Negotiating Compensation: Go for the Win-Win

Welcome to Headhunter Secrets, where I’ll share perspectives about the search business. We hope you’ll use our services to execute searches. Nonetheless, I wanted to give you some insights I’ve gained from doing search work since I was 23 years old.

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Negotiating Compensation
Go for the win-win

Buyers and sellers. That’s how I often think about the process of hiring. “Buyers” are the companies looking to hire someone. “Sellers” are the candidates seeking to be hired.

This process eventually leads to a compensation negotiation. Generally, buyers are looking to pay as little as possible, whereas sellers are looking to make as much as possible. Yet there are limits to what a seller can pay and what a buyer is willing to receive. It’s important to keep this in mind when stepping into a compensation negotiation. 

From my experience, many candidates forget to consider that every company has its limits as to what it can pay.

When a company makes someone an offer, it is typically an amount that fits comfortably within its current compensation and organization infrastructure. Companies are usually not trying to outsmart or exploit candidates so much as they are trying to create sustainable compensation costs and a well-balanced and motivated team. If there is any wiggle room, then my experience is that companies may be able to pay 5% to 10% more than the original offer, but not a measurable amount more than that.

Candidates should bear this reality in mind when negotiating. Companies have constraints that can’t be circumvented. They are handicapped by what others in the company are already making. And they are handicapped by the company’s size and profitability. That said, candidates may be able to negotiate a sign-on or event bonus, more vacation time, a guaranteed salary review by a certain date, a flexible WFH arrangement or other points of value to the candidate.

At the end of the day, candidates want to join well-managed companies because well-managed companies provide good career development opportunities. By definition, well-managed companies do not over pay. They also actively work to create and keep a productive culture that will ensure all hires get to work in a collaborative and cooperative environment.  

As for the company side: When companies genuinely cannot pay more but want to win a candidate hoping for higher pay, there are things companies can do. 

When higher starting pay isn’t possible, companies can consider laying out a clear path to a promotion opportunity, provide a sign-on or event bonus, offer equity that will turn into real money some day or suggest flexible work environment options once the new hire has proven him or herself.

From my experience, companies don’t spend enough time outlining to the candidate the longer-term opportunites—like financial reward and personal career development—of joining their company.

Companies should be especially incentivized to convey to a candidate the upside of working with them, especially over the long term. Companies should sell the intangible as well as the tangible.

Pay is the most important piece of the compensation puzzle, but it is by no means the only one. The most productive and long-term employer-employee partnerships hinge not just on pay but overall and mutual satisfaction and benefit. 

Companies need value-creating candidates. Candidates need jobs that enhance their longer-term career development. When both parties understand this, then negotiating compensation becomes a chance to show goodwill and creativity—and also to lay the foundation for a long collaboration that is fruitful for all. 

Get creative. Show a willingness to be flexible. Consider everyone’s longer-term upside. Start new relationships on the best foot, with the expectation that everyone will share in the gains.

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Hope these insights are helpful. 

We at Leyendecker have been doing search work for 40 years. We’ve completed over 100 C-level searches, most for CFOs. Most have been PE portfolio companies, but we’ve also helped owner/managed and publicly-held companies. Our placements have helped their employers go through almost 50 successful liquidity events.  

Keep us in mind when you seek talent that will get you over the goal line! Hope you have a great year!

Doug