do that, then the more value you can demonstrate.
I also like that you emphasized there, again, there’s still an honesty component here. I always emphasize that you should be honest.
I think it’s an honest thing to say, we nibbled around it here, “I don’t know what a good number is, because I have no idea how you value my skill set, and how you pay other people at your firm, and what sort of value I necessarily add in a monetary sense to your firm. I just don’t know.”
In a way, like you said earlier, this is a signal that I know that it would be foolish for me to guess at that value. It’s not wise for me to guess, and I can shoot myself in the foot, so I’m just going to defer and allow you to make that judgment for me and tell me about what you expect the value I’ll bring is.
We’ll wait as long as we can so I can continue showing you how valuable I’ll be as an asset to your firm if we get to that part of the process.
Patrick: You can explicitly say things like, I don’t know if I would use the exact words, “You have me at a disadvantage here,” but I like the tact that Josh just took which says that, “Look, you’ve had this conversation with many of the people who currently work for your firm.
You know what the numbers look like internally, what your general expectations are, what your ranges are for various levels of seniority, you know what the firm’s needs are, and you know what the hiring market looks like in your area. You know all this much better than I do.
I’m just an engineer. I focus on doing very, very good work and let chips fall where they may on the money side of things, because I’m not in the business.
So, I trust you to give me an offer which will be consistent with your standard practices and with compensation in the industry. I expect you to quote a number which will be fair to both of us, and then we’ll negotiate honestly on it, but I don’t feel the need to dictate to you what you should be paying your employees, because obviously I don’t have that information in front of me.”
Then, of course, you are going to negotiate once you actually get to the point of talking about the offers.
Let’s speed this conversation along, conversation interviewing process. You’ve been screened. You’ve passed through the screening. You’ve had your interview. You’re at “yes if.” They’ve said, “We like you. We would like you to work at our firm. Let’s talk offer.” Where do we go from here?
Josh: At this point, you have spent a good deal of effort throughout the interview demonstrating your value as a candidate, so you’re also waiting for them to make the first offer.
We’ve been talking about kicking the can down the road in terms of talking about desired salary, deferring to their expertise and experience with evaluating the monetary value that you’ll bring to the company, so you’re waiting for them to make you an offer.
Just before they make you that offer, I think it’s very important to step back and think about what you what I call your minimum acceptable salary is. In other words, what’s the line in the sand for me that I must make either directly as the offer comes across or in the course of the negotiation in order to accept this position for this firm?
You can do that by evaluating your market value — there’s a ton of great data out there online — and estimating your value to this firm and this region with your skill set and experience, with your background.
Try to determine what it is for you taking in even subjective factors like do I want to move to that location, what’s the cost of living there, how much of a commute will I have, how much of a drain will this be on my personal life? All those things get wrapped up into this minimum acceptable salary number.
Before you even hear their offer, you should have this number written down somewhere. If it’s 70,000 or 100,000 or 150,000, you write that down and you have that line in the sand. That sets up your negotiation to be a lot more successful.
Patrick: I really like the idea of explicitly writing this down. I would literally write out on an index card and keep it in my pocket. Obviously, I’m never going to show them the index card, but partly it’s imminent strategy.
Partly, the psychology of this conversation is ruinous for a lot of people, particularly a lot of people who act like engineers. It’s a very, very high stakes conversation for you. It’s high stress. In the moment, you might say yes to things that you’re not truly happy with just to get out of this high stress situation where you find your mouth talks before you can even rein it in.
My sister, who literally is a recruiting manager, found herself given a number, and it went south before she could even call it back. This is her only job. You want to prepare for the fact that I know I’m going to be under stress in this situation. I’m going to pre-commit by literally writing the words, “I will not say yes to any offer under X.” Right there in your pocket.
I want you to write a second thing right under that. “No matter what their offer is, I will negotiate upwards.” I think this is important. If your line in the sand is like I need $110,000 and they come in with, “We think that we could see a way to paying you $125,000.” You don’t say yes. You say, “$125,000 is a very interesting number, and I think we’re close.”
Then, you negotiate upwards from 125. Do you want to riff a little bit on why this is so important?
Josh: There’s an obvious reason it’s important, which goes back to what we talked about earlier, which is, you don’t know the maximum number they’re willing to pay.
My whole negotiation strategy that I write about in my book and everywhere else that I write is that you don’t know what the max they’re willing to pay is, so your task is to determine that number, to find that number, and you do that by negotiating.
First, you don’t give them any anchors to use when they’re setting your offer amount. They make you an offer. Then, you negotiate above that offer. Your whole goal is to essentially make them a little bit uncomfortable, push them right up to the tippy-top of their comfort zone so that you know that they’re giving you the best possible salary that they can give.
The only way that you can do that is by negotiating. Obviously, even if your minimum acceptable is 110, they offer you 125, this goes back to why you don’t guess. Obviously, you’re pretty far out of line in terms of what you thought that they would pay you or what you think your value is. You’ve misestimated your value.
It’s time to negotiate, and you’re 100 percent right that once you get that offer, your next move is always to negotiate.
Negotiating Non-Salary Components of an Offer
Patrick: We’ve been talking about salary like it’s a single scale or number, but there’s actually multiple components to an offer. Many of them are interesting.
Typically, the salary one is going to be the number that has the most amount of leverage for you personally. It’s the easiest thing to get them to negotiate, because paying money is easy and scalable. That’s why we do it. Some other parts of the offer are less easy to change on a per-candidate basis for the firm.
You should consider any number that they put in an offer letter, whether that’s salary, whether that’s vacation days, whether that’s number of shares in the company, exercise window, yada, yada, in principle, every number is negotiable. They’re all variables. You can trade off a little on one number to get you to happier on another number.
This is probably the first thing you should say after they say, “We’re at the absolute top of our range on salary. I can’t give you a single dollar more.” You say, “I understand that. Let’s bracket the question of salary for the moment.” I like that phrasing, because it doesn’t say I accept the salary number.
Just tabling that for a second, let’s talk about number of vacation days. You were offering me 14. 14 is very generous, but blah, blah, blah, I like traveling, I want to have a little bit of leeway. Could you see a way to offer 20?
If they say yes, great, you just got six extra vacation days for nothing.
If they say, “Well, this is company policy. Everybody gets 14,” it’s like, “If we don’t have flexibility on vacation days, where do you suggest that we have flexibility?” They might come up with something which is not too useful for you like, “We will flexibly offer you anything you want to eat from our selections of lunches available,” which you say, “That’s nice. Try again.” [laughs]
They might come back with something like, “We could potentially up your equity grant.” This is important for many of the people here who are working for start-ups and negotiating equity grants. It’s just a very deep topic. We’ll link you to a post or two about the specifics of this, because they’re mind-bending if you haven’t done it before.
[Patrick notes: This topic is a little off the beaten path for me, so I’m going to point you at VentureHacks which has done it better.]
The thing I would suggest for negotiating equity grants is, A, make sure it’s in writing in, like, the form of an offer letter, and don’t negotiate that live. Almost certainly need to have an Excel model in front of you to be able to properly value equity grants.
That’s something, by the way, that you can do with any components of this. Rough out the offer and then get it in writing, which they’ll force you to do anyhow in the form of a formal written offer letter. Say, “After I have your formal offer in hand, I will take a day or two to think on it and then give you my answer.”
You don’t need to give them any reason for why you need to think on it, but it’s almost always to your benefit to take some time, get out of a high pressure situation, and then come back with an answer that you’ve slept on and are happy with.
Josh: I totally agree with that. To put a finer point on some of the things you said, for me, I always emphasize that base salary is the most important thing. It should probably be the most important thing to you when you’re negotiating starting salary. I could think of exceptions, but for the most part, I think that’s a good rule of thumb.
Then, you just prioritize the other things that you think might be available. Your tactic is really great, starting with something that’s important to you. If they shoot it down, then asking them what’s available, what levers are available to pull. I think it’s important to start with some sort of priority in your mind so you can try to get the best thing.
My general rule of thumb is if they say no or compromise on the last thing you suggested, then there’s room for you to continue negotiating. If you said, “I’d be more comfortable at 120,000,” they said, “Deal,” then you’re probably done.
If you said, “I’d be more comfortable at 120,” and they say, “Well, we can go as high as 115,” then, just like you said, that’s an opportunity for you to say, “I was hoping for 120. You said we can come up to 115. Can you do 115 and an extra week of vacation?” or, “Can you do 115 and whatever?”
Then, you start walking down that list until you get a yes or you run out of things to ask about. Then you know that you’re at 115 with the set of benefits that are available that can’t be moved. I think that’s a great strategy just to walk down that list.
Patrick: It might be worth talking about here one of the classic things in negotiation is worrying about your BATNA, your best alternative to negotiated agreement. This is something that business folks do all the time. In the event that this doesn’t go through, what’s the worst-case scenario for us?
In general, you don’t want your BATNA to be unemployment. [laughs] It will make this negotiation much better, both for salary and for everything else out of this process, if you have multiple irons in the fire.
[Patrick notes: BATNA means “best alternative to a negotiated agreement.”
It is a very useful word to learn and keep in your mind when negotiating.
Basically: what happens if you walk away at this point?
You take your best course of action available without this negotiation happening.
For example, if you’re a consultant, your BATNA to someone asking to chip 25% off your rate is possibly either “You don’t bill anything for two weeks” if you have no pipeline or “You bill two weeks at full rate” if you have decent pipeline.
If you’re in that second category, you should almost certainly not accede to their request.
If you’re in the first, you probably shouldn’t either, but you might be tempted because your easily available options are not wonderful.
This is one of those concepts that you cannot “unhear” after learning it.
The MBAs occasionally have useful technology to steal git clone and appropriate for our own purposes.]
How To Use Other Offers To Your Advantage
Patrick: If you’re actually searching for a job with multiple companies at once and ideally you have another offering in-hand already. How do you play this differently if I have an offer in-hand already?
Josh: To pat myself on the back a little bit here, this is one thing I really like about my strategy is that it all goes back to your minimum acceptable salary. That number will change based on objective measures like your market value, as far as you can measure it, and other things but also subjective measures like, “Is this your only opportunity or do you have other opportunities?”
If you have other opportunities and you have a sense of what the value of those opportunities might be, then you might adjust your minimum to be higher. If you have two offers in-hand, then your minimum for either will probably be a little bit higher knowing that your fallback is most likely the other opportunity.
The simple method that I use is I don’t suggest adjusting your minimum once you’ve set it.
However, if you are in a situation where you’re getting multiple offers or you have other opportunities that are coming and going, then you might be adjusting your minimum just based on the probability that you’re going to land another gig, or that you’re going to have a better gig, or that this opportunity that’s in front of you doesn’t necessarily have to be the one that you get.
My general strategy is, continue to monitor your minimum acceptable salary and account for the fact that you’ve got other opportunities. There are a lot more nuances that you get into when you’re mostly juggling timelines. You’ll get I’m waiting to hear on this offer and they want to know by Tuesday. What do I do?
That’s, I think, a little bit different conversation than what you were asking about. Adjust your minimum to account for the fact that you’ve got other offers, and make sure that you’re being honest with that minimum.
Patrick: Should I explicitly say to my counterparty at the company, “I have a competing offer here.” Should I tell them what the competing offer is? Should I tell them who made the competing offer?
Josh: I think that’s a matter of personal taste. I’d be curious to know what you think about that. In general, I think that the less information you reveal, the better, unless you’re positive that it’s going to have some sort of benefit.
Back to something that we talked about earlier when we were talking about the dreaded salary question is one reason that you may not name your currently salary is you’re trying to keep information between you and a counterparty, which would be your current employer or, in the case of another offer that’s on the table, that other employer.
I do think that probably your first instinct should be I’m going to demonstrate to this firm that I’m talking to that I’m going to keep our offer between me and the firm, if possible, and to demonstrate that, I’ll not tell them the details of another offer.
You might run a blur filter over it and say, “I’m not going to tell you who the firm is, but I have another offer, a strong offer, that I’m very interested in, so we need to work on your offer for me to continue negotiating,” or something like that.
Patrick: I like that lens. I wouldn’t lead with the fact that I have another offer. I’d probably keep that under your vest until you get to the point where they’ve given you an offer which isn’t competitive or which you’re not fully happy with.
At that point, you say, “I think we’re close here. It’s important for me to let you know that while I would really love to work for your company, I’m fairly decent at what I do, and I’m obviously searching for a lot of offers in parallel. There’s another offer on the table from a peer organization.”
That’s as specific as I would be: “a peer company.”
Start-ups don’t feel that they have to match offers against finance firms, and finance firms don’t feel that they necessarily care how they compare with Google, so you just say “a peer organization.” That’s as specific as you have to be.
A peer company has put an offer on the table which I felt was very fair, and I don’t want to have to make the decision to work for that company just based on numbers. I would love to work for you so much, so do you have any slack on your offer?
Then, see what they can do.
If they ask you, “What is that offer?” say, “Just like I won’t be sending them a write-up of our conversation, I’m not going to tell you the specifics of the conversation I had with them, but trust me, I’m an honest professional.” If they don’t believe you’re an honest professional, then get out of this conversation, because you definitely don’t want to be working there.
This is, again, demonstrating competent, confident professional. You’re going to want to ask me some things that I do not want to answer, and that’s OK. We’re going to move on from that. If you attempt to brow-beat me about that, then I’m not going to wilt on this question, because this is what I do for a living.
A lot of engineers will read this as intransigence, a word I’ve only ever seen in print. They’ll think you don’t lose points if you don’t immediately roll over. This is the opposite of how business people think. I think that people who roll over immediately are less trustworthy in their eyes than people who don’t. Don’t roll over immediately in the face of opposition.
Josh: You’re dead on there about the signals that you’re sending. We talked about this a little earlier with the dreaded salary question, too. It’s sort of a double whammy if you just close that information.
Not only have you given away a few of the bits of information that you had that were unique that the company doesn’t have, but you’ve also sent a signal to them that you may not be the most savvy businessperson or the most savvy negotiator. You may not be someone who can be depended on to be left alone to your own devices because pressure gets to you and that sort of thing.
Even if it’s not an explicit evaluation that they’re doing of these things, it could be a subconscious thing. It could literally affect the offer they make you if they just think that you’re a weaker candidate because you’re too easy to push around.
There’s a lot riding on staying strong, setting boundaries, and sticking to the rules that you lay out during the negotiation to signal to them that you’re a serious candidate, and that you understand business, and you understand what you’re doing, and that you’re not going to roll over for them.
Patrick: I had an incident which put this in a sharp relief back during my consulting career. I was in negotiation with a prospective consulting client for a deal which was in the bag. He loved me. We had worked together informally for a bunch of years.
Then we got to the number question, and I said, “My rate is X, but because I like you, I’ll give you half X.” He told me, years later, “Yeah, I almost exited the conversation at that point.” He was face-palming internally.
I was like, “Of course you did, because I’m sending the signal very strongly that either I’m lying about my rate generally being X,” which I wasn’t, I was being totally honest about it, “or that I’m a terrible, terrible businessman to be in business with.”
I was just willing to give him 50 percent, negotiating against myself for 50 percent, which is an absurd discount, without even any hint of pushback from him on the number that I had said. I’m signaling all the sorts of the wrong things during that.
We eventually got the engagement done at half of my rate, and it was successful, but it got the engagement off on the wrong foot and cost me a whole heck of a lot of money without meaningfully improving anything about that relationship. Don’t do that to yourself.
Josh: Yeah, you signaled either that you are lying about your rate or that you don’t believe your own rate. Either way, it’s not good. Either way, you’re sending the wrong signal to them about how much of a professional you are and the quality of your work.
Negotiating A Raise While Staying At A Company
Patrick: We’ve talked a little bit about how to negotiate the salary before you’re hired. A lot of engineers ask me, “How do I negotiate a salary once I’m hired? I feel like I haven’t gotten a raise in a while, or market conditions have changed, or I’ve gotten better at my job, I’ve been given more responsibilities. I think I’m worth more. How would I go about getting that?”
Josh: This is a really common concern, and it’s quite a lot different than what I call a starting-salary negotiation when you’re changing firms. When you’re in the firm, things look quite a bit different. You mentioned earlier, for example, your BATNA.
You are not typically in a situation where you’re going to draw a line in the sand and say, “I’m leaving if I don’t get this,” so it’s a much more collaborative conversation where I think it’s even more imperative that you demonstrate value and quantify that value to your manager and to whoever else needs to approve the raise that you’re seeking.
My general strategy is, first of all, you hit the nail on the head with things have changed since my salary was set, so I need to estimate what my current value is to this firm. You do that, again, by doing a market value estimation, using the tools that are out there, talking to peers and colleagues, even people that work at the same firm, figure out what they’re making.
Little sidebar, people are uncomfortable talking about salary. I think we all know this. A nice tactic that I like to use when you’re trying to figure out what somebody makes is to ask them a hypothetical about someone just like them working at a company just like theirs.
People are surprisingly willing to say, “Hypothetically, somebody with my skill set and experience at my firm if they were hired tomorrow would probably make about X,” and it’s usually going to turn out that X is really close to their salary.
That’s a nice little workaround there to figure out pretty precise estimates of people’s salaries without actually asking them outright what their salary is.
You aggregate this data and get a sense of I think my value, my market value and my value to this specific firm, based on my experience here, and the responsibilities that I’ve taken on, and all that good stuff is some number. That’s your target salary. I think it’s good to have a target salary in mind.
From a manager’s perspective, if you imagine what it’s like to sit on the other side of the table, vague requests are very hard to satisfy and specific requests are very easy to evaluate and usually satisfy.
If you go to your manager and say, “I would like a raise because I need to make my car payment. I just bought a Ferrari.” Your manager, first of all, doesn’t have a lot of incentive to cooperate with you because he probably doesn’t care that you bought a car, and you buying a Ferrari doesn’t add value to the firm.
However, if you go to your manager and say, “I would like a raise because these conditions have changed. It’s been this long since my salary was set, and I think my value is closer to this other number,” then you have a conversation that can be very productive. Your manager has very specific, tangible things to evaluate and give you feedback on.
I think you should start by figuring out what your target salary is. Then, it’s important to catalog all the things that you mentioned earlier in terms of what are the things that are different now than they were when we set my current salary.
Am I leading a team and I wasn’t leading a team before? Have I learned new technology? Am I managing more projects? Am I managing a bigger portfolio? Am I doing more sophisticated reporting that demonstrates what my team is up to? All these things that you could be doing, I call them your accomplishments.
You want to specifically catalog what are the things that you’re doing that are adding additional value since your last salary was set. You also want to get social proof. I call it accolades. What have other people said about you?
This is usually somewhere in your inbox. You could search for things like “thank you” or “awesome!” and look for proof or feedback from clients and colleagues that demonstrate that you’re doing a great job, you’re going above and beyond.
This way, even if your manager hasn’t been paying attention or hasn’t had time to really think about what you’re doing, you can say, “These other people have been paying attention, and they think I’m doing pretty great.”
That all bundles up into a nice, tidy package that you can then present to your manager saying something along the lines of, “It’s been 18 months’ salary was adjusted. I’ve done some research. I think my value to the firm is probably closer to this other number.
Here’s all the stuff that I’ve been doing since my salary was last set to add value to the firm, to continue to take on responsibility. Here are a few things other people have said about me. Can we talk about getting a raise to X for me now?”
Then, you’ve turned it loose into the wild by proposing that to your manager.
Patrick: I also like to have this conversation be partly retrospective and partly prospective about your future value to the company. You’re going to be earning the new salary over the course of weeks, months, potentially a year or two in the future.
You’re not talking about your last, say, 12 months of accomplishments to talk about what got done within the last 12 months and you’re going to compensate me in the future for what I did in the last 12 months. Those salary checks have been cut. You’re even with regards to the last 12 months.
What you want to say is, “The last 12 months proves that I’m on a growth trajectory. I will be producing even more value in the future. Ideally, the amount of value that I’m producing is already accelerating. Given that I’m going to go on to do great things in the next 12 months, let’s talk about how to properly compensate me in the moment for those great things that will be happening.”
This is one reason, by the way, where it’s good to time this conversation, if you can, after you’ve delivered a major project, for example.
Say, “We got this done, but I’m not going to rest on my laurels. My next big thing that I want to deliver for the company is X, Y, or Z, and while I’m delivering that great value, which is demonstrated by the great value that we’re in the nice, warm afterglow of at the moment, let’s talk about making this a mutually rewarding outcome.”
Josh: I totally agree. I think that’s a great tactic too is to essentially demonstrate to your manager that you’re going to continue adding value and probably going to continue acquiring new skills and taking on more responsibility at about the same rate you have for the past 12 months, so this is an investment on both of your parts. I think that’s a great tactic.
One other thing you can do to maximize your chances of getting that raise through are I actually like to put that request in writing. So, everything that you said verbally in your manager, summarize it in a nice, tidy email and send it over after you’ve had a verbal conversation in a one-on-one or a face-to-face meeting.
The reason for that is a lot of times, even if your manager agrees with you, the next step will be they’ll have to go to their manager or somebody else and start the approval process for a raise. Typically, you’re not doing this to get a one-percent raise. You’re doing this to get an extraordinary raise.
It usually will require an approval process that could be grueling. It could be four, five, six people deep.
Giving them your written case, summarizing all that effort that you put into building your case, in an email gives your manager something that they can circulate so that now everybody who hears about the raise request that you’ve made also gets to see that accompanied by your case in writing.
Obviously, you’re going to do a better job of making your case than anybody else. That’s one more layer to the process that I like to emphasize.
Patrick: Plus, this makes it easier for your manager rather than forcing them to make the case and giving them additional work, which would be the lower priority for them than the work they actually get scored on. [laughs] It wraps it up nicely in a bow for them. Again, giving people the image of you as competent, professional.
It’s easy for just talk with your manager to be read as just talk, or maybe they don’t read it that way but they treat it as just talk. It’s like, “Yeah, Josh was grousing a little bit about his salary, but everybody grouses about their salary occasionally.” Professionals, when they want something done, they put it in writing. That’s a core professional skill.
When you put something in writing, in a well-written, formal request, you’re saying, “This is a request. You can say no to it. You can say yes to it. Because we’re professionals, when I put a formal request in writing, you are expected to act on it rather than just not acting for the next two weeks and seeing what happens.”
You can follow up a week later. Again, follow up verbally first, but then with email. “Boss, I’m just inquiring on the status of my raise request. Is there any additional information that you need to help make the determination to grant my request?”
I would approach it from the perspective of you’re not asking for the moon and stars here. You’ve earned this. It’s very obvious that it’s in the company’s mutual interest to keep you happy. You’ve calculated a number that will make you happy.
Enter the negotiation from the perspective of ”I assume that the company is going to say yes to this if I figure out the right words to say for you. Tell me what the right words are.”
Josh: That’s exactly right. I think everything you’ve said there is spot on. You want to make your best case but also present a professional front. You have to follow up. I think following up is something important that is overlooked.
You don’t verbally request, and then send an email, and then just forget about it and hope the raise happens. You’re probably going to need to ask again in your next one-on-one. You’re probably going to need to follow up on that email a week or two later. You might have to do that several times. As you mentioned, Patrick, there are specific job responsibilities that your manager has that are probably more important to the company and to him than your raise.
You’ve got to stay on the radar and keep on it and keep demonstrating that you’re engaged and that you would like a response.
Patrick: The potentially uncomfortable question comes up: what if you’ve topped out a firm, you’re at the very top of the ranges? The firm might not be keeping pace with salaries in the industry. Perhaps they’re at the limit of their actual ability to pay with their business model when compared to, say, the Googles of the world that are spinning money every day.
When we do make the decision that we need to have other offers on the table? Do we communicate that internally? How do we think about whether we want to jump?
Josh: It’s a great question, and it’s something that even in my book, it’s the unhappy coda to the raise and promotion process. Like I said, this is not the same as a salary negotiation where you’re evaluating your BATNA and you’re just going to walk away. You may actually have to walk away, even if it’s delayed.
If they say, “We’re not able to accommodate your raise request,” then I think the first thing you want to do is figure out why. You mentioned the term “topped out.” I actually take that term a couple of ways. The first way is the way I think you attended it which is the firm simply cannot afford to pay you more money for the role that you’re in for whatever reason.
It may be that they’re not plush with cash, or maybe they’re stretched for whatever reasons, the financials aren’t great. Maybe the role that you’re in is a valuable role elsewhere, but maybe not for your particular firm to the level of value that you’ve estimated. I call that being other-valued as opposed to over or undervalued.
It’s also possible that you’ve topped out in terms of the salary available to you in your current position, so you may actually be having the wrong conversation. You may have asked for a raise, and it turns out that giving you a raise would bump you into the top of the pay range available for the job that you’re in.
You, in fact, may be better off, then, trying to discern from your manager whether your raise is not the right request but you need a promotion, which will often come with a raise.
That’s the first thing to determine is why am I not able to get this raise? Is it because the firm cannot afford to give me a raise, or is it because my salary is more or less maxed out in my current pay range?
Patrick: Thinking about it from the firm’s perspective, the reason they have salary ranges for particular positions is they’re not just buying your time. They’re buying 30 units, which the firm considers more or less isomorphic to you at the moment, and the expectation of having these conversations hundreds of times with people who are in a position similar to you.
If having the conversation with you requires them adjusting their salary ranges, they get tremendous leverage with regards to that… in a bad way. [Patrick notes: It is positive for you when you create leverage which multiplies your effect across all of the firm’s clients, projects, or revenue.
It is not so positive when the fact of having you at the firm increases costs across their entire engineering employee base.]
They might think, “Oh man, this is committing us not to giving this particular person $10,000 extra this one time, but rather paying 10,000 times the number of people we have in this position times the total number of employee years we expect to pay for this position from now to infinity.”
That’s a tremendous amount of disincentive for them to bump up their ranges just to make you happy. If “all you’re talking about” is just getting a promotion, you mean we don’t have to pay more for every other software engineer II for forever? We just have to put one person into the software engineer III bucket? Easy to do.
Josh: Exactly. It’s a much easier transaction often. Sometimes the benefit of that promotion, in that case, is that you’ll also get a raise built in. Sometimes it’s a lock-step raise and sometimes you’ll also get to negotiate for that raise in the same way that you did before.
It could also open up quite a bit more room for you next time you pursue a raise without going into the minutia of a pay raise or salary grades. Moving up into a new pay grade often means that your ceiling has just also moved up in terms of available salary. That’s a move that you want to pursue.
Usually your manager will be able to tell you. Sometimes they’ll think they have told you this. You might need to ask for clarification, but it is important to know, were you unable to give me a raise because the firm cannot afford to pay me more or because I’m in the wrong job? Then you have a much better picture of what your next step should be.
Patrick: Also an important thing: they might not say it in as many words, but it is possible that they might decline a raise because they do not have the same view of your accomplishments that you have of your accomplishments. It happens all the time.
There’s a variety of actions forward that you take if you get that signal.
One option is doing the same amount of work and making sure that value is surfaced better within the company. If you’re doing great work and you’re in a position where great work is not being rewarded, then that should be a big, flaming signal that you should get into a position where great work is rewarded.
This is partly projection, because I spent six years in a variety of traditionally managed Japanese organizations, which are not set up to reward great performance, to put it mildly. Don’t work for people who don’t appreciate what you bring to the table.
That is a trap you get into, and it is highly unlikely that you will successfully change the company culture to suddenly start rewarding performance. Rather, get yourself to a position and to a company that feels like great work is something that’s worth paying for.
Josh: You just used the “culture” word. You end up quickly in this squishy area where it really depends on who your manager is and what the company culture is.
Some managers are very open. You’ll go to them and say, “I’d like a raise to this number. Here are the reasons that I think I deserve this raise.”
They’ll say, “I understand that you feel that way. However, here are the things that I’m seeing from my perspective. Here are the KPIs [Patrick notes: key performance indicators, which is MBA speak for “metrics you’re held accountable for”] that I’m measuring, the goals that I had for you, and here’s why you’ve fallen short so far. You haven’t earned the raise that you’ve asked for.”
That’s a good manager. A better manager is, “And here’s a plan that you and I can work out together to set a target time frame and responsibility bar that you need to achieve in order to get the raise that you’ve asked for.”
So that’s on the table. It’s not on the table right now, but here’s what you need to accomplish and here’s about how long I think that it will take us to get there to get you that raise.
On the other side of the coin is the sort of manager that just won’t engage. They’re too busy doing other things or they don’t want to ruffle feathers. A lot of managers simply don’t want to stick their neck out for people.
Detecting that can be frustrating but is also an important signal, like you said, to understand that it doesn’t matter what I do, how much value that I think I’m bringing or I am bringing, it can’t be rewarded at this firm for whatever reason and I might need to look for alternatives.
Patrick: If you hammer out a plan with your manager, again, be the competent, confident professional and follow up on that conversation via email.
Hey, Bob, thanks for having the conversation with me earlier today. I understand that you feel now is not the right time to grant my formal request for a raise, but I like the plan that we discussed where we have committed to revisiting this question in six months contingent on me achieving the KPIs X, Y, and Z, that we will reopen this discussion with an eye towards granting me the raise of Y.
Put it on paper or email, whichever. Even just announcing in writing, making sure we’ve captured that whole identity agreements. Bob might not be with the firm in six months, and you don’t want to be starting this conversation entirely again over with the person who replaces Bob.
Also, it is highly likely that Bob considers your salary less salient to him than, say, Bob’s salary or anything else that Bob is working about.
Bob might have totally forgotten this conversation in six months, so be able to have something to point to him like, “Hey, remember this conversation that we had last July, a whole lifetime ago? Well, I’ve kept up my end of the bargain.
With probability approaching the sun rising tomorrow, because you are a competent professional yourself, you are going to keep up your end of the bargain.”
Josh: Exactly. You would want to bring it up maybe not every one-on-one. If you meet with your manager once a week for a one-on-one, you might want to bring it up once every three or four weeks.
Say, “Hey, by the way, I’m still working on this plan we put together. As far as I can tell, I’m on track. What do you think? Here’s what I’ve accomplished since we set the goals,” and that kind of thing.
Keep it a front of mind thing for you, because now you’ve actually got a concrete set of things that you can do to demonstrate that you’re ready for that raise. Also for your manager so that there are no surprises when you show up out of the blue and say, “Here’s all the stuff I did. I’m ready for my raise.” It’s easier to take it incrementally.
Patrick: When you deliver on a huge project over the interval or when you hit one of your KPIs, you’ll tell your boss about this. In the email that you send out grabbing credit for it, remember to forward that email on to your manager with a quick note like, “Hey, Bob, first one out of three, knocked it out of the park. Still working on Y and Z, I’ll send you an update when it’s ready.”
“Hey, Bob, X and Y are done. Just Z left to go.” No surprises. I think that’s a pretty good place to leave us off for this conversation, unless you have anything else you want to add.
Josh: I feel good about it. I think we covered a lot of ground. I like that we got into raises at the end, so I feel like we hit a lot of the highlights and gave a pretty good overview of the before you’re at a firm to when you’re there and to what you can do to continue pursuing salary increases as you go. I think it was good.
Patrick: Thanks very much for taking the time to chat with me today, Josh. If any of you have questions on this or any other topic, my inbox is always open. I’m [Patrick notes: patrick at the domain you’re reading this transcript on]. Josh, if folks want to reach you, what’s the best way to do that?
Josh: The easiest and fastest way to get in touch with me is probably just to reach out on Twitter. I’m @JoshDoody on Twitter. You can find my blog and other things I’ve written at joshdoody.com.
I’ve also set up a special offer for Kalzumeus podcast listeners today over at https://fearlesssalarynegotiation.com/kalzumeus. Throughout the podcast, Patrick, you and I talked about estimating your market value and then leveraging that market value to request a raise later on.
I’ve got a great offer with a couple of guides on how to estimate your market value, how to request that raise, and even an email template that you can send to your manager with your written request after you’ve made it. That’s https://fearlesssalarynegotiation.com/kalzumeus, and that’s a free offer that you can go download.
Patrick: Thanks very much for taking time to chat with me today, Josh. Folks, I really recommend his book. I’ve read it cover to cover. It’s exactly what it says on the tin. It’s a full book devoted to this question, which I think is really, really worth your time considering the amount of leverage you’ll get out of the salary negotiation question.
I would encourage you to read that in whatever form and definitely subscribe to Josh’s list. He’s got great stuff coming about this all the time. Thanks so much for talking with us today, and we’ll be back in a couple of weeks with a new episode.
[Patrick notes: Yeah really — recording one later today, as a matter of fact.]
Links from the episode:
Fearless Salary Negotiation: book and Amazon link
Give Josh your email address and he’ll give you a freebie here (you should totally have one of these for any podcast appearances or conference presentations you do, by the way — it works like gangbusters specifically because it gives the people who got the most value out of your expertise the easy and accessible option to hear more from you)
Josh Doody’s site and Twitter: @JoshDoody