The Art of Salary Negotiation: A Guide for Executives

By Aaron Cleavinger, MBA, CPSM, C.P.M., Managing Partner, Murdoch Mason Executive Search Group

Does the thought of salary negotiation make you break out in a cold sweat? Are you unsure how to approach the negotiation process without damaging relationships?

Although a crucial aspect of the job search process, salary negotiation can be intimidating for many executives. But it doesn't have to be. In fact, according to a survey by Robert Half, a whopping 70% of hiring managers expect candidates to negotiate their salary. Moreover, 55% of them are more willing to negotiate salary now than a year ago. In many cases, it's not only acceptable, but expected!

As an elite executive recruiter and negotiation expert, I have seen firsthand the impact of effective salary negotiation for executives and companies. When planned and executed well, compensation negotiations solidify commitment on both sides, and allow executives and companies to start working together while focused on the right things.

In this article, we will explore the key aspects of salary negotiation and why it's essential to approach it with a well-informed and strategic mindset. I will also share some insights and advice to help both sides confidently navigate the negotiation process.

Let’s dive in!

Step 1: Preparing For a Successful Salary Negotiation

Before entering a salary negotiation, it's essential to do your research and prepare accordingly. One of the biggest mistakes executives make is not understanding their worth in the current job market.

Do Your Research

First and foremost, research industry benchmarks for executive salaries in your desired role and region. This will give you a general idea of what the market is paying for someone with your skills and experience. Sites like Glassdoor, PayScale, and Salary.com offer salary data specific to job titles, industries, and locations.

But don't stop there – dig deeper into your specific field and company to better understand the market value for your role. Talk to colleagues in similar positions, consult with industry experts, and utilize resources such as professional associations or recruiters for insider insights. As a recruiter, I regularly provide current market pay insights to company clients and CEOs as they recruit leaders for their teams. Reach out to people you know.

Quantify Your Unique Value Proposition

Now that you better understand the market value for your role, it's time to identify and quantify your unique value proposition. What makes you stand out from other candidates? What specific skills and experiences do you bring to the table? How have you contributed to the success of your previous companies?

Be sure to highlight these accomplishments and back them up with tangible examples (in your discussions, in your resume, and on LinkedIn). Numbers speak louder than words, so be prepared to share specific metrics that showcase your impact on the company's bottom line.

Also consider using precise figures. In a series of experiments, researchers found that receiving a precise first offer (i.e. $42,500) versus a round one (i.e. $40,000) led to greater counteroffer adjustments in favor of the offerer. In addition, recipients of precise offers were more likely to perceive the offerer as knowledgeable and well-informed. This is a strategy I use in my negotiation workshops and when facilitating complex negotiations.

Consider the Full Compensation Package

Negotiations shouldn't solely focus on base salary. Consider the total compensation package, including bonuses, benefits, equity offerings, and work location. These can add significant value to executives’ overall compensation and job satisfaction, and they should not be overlooked.

Additionally, think about non-monetary benefits. For hiring managers, highlight the company's strengths and offerings, such as a great company culture, opportunities for growth, or unique perks. Identify your priorities and potential trade-offs for executive candidates, such as work-life balance, location flexibility, or professional development opportunities.

Step 2: Understand Your Options

Now that you've researched and clearly understand your value proposition and desired compensation package, it's time to put on your negotiation hat. While effective negotiations have many different aspects, one key factor is having a strong BATNA.

Understand Your BATNA

BATNA stands for Best Alternative To a Negotiated Agreement. In other words, it's your fallback plan if the current negotiation fails. A strong BATNA gives you leverage and boundaries for the negotiation process.

Leverage Your BATNA

Knowing and leveraging your BATNA can help you set realistic expectations for the negotiation. For example, suppose you have multiple job offers or know other companies are interested in hiring you. You may feel more confident negotiating a higher salary or better benefits, knowing that if you don’t achieve your negotiation aims, you’ll have other offers to fall back on.

It's important to remember that your BATNA should not be used as a threat during negotiations. Instead, it should be seen as a tool to help you make informed decisions and set boundaries.

Examples of Potential BATNAs

For hiring managers, potential BATNAs could include:

• Considering other external candidates who may be a better fit for the role
• Promoting an existing employee to fill the position
• Outsourcing or automating work instead of hiring for the role

For executive candidates, potential BATNAs could include:

• Seeking job offers from other companies
• Remaining with your current employer and discussing options for advancement or development opportunities
• Pursuing additional education or skill development to make yourself more marketable

Whether you're a hiring manager or an executive candidate, it's crucial to continually assess your BATNA. This will give you more confidence in the negotiation process and increase your chances of achieving a favorable outcome.

Step 3: Use Negotiation Strategies to Close the Deal

Negotiations are all about finding a mutually beneficial agreement. It's not about one side winning and the other losing, but rather, both sides feeling like they emerge with a positive outcome. Especially when it comes to compensation negotiations. Don’t lose sight of the goal: to start work in the new role. Here are some strategies to keep in mind during negotiations:

The Power of Anchoring

Anchoring is a powerful negotiation tactic where the first offer sets the tone for the rest of the conversation. As an executive candidate, it's essential to anchor with a solid and well-informed initial salary request. This will set the bar higher and give you more room to negotiate. You don’t have to say your current salary or pay history (in fact, it’s illegal for companies to ask for that information in some places).

The Strategic Use of Pauses

Despite what you may see in movies, effective negotiations involve a lot of listening and strategic pauses. Pausing after making an offer or counteroffer allows the other party to respond and gives you time to assess their reaction. It also prevents you from negotiating against yourself by offering more concessions too soon.

Expanding Value for Both Parties

Negotiations should not be seen as a battle but rather an opportunity to find a win-win solution. This means expanding the value for both parties involved. As a hiring manager, this may mean offering additional benefits or flexibility to an executive candidate to secure their acceptance of a lower salary. As an executive candidate, this could mean being open to non-monetary benefits or finding creative solutions that benefit you and the company. The key is to think outside the box and find ways to create a mutually beneficial agreement.

Step 4: Consider the Company’s Perspective

It's vital to understand and consider the company's perspective in negotiations. Here are some key points to keep in mind:

Recognize Financial Limitations

Every company has a budget and financial limitations. However, this doesn't mean they can't make competitive offers or offer attractive compensation packages. It's important to recognize and work within these limitations while advocating for your value.

Consider Long-Term Value

While focusing on short-term gains during negotiations may be tempting, consider the long-term value for both parties.

As a hiring manager, offering a competitive salary and benefits package may mean investing more upfront. Still, retaining top talent and avoiding costly turnover can save the company money in the long run. And speed to hire can save (or earn) the company much more than any nitpicking in a salary negotiation. As an executive candidate, accepting a slightly lower salary for additional development opportunities or unique perks may bring long-term career growth and satisfaction.

Internal Equity

Most companies strive to maintain internal equity, where employees with similar positions, skill sets, and experience are paid similarly. This means they may have salary bands or guidelines for certain positions. While advocating for yourself is crucial, executives must also understand and respect these considerations. Here are some creative ways to balance internal equity with competitive salaries:

• Negotiate for additional benefits or perks instead of a higher base salary
• Discuss potential opportunities for advancement or development within the company
• Propose a different title or team structure that can align with candidates’ experience and compensation requirements
• Consider a shorter-term contract with performance-based bonuses that can lead to a higher overall compensation package.

Step 5: Keep Emotions In Check

During negotiations, despite our best efforts to remain professional and objective, things can sometimes get heated, and emotions may come into play. It's essential to acknowledge the role of emotions in negotiations. After all, no one wants to feel like they have been mistreated.

Here are some tips to keep in mind:

• Encourage openness to flexible compensation structures. This means being open to discussing different options and finding a solution that works for both parties.
• Highlight the importance of professionalism in negotiations. It's OK to be assertive, but it's important to remain respectful and factual.
• Customize benefit packages for senior executives. Executive candidates may have unique needs that require more flexibility in benefits offerings.
• Remember that rational negotiations can go out the window if either party feels offended. (This happens surprisingly often during the executive recruiting process.) Strive for a feeling of partnership, focused on the common goal of coming to agreement, while maintaining a level head.

Step 6: Effective Communication and Conflict Resolution

As discussed throughout this article, salary negotiations can sometimes stir intense emotions and potential conflicts. So, how do we handle these situations and reach a mutually beneficial agreement?

1. A knowledgeable and experienced executive recruiter can serve as a neutral third party and facilitate communication between the hiring company and the executive candidate.
2. Transparent and explicit communication is key to avoiding conflicts down the road. Be upfront about job responsibilities, expectations, and performance metrics to ensure everyone is on the same page.
3. Clarity is crucial in mitigating conflicts. Ensure both parties understand the terms of the agreement and clearly understand their roles and responsibilities.
4. Use humor. According to research led by Nale Lehmann-Willenbrock at the University of Amsterdam, humor induces positive emotions, which triggers positive communication!

Final Thoughts

Hopefully, this article has given you some good food for thought regarding salary negotiations. Remember, the key is striving for an outcome that benefits both parties, and gets everyone excited about onboarding. If you'd like to discuss this topic in more detail, I'm more than happy to chat. Feel free to message me on LinkedIn or email aaron@murdochmason.com.

P.S. If you haven't already, you can get my insights delivered straight to your inbox. All you need to do is click on the subscribe button on the LinkedIn article.

Thanks for reading, and happy negotiating!