How to Negotiate Compensation: A 5 Step Framework

You're leaving money on the table if you bring up salary in your first interview.

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Here's why:

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A job search is a sales process.

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In any sales process, you need to go through the following stages BEFORE you can come up with a fair price.

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1. Value:

Understand the value you can create if you execute well on the buyer's desired goal

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2. Process:

Understand IF you can execute well on the buyer's desired goal

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3. Alternatives:

Understand what alternative options your buyer has if they don't hire you

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4. Budget:

Understand if the buyer has budget to hire you.

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5. Alignment:

Mutually agree on 1 through 4

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6. Only at that point, state your price.

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For example, let's say I was selling myself for a marketing role at a company.

Here's how I would do this:

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1. Value:

I would first understand what I'm being hired to do. If I'm being hired to market a product and there are 10,000 users we expect to buy the product at $1000 each, the value I can create is $10MN.

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2. Process:

I would then understand whether I can actually deliver on this result.

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Specifically, I would try to understand the steps (A through Z) that need to happen for me to do the role well.

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This may include understanding the target market, growing the product to XK users through content marketing, etc.

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Obviously, it's hard to know for sure if I can execute, but by clarifying the high level steps and thinking through whether I've done something similar in the past, I can come up with a reasonable estimate.

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3. Alternatives:

I would then understand how the company is thinking of solving this problem without me.

For example, If the company is considering hiring someone who is 1/10th my current salary, then I'm going to have a hard time convincing them to hire me.

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If on the other hand, this is a role where few people can execute well, then I know the company has limited options.

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4. Budget:

I would then understand if the company has enough money to hire me.

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5. Alignment:

I would then make sure the company and I are in alignment on 1 through 5.

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Here's an example of what this could look like:

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Candidate:

I've really enjoyed speaking to you so far and learning about this role!

I wanted to clarify a few questions I have after learning more about your needs.

It sounds like this person could create $10MN in net profit by doing this role, right?

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‍Company:

Yes, that sounds right.

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‍Candidate:

Awesome!

Here's how I'd execute on this [explain process].

Does this seem like a good game plan or would you change something?

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‍Company:

I think we'd need to do X step too.

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Candidate:

Great! Well if we made that change. Would you feel like the game plan works well?

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Company:

Yes

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‍Candidate:

I've done all of these steps before for previous employers.

Do you have any concerns about whether I'd be able to do it for you too?

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*To sell well, you always want to understand your employer’s “objections” to hiring you. This gives you the opportunity to address those objections. If you don’t hear “objections” during an interview process, it’s probably because you’re not asking for them and/or you’re not making your interviewer feel comfortable enough to share them

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‍Company:

I think Y would be difficult.

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Candidate:

That makes sense.

Couldn't we try Z if that didn't work though?

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Company:

Yes, actually. That's a fair point.

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Candidate:

Great, so how do you feel about my plan to execute on this on a scale of 1 to 10?

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Company:

I feel good. I'm at a 9.

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Candidate:

What would make it a 10/10?

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Company:

I want to learn more about your ability to do Z.

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Candidate:

Great. Well here’s a little more information on that. Does that help?

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Company:

Yes. That’s useful.

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Candidate:

Great! I have to ask, I'm sure I'm not your only option. Are there others you're considering?

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Company:

Yes, but to be honest, no one has gone into as much depth as you have so I'm not even sure we have anyone that could execute as well as you.

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Candidate:

If we didn't decide to work together, how would you plan to solve this problem anyway?

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Company:

It would be tough. We'd probably have to spend another 3 months searching and it would push back product timelines.

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Candidate:

And what would that cost you?

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Company:

Well, this is a timely opportunity so we could lose millions if we executed late. We also spend $XXK a month on recruiting fees so that adds a little more to costs.

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Candidate:

Got it. Thanks for sharing. So the next best solution costs about a few million?

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Company:

God.. when you put it like that.. yes. I haven't thought about it that way.

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Candidate:

Haha - I understand. I agree that the opportunity is time sensitive - that's what makes me all the more excited to work on it!

Do you mind if we talk about company finances a bit? Is there a specific budget this department is currently allocated?

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Company:

Yeah. We're fairly well capitalized. I can't share specifics though.

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Candidate:

I totally understand. I know you guys just raised a series B, so I think that's a testament to how well positioned you guys are to tackle this market anyway.

Do you mind if I summarize where we've gotten so far in this conversation?

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Company:

Yeah - go for it.

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Candidate:

So it sounds like the potential value we're looking at here is $10MN in profit and it sounds like we're aligned on how I'd deliver on this.

Is that right?

It also sounds like the next best option (which is to wait and find someone else) would cost a few million (in addition to the compensation you pay them).

Right?

It also sounds like you guys are really willing to invest in the right person here to make this work.

Right?

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Company:

Yes, that all sounds right.

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Candidate:

Great, well I'm currently looking at roles that are in the $600K in annual compensation range.

I don't want that in cash - I want to take some risk here and make sure I have skin in the game, so a base of $200K would be reasonable and then we can figure out the specifics on equity and bonus.

Does that sound fair?

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*The price you ask for should always be a fraction of the value you could create. This is modeled off a role we got an exec with 10+ years of experience at a Fortune 500.

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Company:

That's double what we were thinking for this role.

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Candidate:

Totally understand. But is it unreasonable given everything we've spoken about?

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Company:

‍No. Well. Yes. I need to think about it.

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Candidate:

I totally get it's out of budget and I don't want to do this if you're not super excited about working with me.

Can we chat about what concerns you have?

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Company:

Yes, well. I'd need to check in with X person to see if we could even approve a budget like this for the role, and I don't know if he'd be ok with it, even if I was.

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Candidate:

Ok great, thanks for sharing. And can you think of some reasons they wouldn't be ok with this budget?

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*Asking this question gives you the opportunity to find out what concern the interviewer you're speaking to has. Sometimes, by asking what another person's objection might be, you'll actually get to hear this person's objection.

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Company:

Well yes. I think they'd have an issue with X part of your game plan. It's hard to know if that would work.

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Candidate:

Totally understand. Well, keep in mind, I'm not looking for all of this upfront, right? We'd be able to figure out pretty quickly if the game plan is working and if it wasn't, we'd move our separate ways, right?

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Company:

That's fair. Hmm, let me circle back with X and get back to you.

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*Ending the call here wouldn't be the best idea because people get busy after calls and may not follow up. It's always best to try to lock in the next step while on the phone call

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Candidate:‍

Can I propose something?

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*To sell well, you always want to be leading the conversation WHILE making sure the other person feel’s like they’re in control. Asking for permission to propose something achieves both those ends.

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Company:

Yes, of course.

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Candidate:

Do you have visibility on X person's calendar?

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Company:

Yes.

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Candidate:

‍Could you have a look at it and could we just lock in X time on Y day? I'm personally pretty busy these next few days and want to make sure I block in time for this instead of having to figure things out over email.

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Company:

Yeah - he's free then. Let's do it.

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Candidate:

Great, and even if you don't want to do this, could you still come to our call?

I don't want compensation to stop us from going forward, but if it did that would be 100% ok with me.

I've still very much enjoyed meeting you guys and would love to end on a good note and share some resources.

Remember X part of the game plan you liked?

I'd be happy to show you guys how to do it on that call so at least you get something out of it even if we don't work together?

Does that sound fair?

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*This is very important. People are generally uncomfortable making buying decisions and will do everything they can to avoid making an investment, regardless of whether it benefits them. For that reason, always incentivize hiring managers to come to the next call by making it clear that you will not be offended if they don’t want to hire you AND by baiting them with some value.

Doing this gives them the space to think about other reasons hiring you is a bad idea and gives you the opportunity to address those concerns on your upcoming call (instead of being ghosted or rejected over message).

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Company:

That sounds like a great plan.

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Candidate:

Great, talk soon. Thanks again for taking the time to chat and I'm excited to talking again to see whether we should work together.

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Here’s a few final notes as you reflect on this and how it applies to your own job search:

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1. You'll always need to work hard to get this information and often won’t get all of it - sometimes companies won't know answers to questions like "value." Sometimes they will but they'll need your help to connect the dots. Other times, they will have answers but won't feel psychologically safe enough with you to give you honest answers - This is especially the case with questions where you ask them how they feel about your candidacy - not everyone is comfortable giving negative feedback.
2. If you struggle to stand up for yourself and negotiate or are bad at discussing money because of psychological biases, hire someone because you could be losing hundreds of thousands of dollars over your career.
   
   It doesn't need to be Relentless (although if you hired us, you’d work directly with me on negotiation and it would be a blast! Link to apply).
   
3. If you find out that the potential value of the role is low, or that you can't deliver for the role, or that they have better options than you, or for any reason it's just not a good fit, find a better opportunity.
   
   Trying to sell someone who isn't the right fit doesn't help you or your buyer.
   
   The point of a job search is to find a buyer that gets more from the relationship than you do (so you can create a return on investment) and who pays you enough so that you feel like you're getting a good deal too.
   
   There are plenty of potential buyers out there. If you're not meeting enough, figure out how to get more interviews or hire a provider to help you get interviews.
   
   (Hint: Relentless has built a product for interview generation and can probably help - Link to apply)
4. Getting the company to see an ROI on hiring you helps, but at the end of the day humans are human. You need to connect emotionally and build rapport with the hiring manager to close any deal.

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Lastly, remember that sales, the job search, life, it's all hard.

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But challenges are exactly what makes life meaningful and exciting.

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So keep going.

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I hope you found this article as valuable as I enjoyed writing it.

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-Kareem

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