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The Four Essential Numbers in Negotiating Salary


Robby

A lot of people here in Indianapolis ask me for advice when seeking jobs, or when hiring employees. Among the most common questions I get is: “How should I negotiate the salary?”

The short answer to this question is that in an ideal world, this is not really something you should have to negotiate. (And if you do, ensure you make that negotiation not a negotiation.) Work is something you do that has value in the marketplace, in the same way that produce is fruit that has value in the grocery store. Employers and candidates should look to the market to set prices. But that’s not how it works (at least not until you make it that way.)

So how should you negotiate? Start by writing down four numbers.

Numbers on Cups
© Flickr User crobj

The Amount You Make Now (Or At Your Last Job)

Everyone has salary expectations, and those start with whatever they are currently making. Or if you aren’t currently employed, you might look at what you were paid in your previous position.

The reason you need to write this number down is because you probably want to move up. You want to make more money, so you need to know what you’ve earned in the past. Or, if you’d like less responsibility, you can use this as a frame of reference

Now, once you’ve written down that number you need to cross it out. You need to forget it. Because the amount of money you made before has nothing to do with the next job. They aren’t related, just like the last roll of the roulette table has nothing to do with the next roll.

Why not? We’ll get to that in a minute.

The Amount of Money You Think You Deserve

Look in the mirror. You’re special. You’re hard-working. You’re detail-oriented. You know about all of your past accomplishments and the great work you’re going to do. So it’s time to write down how much somebody should pay you to pour your heart and soul into their enterprise.

Got that dream salary written down? Great! Now cross it out. What you think you should be paid has nothing to do with the negotiation process.

Why not? More in a minute.

The Stated Amount of the Offer

Here’s one you probably won’t have to write down because it will be printed in the offer letter. But you may hear a number in a phone conversation or during the interview itself. It might be a range between X and Y dollars.

But what should you do with it? Cross it out. Yup, the amount that they offer is not relevant.

Numbers
© Flickr User andymag

The Value of the Position to the Company

Here’s the only number that matters, and it’s the hardest one to determine. You need to know how much value that the job itself—if done correctly and completely—will bring to the business.

In some cases you can figure this out directly based on revenue. If your job is to sell widgets, then you should be bringing in enough total sales to cover the cost of the widgets, plus your salary, plus company profits. A similar argument can be made for marketing. If you’re in customer service, you can tie it to the value of retaining a customer.

If the role is not directly customer facing, it’s good to look on the open market. What are other companies paying for this role? Or if it consists of multiple skills from different disciplines, how can you reasonably combine and/or average them? Websites like salary.com can give you more information, as well as other job postings.

Four Numbers, But Only One Matters

Ultimately, the conversation should never be about “This is how much I’m worth” or “This is what I get paid now” or “This is what you’re offering.”

Rather, it’s about “what is the value of this work to the company?” If you had to outsource it, what would you pay? If other employees had to cover the work, how much would the overtime cost? If it’s not done, what does the company lose?

The salary is not about you, the candidate. It’s not about the hiring manager or business owner’s budget. It’s purely about the marketplace. There is value in work. We just need to compute that value, and determine if an individual person is a good fit to provide it.

No other number matters.

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About the Blogger: Robby Slaughter is a productivity speaker and expert. He is a principal with a AccelaWork, an Indianapolis consulting firm.

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