Deciding what you expect or want to be paid for a given position and discussing compensation with potential employers are important parts of a successful job search. During such discussions, both parties share the common objective of determining the fair market value for an individual's contributions to an organization. Each party also hopes to meet personal goals as well. Primary in the employer's mind is the desire to preserve equity among employees of similar backgrounds and responsibility levels. A company's internal salary structure developed over time dictates the boundaries within which the manager negotiates, balancing needs and expectations of new recruits with those of current employees. It is a delicate juggling act, particularly in light of the fact that salaries paid to graduating students are often high relative to salaries paid to individuals who have worked for a company for some time.
The student also brings personal agendas to the bargaining table. These typically include such factors as desire for pay-back on one's investment in an MBA, expectation that one's future salary will exceed prior compensation by a particular percentage (subjectively defined), and desire to fare well in competition with one's peers.
Learning to determine and negotiate one's fair market value takes time and practice. We offer the following material to help you prepare to approach salary discussions with comfort and confidence. The key thought to keep in mind is that information is power. Thinking through what information you require to make a decision and then gathering that information is the best way to guarantee that you will be fairly compensated in future positions.
1. Be prepared to discuss salary at any point in the interview process. Salary typically comes up during a second interview but may be discussed right away. Do your homework so you will be ready for the situation whenever it arises and not be caught off guard. If questions about salary come up before you know what a job entails, feel free to say you would like to understand the position responsibilities before discussing compensation.
2. Appropriate compensation is based on many factors relating to you, the company involved, and the position to be filled. Firms typically consider:
3. Most employers conduct careful research before setting salaries. Be equally well prepared with the facts. Start with offer data and information from other MBA programs (see the "Placement Reports" section of the CDO web site for Sloan data plus links to placement reports from other schools). But don't stop there. Ask fellow students, alumni or friends familiar with an industry, firm or geographic region what to expect. Review business journal articles on the subject. Consult information in Dewey Library, or publications available from relevant professional associations. In short, dig. This will allow you to present your needs and expectations clearly and confidently.
4. Don't assume all offers are negotiable or that the "sky is the limit". Although many managers expect to negotiate, some do not. They have already determined the "fair market value" for a particular position. In this case, their first offer is their best offer. You may damage your relationship with them if you ask for more. Here again, know your audience.
5. When considering compensation, look at the total package being offered. Compensation may take many forms, including salary, bonuses, equity, stock options, health and dental insurance, life insurance, pension plans, housing, moving expenses, family leave, child care benefits, paid vacation, extra leave without pay, a car, a personal computer, professional development (tuition assistance, professional meetings, etc.), loan repayment, interest-free or low-interest loans, a one-shot offer of $2-5K for miscellaneous expenses. Look at the big picture, not just salary. Expand your thinking about the ways an employer might reward you. Develop a list of your interests (i.e., what you want).
6. Be aware that issues of wage compression challenge many organizations today. Salaries of experienced personnel often fall, on both relative and absolute scales, behind salaries of new graduates. Firms struggle regularly with this problem in their efforts to retain long-term employees while simultaneously bringing new blood into the organization. This does not mean that you should automatically lower your expectations. Just be sensitive to the constraints employers may face when discussing your compensation.
Several years ago, Dr. Heather Hazard, a former Sloan faculty member, offered a seminar on "Negotiating Compensation with Employers". She shared the following useful insights at that time.
Negotiation is the process of arriving at agreement between two or more parties about one or more issues. The process is successful when:
You also need to determine six figures in advance of any negotiation:
Few negotiations involve only a single issue. When negotiating compensation, discuss all forms of compensation you value. In sum, expand the pie before you divide it between yourselves.
You can influence the success of your negotiation as follows:
If you have trouble negotiating for yourself, pretend you are doing it for someone else whom you respect and value. Try to depersonalize the discussion, and develop a sense that you are entitled to your request. Finally, recognize that practice improves your chance of success. Role play the discussion several times to anticipate what issues might surface and decide how you will handle them.
For more information on negotiation, we recommend visiting MIT's web site, "Negotiating Your Future", which we helped to develop.
This article was reprinted from the Sloan School of Management web site.