Negotiating compensation packages is often the most stressful part of accepting a new position. Suggest a number too low and you're forever trying to play catch up, but mention a salary level too high, and your request could be seen as outrageous. There are several things to consider when entering into negotiations.
A few years ago, Neil Block negotiated a very specific compensation package when he jumped from a large, bulge bracket investment bank to a small entrepreneurial firm. Top on his list: a reasonable severance package. "It's necessary to prioritize what is most important and I wanted to protect myself in case I was let go for no cause," says Block, who has since taken another job as head of fixed income for Dominick and Dominick in Manhattan. "In this position, what was most important was to have a vested interest in the profitability of my area as well as the firm," says Block. In both cases, the employers asked him what it would take to get him to come to their firms. Block's answer: "I was realistic and always explained my request."
Know Your Value
Knowing what you're worth is at the heart of every negotiation. Do your homework and talk to a lot of people. This where it is essential that you tap your network of colleagues. Try to find out the range of what others in your position are paid. "You also need to be aware of the current environment where regulations around compensation are swirling around," says Martha Glantz, senior director at Total Compensation Solutions LLC, a human resources consulting firm in Armonk, NY. While there are a host of websites, like salary.com, that give some sense of what particular jobs pay, it is likely that they represent an average of what is a very big range.
Know the Issues
Once in the negotiation process, there are several questions that are unique to finance professionals, says Glantz. Is there variable pay? How is it calculated? Is there a target incentive opportunity? Does it go up or down? "Have the potential employer try to explain the process and ask if there is any deferral on the compensation," says Glantz. In an effort to prevent the kinds of toxic deals that led to the financial crisis (and had huge bonus payouts due to short-term gains), firms are now deferring payouts on specific deals for up to three years to ensure that the deals hold up over time. Unfortunately, no two firms calculate bonus payouts the same way and, in fact, the actual equation can often be a mystery.
Another trend: Finance professionals are negotiating for access to revenue streams as they are generated and want them paid out monthly or quarterly rather than waiting until the end of the year. Also, the current climate in Washington regarding Wall Street compensation regulation could have a long-term impact on larger financial firms.
It's Not Just About Salary
Focusing just on salary can be detrimental to the entire process. "If you're single-minded about the financial aspects of the job then it pits you against the potential employer and someone has to lose that battle," says Iris Bohnet, the vice chair of the Program on Negotiation at Harvard and the director of Women and Public Policy Program. Unfortunately, many professionals, especially in finance, focus only on the monetary benefits of the job.
Instead, make sure you're negotiating a package that includes many aspects of your compensation such as salary, severance, vacation, among other things, says Bohnet. To that end, it's necessary to "think about things in terms of trade-offs as you enter the negotiation and understand what your interests are and how important they are to you," says Bohnet. For example, how important is salary relative to career opportunities, professional training and flexibility? That way, if you find that salary may not negotiable, which is likely in this economy, you can focus on something else that is important to you. Health benefits are typically non-negotiable as companies can't decide to waive co-pays or premiumns. Perhaps you can request soft benefits such as a certain number of vacation days or gym membership.
Given the state of Wall Street now, it might be tough to negotiate a severance package. "Wall Street employers are very keen at employment at will and I don't see many job seekers able to negotiate severance," says a director of fixed income sales at an investment firm in Greenwich who asked not to be identified. Still, if you feel you're in a position of strength similar to Block, then request it. A typical severance package includes two weeks for every year of service. Try to find out what the company has offered in the past. "See if you can get outplacement services and whether you can stay on the company's health plan for a longer period of time before switching to COBRA," says Glantz.
It's of central importance when considering hiring someone or taking a job offer, but who brings up the topic of the compensation package first? "If you have a relatively good understanding of what the range of salaries are then put in your number first and go with the upper range," says Bohnet. But if there is little transparency in the compensation for your position and the variance in the range is huge, it could be a risk to mention a salary figure." In that case, let the potential employer make the first move.
-- Toddi Gutner
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