Negotiation

Once you’ve made an offer, you should be prepared with a strategy for negotiations and an understanding of how much—if anything—you are willing to negotiate.

Should Companies Negotiate?

danger You want to avoid zero-sum negotiating with a candidate, where each party feels they need to “win” a negotiation. How much you pay someone or what role and title they have should closely reflect their likely value to the company rather than their willingness and ability to negotiate. These types of negotiations, especially if they vary depending on candidate behavior, create a risk of pay inequity and unfairness for everyone. Research shows that the pay gap that disadvantages women and underrepresented people is due in part to how negotiations are handled, the behaviors expected of underrepresented candidates in negotiations, and the pressures they often face throughout the hiring process.

caution Your intention when negotiating might be to try and make things work for the candidate because you value them. But negotiations can send implicit signals that can lead to distrust. By negotiating, are you implying that you don’t actually know how to value the candidate? Or that you do, but are trying to underpay them? Both of those signals can be dangerous in the relationship between a future employee and the company.

controversy Liz Davidson argues that refusing to negotiate salaries is one of the best ways to close the pay gap. If your company has decided not to negotiate salaries, make that clear to the candidate early. Some companies, like Reddit and Clover, have tried a clear “no salary negotiation” rule—this can be a relief for some candidates who would otherwise be stressed about finding the balance between negotiating too hard or not hard enough. But you have to really commit to it. A no-negotiation policy can also be discriminatory if you’re not careful. If you tell candidates that you don’t negotiate, but then allow for exceptions with candidates who are outspoken enough to negotiate anyway, the end result could also be that you end up paying unfairly.

Some companies allow some room for candidates to negotiate, but will increase the compensation of candidates who don’t negotiate to the same level as those who do after offer acceptance.

How Should Companies Negotiate?

A common refrain among companies is that they have to allow negotiations because negotiating offers is so pervasive in the industry. Some of these companies even lower the offers they extend by some margin to account for that negotiation (this is sometimes known as “low-balling”). We don’t think “everyone’s doing it” is a good argument when it comes to practices that can lead to unfair outcomes. Instead, consider the following:

  • As a company, do your research, survey the market, and really understand the market for compensation. Have an opinion on what’s fair, and a way to map roles to compensation, and make sure that your hiring process is mapping people to the right roles and the right levels.

  • Be as transparent as you can with candidates about your compensation philosophy. A good rule is: are there any pieces of information this candidate might discover in the future that would cause them to feel unfairly treated, bitter, or resentful? The industry is trending toward more transparency around pay,* and the cost of paying all of your employees fairly is miniscule compared to the trust you can lose if you don’t.

  • Be thoughtful about when and how you first discuss compensation, and make sure you understand the candidate’s needs and preferences.

  • Use equity as a lever when possible, especially for startups. Explain the value of equity clearly. As discussed in our section on compensation, you might allow candidates to trade between equity and cash, depending on their needs.

  • It’s normal to have practical needs around income and compensation, but mostly, people just want to be compensated fairly. You and a candidate working together to find creative ways of making things work will feel very different than an adversarial negotiation.

caution Although you want nonconfrontational negotiations, also be wary of judging candidates for negotiating hard Judgements like “They’re being too aggressive,” are often themselves applied with bias.

Studies have shown this influences the gender and Black-white pay gaps.**

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If you’ve done all of the above, and you have a concern about how a candidate conducts themselves in a negotiation, it’s best to get feedback from others present in the room. Does this indicate something about their personality, their values, or their priorities that you missed earlier, or are they simply being reasonable but firm negotiators? Ultimately, even if you are fair, transparent, and disciplined about your compensation, you will still find situations where there is a gap between what you offer and what the candidate is willing to accept (or what another company is offering them). Try to understand whether there is a problem with your compensation framework, whether a competing offer is off the mark, or whether you’re looking at a candidate with a unique situation. If it’s the latter, be aware of the cost of bending the rules for exceptional cases. Is this candidate truly exceptional and worth bending the rules for, or are you simply bending them because they are a good negotiator? Are there other creative ways you can find that can fulfill the candidate’s needs, without jeopardizing the integrity of your compensation structure?

If you’re caught in a situation with a candidate who has (what you believe to be) a disproportionately high competing offer, be careful about how you proceed. These battles are tough to win. If you attempt to match the competing offer and end up winning the candidate, you might end up doing more damage to the fairness and integrity of your incentive system—is this employee now being paid a lot more than his colleagues at the same level? You may want to ask why they think the competing company feels like they need to compensate candidates so disproportionately, but be careful about undermining their other offer. Don’t be petty. (Perhaps the candidate believes your offer to be disproportionately low.) If the candidate is considering a high competing offer, you can ask them how important compensation is to them (even if you’ve discussed it already), with the goal of figuring out if there are other areas where adjustments that matter to them could be made instead. If you don’t have the funds to offer a higher salary, are there benefits that could be afforded them, or a higher percentage of equity with an adjusted vesting schedule?

The Candidate’s Perspective on Negotiations

candidate Before accepting any job offer, you’ll want to negotiate firmly and fairly. You’re planning to devote a lot of your time and sanity to any full-time role; help yourself make sure that this is what you want.*

It’s perfectly natural to be anxious about negotiations, whether you’re going through this process for the first time or the tenth. There is a lot at stake, and it can be uncomfortable and stressful to ask for things you need or want. Many people think negotiating could get the job offer revoked, so they’ll accept their offer with little or no discussion. But remember that negotiations are the first experience you’ll have of working with your new team. If you’re nervous, it can help to remind yourself why it’s important to have these conversations:

  • Negotiations ask you to focus on what you actually want. What is important to you—personal growth, career growth, impact, recognition, cash, ownership, teamwork? Not being clear with yourself on what your priorities really are is a recipe for dissatisfaction later.

  • If you aren’t satisfied with the terms of your offer, accepting it without discussion can be tough not just for you but for your new company and colleagues as well. No one wants to take on a hire who’s going to walk away in just a few months when something better comes along. For everyone’s sake, take your time now to consider what you want—and then ask for it.

  • The negotiation process itself can teach you a lot about a company and your future manager. Talking about a tough subject like an offer is a great way to see how you’ll work with someone down the road.

A Guide like this can’t give you personalized advice on what a reasonable offer is, as that depends greatly on your skills and experience, the marketplace of candidates, what other offers you have, what the company can pay, what other candidates the company has found, and the company’s needs. Negotiations are full of pitfalls and unconscious bias, and they work differently company to company. All candidates should take the time to understand their worth and the specific value they can add to a company, so that they are fully prepared to negotiate for a better offer if need be.

  • Do you have the right expectations? Have a good understanding of what you want and need (in cash and/or equity, as well as benefits), based on your personal situation and on market rates. You can use tools like Glassdoor to research typical compensation for your role or company (though of course, companies can have very different compensation philosophies).

  • Having offers from other companies can also help you understand market rates and provide negotiation leverage, if needed. Candidates with competing offers almost always have more leverage and get better offers. If you don’t have any other offers, Levels.fyi is a great tool for understanding industry standards. You can also get this information from mentors and peers from your industry.

  • What’s the company policy? Find out the company’s policy on compensation and negotiations, by asking them directly and double-checking by doing research. First, decide whether you agree with those policies. Are they fair? Are they thoughtful? Do they change your perception of the company? If they do negotiate, the usual advice on negotiations applies. If they don’t, at least you’ll have certainty that you’re not being taken advantage of.

  • Is this a startup? Salaries at startups are often a bit below (or a lot below) what you’d get at an established company, since early on, cash is at a premium. For very early-stage startups, risk is higher, offers can be highly variable, and variation among companies will be greater, particularly when it comes to equity.

  • The dominant factors determining equity are what funding stage a company is at and the role you’ll play at the company. If no funding has been raised, a higher percentage of equity to cash may be required. Once significant funding of an A round is in place, most people will take typical or moderately discounted salaries. Startups with seed funding lie somewhere in between.

  • Many companies will give some leeway during negotiations, letting you indicate whether you prefer higher salary or higher equity.

  • Am I being treated fairly? Hopefully, the company is working hard to ensure that all candidates are given equal treatment in the hiring process, but inequalities may persist. Workplace disparities in pay and opportunity span race and gender, with research focusing on inequality in the U.S. workplace, the technology industry, and executive leadership and its well-documented lack of diversity. In negotiation itself, gender bias is an issue, where women are often made to feel that they shouldn’t ask for what they deserve. According to research at MIT Sloan, there are a number of discriminatory practices in negotiations that have contributed to the Black-white pay gap. If you believe you are being unfairly discriminated against in an offer negotiation, Time offers a number of options for recourse.

contribute We hope to provide more resources for those experiencing discrimination in negotiations soon. Please reach out if you have anything to contribute!

Harvard Business Review has a useful set of negotiation tips for candidates.

Our Guide to Equity Compensation has additional coverage of negotiation for companies and candidates.

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