 | |
|
SALARY EQUATION GOLD MINE: EXPANDING THE MARKET VALUE FORMULA This article expands the formula for Market Value found in Negotiating
Your Salary: How to Make $1000 a Minute.
The Compensation Formula in the book has three factors: Objective Value,
Individual Value, and Risk Factor Dollars. Recently, Benefits and Perks can
make up a substantial portion of total compensation, so the formula can be
better expressed as an equation with FOUR factors: ORV$ + (IV$ + B/P) + Rf$
= a good salary.
I call it the "salary-equation gold mine" because each one of those elements can contain value-nuggets to boost your income, but you have to dig below the surface to find them. Let's explore all four factors and how to mine them. If you've waited until you've heard an offer, they want you! That emotion drives the negotiations in your favor. That's what you want. Now, beyond emotions, you need to give them some REASONS why they should pay you more. Okay. Here's the plan. PLAN PART I ORV$ First present your best case for your optimal Objectively Researched Value [ORV$]. "A rising tide lifts all boats." By raising your starting point to as strong and lofty level as possible, you optimize the three other factors of ORV$ -- stands for "Objectively Researched Value." It's the average market Value, what they'd have to pay anyone to take the job. IV$ -- your Individual Value -- what you bring that the average candidate doesn't. B/P -- Benefits and Perks that can sweeten an initially sour deal. Rf$ -- Risk Factor dollars. Performance based compensation. ORV$ Companies set their compensation guidelines through a process called “benchmarking.” This is done by first researching what similar companies in the local market pay their employees and then adjusting those rates to meet the company’s needs. As we've covered before, policies differ. A new company to the area may set their compensation at 10% over local market rates in order to attract highly skilled candidates. While another company in the same market may set their compensation rates at 5% under market rate, because they have a reputation for being a great place to work. A third company may set their policy at market rate for most positions, but above market rate for key positions that it is looking to fill. In the days before the internet, most candidates did not have access to this benchmarking information. Today you're on a level playing field with the employer. A PayScale.com or Salary.com report is a top resource for this. It's one thing for you to share your own opinion about the position's relative worth; it's quite another to bring in a documented analysis, adjusted for regional cost of living, that shows people's earnings for your type of work. In addition to these two services, check chapter 5 in Negotiating Your Salary: How to Make $1000 a Minute for full a compendium of resources for this. This forms your baseline; the next step will build on it. PLAN PART II, IV$ Search out your Individual Value. Here's eight starting points: experience, connections, proprietary ideas, previous performance, flexibility, stability, resource assembly, enthusiasm -- anything that makes you worth more than the competition. I have coached hundreds of people from all walks of life and all levels of responsibility. Over and over we've been able to enhance offers. You're welcome to use me that way, too [see note at the end of this report for more info about my coaching.] Meanwhile, I'll give you examples of people who've improved offers by one or more of those categories. EXPERIENCE. Bill, an accountant, had 10 years' experience totaling 1,200 work-outs with the IRS. He knew the formulas, procedures, IRS policies, internal unpublished guidelines. The accounting firm he was joining worked with troubled companies and individuals. Since he could handle twice the number of cases in half the time, experience added $50,000 to his compensation in the form of salary and bonuses. **Will Your Experience Bring In Extra Value? CONNECTIONS. As past president of S.H.R.M., Jill knew 300+ H.R. Directors in the city. She earned very high marks for her capabilities during her tenure as president. Even though she was not going to be a first line salesperson in this HR consulting firm, her reputation would help salespeople close new business that other candidates couldn't. Result $35,000 over ORV$. **Is Who You Know Worth Something? PROPRIETARY IDEAS. This purchasing manager, Bob, had an idea: source specific niche products from China. He knew that he could cut off 85% [yes! 85%!] of the cost of cast-iron components if they fit a manufacturing profile: 1-they weighed between 25-150 lbs., 2-had tolerances and specs that were in metric measurements, and 3-could be ordered in lots of 5000 pieces or more. In addition, Bob's wife could speak [Mandarin] Chinese. He also knew which factories produced quality work and which shops were sloppy. This cost-saving idea earned him a bonus 25¢ on every piece the company ordered. Only two-bits? Don't laugh, it added up to big bucks. **Do You Have Proven Ideas that Add Value? PREVIOUS PERFORMANCE. Nate had four awards for website design: 2-innovation, 1-Aesthetic/Beauty and 1-clarity and navigation. These awards added $18,000 over ORV$. **Awards? FLEXIBILITY (Single…) Acme Ad Agency in Chicago had far flung clients on the East Coast. The A/E for these accounts would spend 85% of the time on the road. After losing three A/Es in four years because of the brutal schedule, the president was particularly excited about Fred: a single, mature, gay man who loved "Antiquing" in the New England area. He easily negotiated an "excess Travel Compensation" payable in a way that rewarded longevity on the job. **Does Your Personal Life Style Offer Competitive Advantages? STABILITY (married…) OTOH, after three "singles" left the association for more exciting venues, Jill and Jennifer applied to job-share the position. They'd both co-manage the membership function. Some weeks Jill would work 30 hours and Jennifer 10; other weeks were the opposite. This combination had a price tag $10,00 higher than the original position. Both Jill and Jennifer were married with children and flex-times allowed them to work and still be "mom." Neither, individually, could offer the stability the director wanted, but together they exceeded the stability specs and the extra money he put in their paycheck(s) was quickly returned by better service (and therefore retention and recruitment) of members. **What Stability Factors Can You Offer? RESOURCE ASSEMBLY As a fundraising event planner, in a few short years Bill had made it his business to get to know an impressive list of ancillary service providers: caterers, ice sculptors, gourmet chefs, printers, banquet hall decorators, hall rental agents, DJs, copywriters, etc. He also knew which ones were sympathetic to which causes and issues and therefore who might be likely to donate all or part of their services when needed. The resources he could assemble to produce events saved money and brought in more donations than any of the other candidates for the job. The event planning firm paid him a cut above the ORV$ of an ordinary event planner, **Can You Save Your Company Money in Special Ways? ENTHUSIASM Susie was a spark plug! She ignited enthusiasm all around her. Her talents were not significantly better than average, but her dedication, passion, commitment, and enthusiasm for the job made her a top candidate. When her employer offered ORV$ + $5,000, she said. "I think my work will be as good or better than average, and more than that, I believe every one else I meet will do better in their work because of my energy. What's the best you can do for someone like that?" [Ans.: ORV$ + $10,000] **Can You Sell Enthusiasm? So, you may be thinking, "Gosh, those are interesting examples, but I don't have 1200 IRS work-outs, 400 H.R. Directors, fluency in Chinese, National Awards, a fat rolodex of contacts, or boundless 'spark plug enthusiasm' to bargain with." I understand. It's unlikely you match these examples exactly, still the categories should help you brainstorm, "What do I have that's special?" so you can creatively sleuth out your own IV$. If you can't think of any IV$ items that will directly bump your salary up front, how about ones that will bump it either indirectly (B/P, Benefits) or later (Rf$, Bonuses)? PLAN PART III: BENNIES AND PERKS Read through this list of Bennies and Perks. I'll follow with a couple examples of enhanced offers using them. I. BASIC COMPENSATION Base salary, Sales commission, Bonuses II. BENEFITS Vacation time, Sick days, Wellness days, personal days, flextime, COLA Insurance: Life, Medical, Dental, Disability, Malpractice / Liability Insurance III. PERQUISITES Financial: --Profit sharing --Financial-planning assistance --Stock options --Pension plan --Tuition reimbursement --Matching-investment program (401K) Services / In-Kind compensation: --Client Entertainment budget --Laptop / Notebook Computer --Cell Phone --Internet Access (DSL/ISDN/Cable...) --Legal assistance --Day Care --Parking Monthly Fee --Country-club membership --Special training courses --Luncheon-club membership --Deferred compensation --Athletic-club membership --C.P.A. and tax assistance --Consumer-product discounts --Executive-dining-room privileges --Company car or travel allowance --Professional- and trade-association dues --Room and Board (especially if the company owns property) IV. RELOCATION Moving expenses, Closing costs Mortgage-rate differential Mortgage-prepayment penalty Real-estate brokerage Trips for your family to look for a home Lodging fees while between homes Shipping of boats and pets Installation of appliances, drapes, and carpets Low interest loans for down payment V. MISCELLANEOUS Annual physical exam Special training courses Severance pay Starting date Future salary reviews Office space; equipment, software, Secretarial and support staff Outplacement assistance upon termination Overrides on others’ performance Time for and expenses of attending trade shows and national conferences PLAN PART III EXAMPLES A librarian negotiated a $50,000, 40-hr/wk job to a $50,000, 20-hr/wk job by promising to upgrade the skills of the four clerical staff and thereby provide overall better service even though only working 1/2 time. A corporate trainer negotiated an extra week of vacation by requesting attendance at 3 conventions/year with one comp-time day for each convention day -- she stayed in the convention city for two days plus the weekend. A home office added $10,00 tax free to Brian. Instead of paying $1000/month office space, he remodeled his basement on the business' dime. A school social worked added 20% to a "take it or leave it" offer by discussing the stipend for the school A/V & Computer Equipment coordinator. Watch how even a few simple bennies can add up to megabucks Non-Cash Compensation Additional Value/Year:
+$600 Company Supplied Cellular Phone +$900 Company Supplied
High-Speed Internet
+$1,200 Company Supplied Laptop +$1,000 Per Extra Vacation Week (2% of salary = $1,000 @ $50K) +$2,100 Monthly Parking Fee +$5,000 25% Child Care Reimbursement +$1,200 Health Club Membership TOTAL:
+$12,000 -- Total Additional Value to Package I could continue, of course, but I think I've made my point: a dollar is a dollar no matter where it comes from. PLAN PART IV: RISK FACTOR DOLLARS Compensation has become more and more performance based over the last 10-20 years. If you are a performer, that's good news, eh? Any time you can measure the success of your job, and especially when that success is tied to money, sales, income, profits, etc., you have the makings of a bonus. Bonuses are paid out of imaginary money. Imaginary money is often much easier to give away than cash from the bank. Think of this proposition: If I could make you a dollar that you'd never see without me, would you be willing to share a dime of it with me? Whether or not you were able to a satisfactory package out of ORV$, IV$, and B/Ps, you can always ask for a bonus. A purchasing manager asked for a bonus of 2% of the amount he saved the company compared to last year. A salesperson asked for a special bonus if she achieved 150% of plan. A waitress asked for a $25 bonus each night her dessert orders exceeded $300. An engineer requested a $10,000 bonus for each patent filed and $25,000 for each one approved. There are hundreds of ways to get your share of "imaginary money." Use your imagination. ONE LAST PART OF THE PLAN: WALK-AWAY NUMBER. Ultimately, the final leverage, and really the only leverage you have is to walk away. I recommend you decide that number before you enter into negotiations. If you have covered all four elements of the salary-equation gold mine and haven't reached an agreement that satisfies that low-ball number, you'll walk away. There are ways of walking away that do not end the negotiating process. Check out chapters 7 & 8 in Negotiating Your Salary: How to Make $1000 a Minute. OTHER WAYS I CAN HELP YOU MAKE MONEY: Coaching Congratulations. With the four step plan and the salary-equation gold mine, you are well equipped. I hope this has been helpful. AND there's another way I might be of help.
My business is to help people prosper in their careers. I've mentioned
before that people of all professions, levels, experience levels, and
educational backgrounds have called on me to help them get the best
compensation possible. Sometimes they need a lot of planning and strategy;
other times all they need is a little extra courage and confidence. If you
think you might make more money by being coached by an expert, contact me:
jkchapman@aol.com, or 847-251-4727.
|