When you’ve got a job offer in hand, it’s easy to blindly accept out of sheer joy. But you’ll want to take a second look at your compensation package before signing on the dotted line.
After receiving a job offer, would you ever say, “No thanks, really, that’s enough money. Please do not give me any more. Give it to someone else.”
Really? Of course not.
But guess what? That’s what people are doing when they don’t follow key steps for discussing pay. Whether it’s a raise, promotion or job offer, lots of people leave money on the table. (Click here to tweet this reality.) It happens all the time.
When people discuss compensation, they assume they know all the possible elements of a package: base salary, bonuses, stock options (maybe), benefits and vacation. But this is just one piece of the puzzle.
Additional elements you could and should be discussing when negotiating a job offer include severance, restrictive clauses and supplemental benefits. And, even when it comes to the basics like base salary, many people do not research what the job is worth, ask questions about future raises or even discuss specific job duties.
People don’t know what they don’t know. And the result is a lot of money is left on the table instead of in your hands.
How do you avoid these monumental mistakes? Simple. As you prepare to respond to your next job offer, follow five key steps.
1. Research your compensation options
The biggest mistake people make is not taking the time to learn everything that’s out there and all the rewards they could be getting. They assume the company means something they don’t (for example, they assume they will be eligible for a raise but then are disappointed to find out they have to wait longer). And you know what happens when you assume.
So do your homework. Find out what your offer should include:
- Bonus (how much and in what form) – any of it guaranteed for the first year? Should it be?
- Equity (stock options, restricted stock, etc.)
- Benefits (employee investment, prescription coverage)
- Supplemental benefits and/or 401(k) matches
- Noncompetes (and other restrictive clauses); and
And those are just a few elements you might find in a job offer. How do you find out? Get advice from peers, friends and experts. Ask around.
Then get answers to important questions like: How much is the job worth in the marketplace? Will you be eligible for an increase next year? Is the bonus amount listed the target, or the maximum available? How much are those stock options worth, and when can I exercise them? Is that noncompete clause fair? How much severance should I be expecting? What about relocation — am I receiving a fair package?
Again, ask around. Some of these questions you can discuss with your employer by asking them more about their rewards programs. For others, you’ll want to reach out to trusted friends or people in your professional network.
2. List what you want and what you need
This is a very critical — yet often overlooked — step in the process. Once you catalogue all the possible compensation, benefits and other contract terms available, prioritize them to guide you through the negotiation process. Identify what tops your list and what sinks to the bottom. Then, during the compensation discussion, revisit your list periodically. Don’t allow yourself to be swayed by a sales pitch that offers stock options when you really wanted more guaranteed income. If you do, you will find yourself very unhappy later.
3. Learn the rules of the game
Remember how you learned to play Candy Crush before you could advance to the next level? Same goes for compensation. Each company approaches compensation differently — as it should. Finding out how your current or potential employer approaches compensation provides critical strategic insight that will help you determine how and what to ask for — and how much.
For example, if the company is pre-IPO, asking for stock options would be a wise move. The company may have limited cash and be unable to offer much cash compensation, including 401(k) matches, relocation or benefits. Keep this in mind when deciding how many options you want, since you won’t be receiving the other rewards that more mature companies can offer.
If the employer is a nonprofit, it manages a fixed budget. Focus on base salary because bonuses (if any) will be minimal. However, the benefits might be quite generous.
Where is this information? Public companies and nonprofits disclose this information in their proxies and annual reports. Some companies highlight their compensation approach on their website. Or, you can ask peers, colleagues and other experts — including the hiring manager.
4. Change your mindset
You aren’t buying a car, so don’t approach this discussion like it is a one-time negotiation. In fact, forget the entire notion of negotiating. Instead, focus on building a long-term relationship with the company. As much as possible, talk “live,” either via phone or in person. Avoid texts and emails if possible. Be personable. Smile. Make small talk. Use good manners and watch nonverbal cues, like crossing your arms.
5. Practice a winning approach
Still nervous? Then practice. It may seem silly, but practicing you approach and key topics with a friend will help shed your nerves and build confidence.
In essence, make a new friend with your potential new employer. You want to keep the conversation friendly and informal. Most importantly, listen. Don’t feel the need to talk incessantly. Ask open-ended questions and take notes. Never agree to anything right away.
Always ask for time to think over the offer before responding. And always get the offer in writing.
Stacey Hawley (@staceycredo) is an author, speaker and compensation and talent management consultant who has her own business, Credo. She helps companies reward and recognize their people effectively and helps individuals like you earn more money.