A practical guide to salary negotiation

I never really knew how salaries are negotiated. It seemed like Vodoo to me. No one taught me or said anything and I found out quickly during my own career that this topic is Vodoo to everyone - not to be discussed.

So what do we do? As always, we engineer the solution and take the fear away. First, establish some ground rules of what a salary is, then understand why do different people have different salaries, and finally, how to ensure we get the salary we are worth. All this while ensuring no one hates us at the end of a negotiation. Sound awesome? Let's go.

Why is it so hard for people to talk salary?

There are a few reasons. First employers fear salary talk would make employees ask for more money (but their fear is misplaced). As such all employees are asked to keep their salaries private. Then it's a touchy subject to discuss between work colleagues so the whole thing gets shoved under a rug and becomes a forbidden topic. No one talks about it, cause it's just so damn difficult and sensible.

What is a salary?

You might find this funny, because of course you know, but I'll come back to this definition later: Salary is the amount you are paid for the services you provide to the company.

Common misconceptions are that it is a)gift b)mercy of the boss c)luck.

Of course it can be the case, but for most intents and purposes salary is the reward for the work you and your hands do.

Why do some people get paid very well?

I asked this question as a child in the form of: how come some people have money to buy nice cars or have good salaries. Here are a few answers that completely mislead me from the correct one: "Because they steal", "Because they negotiate well", "Because they have rich relatives". If to be well paid, you had to be a sweet talker or be born a prince, then I was out of luck and I had seen plenty examples of rich people who were neither. No, we need to engineer our way to being well paid so we're going to provide a simpler definition: Being well paid is just a result of providing services/goods to the world that the world is willing to pay for. The better/more you provide to the world the more you are paid. Greater your impact, greater reward.

So what service are you providing to be paid?

For myself I figured I'm a software developer: I write software. Therefore I'm developing apps in exchange for a salary. The better I'm at my job the higher my salary.

How to measure being "better" at your job.

Now we're getting to the measuring part. I figured for my own field there's at least 3 positions I can have: Junior, Med., Senior. Junior meant I needed constant supervision (Salary X). Med. meant I could do work, but needed occasional help (Salary 2X). Senior meant I could help the previous two guys (3X). Many employers will have- and If they don't have I highly recommend you having - a scale of sorts to measure employees and their skill set.

After I reached the coveted senior role, with my salary growing from amount X to 3X (3 times X) I figured I take the next step. Next step was leading a team and moving to a more wealthy country. Salary grew to 6X.

The next step would be leading a more prestigious team, or more teams at once - or simply switching to a job where the company gets more value out of my work - so pays me more.

What does this mean for your employer?

Any employer needs to provide a path for employees to grow. What better way to do that than to establish how you measure your employees' performance and how they can get to the next step. Once this is public, salary talk is not Vodoo anymore - everyone knows the work they need to do, to be more valuable to you.

My employer doesn't have a career plan (or never mentions it).

Here our engineering skills come in handy. I report my performance every two months everywhere I go. I set goals for myself - and most of time align them with the company's goals and review them every two months. Even if the company has no plan at all, and many don't, I make sure my own skill set grows at a high speed. My goals are usually, developing faster, less bugs, more releases, more automation, better features. You chose your own goals. I always set goals that look close to or hard to do, I want to challenge myself and I make sure my employer knows about my progress - I schedule my own performance reviews and come well prepared with my successes and failures.

I made my plan, achieved it and employer still says no raise anytime soon.

It's common of employers who are used to keeping this stuff hidden, to not react well to salary or any other type demands. After being shown the progress employers will blackmail you into not getting the salary you deserve - promising future rewards, or reminding you of that nice chair they bought for you. So what are you worth, and aren't you asking for too much anyway, John over here gets half your salary and does twice the work!

What is your worth?

Before asking for a specific compensation for your work, even if it's a lot, you need to have a few offers/near offers that confirm your hypothesis that what you're asking is real, and someone is willing to offer you that salary. No point in telling your boss you deserve salary Z, then him shooting you down and not having the option to go somewhere else for that salary and being humiliated. It's good to have a feel of the Job market at all times - make connections, talk to people.

Don't allow yourself to be blackmailed

I've followed these steps. As said I was receiving salary 6X but the market was offering about 7.5X for my skill set now and I almost had an offer. At renegotiation time - told my employer: "I need salary 7.5X, this was my goal,worked super hard towards it and according to my information this is what the market thinks, so it's fair". Employer refused, which I almost expected. I resigned and moved to salary 7.5X - despite Employer's begging to now pay 7.5X if only I stayed.

I went to Employer2, told them why I left Employer1 in precise details so the story doesn't repeat itself.

Comes negotiation time with Employer2: I figured the market was willing to offer salary 9X for my skill set - lead some teams, did some nice work , spoke at some conferences. So I wrote an email to Employer2 - let's talk in advance so we don't repeat the situation with the first one. I wasn't really looking for the full salary the market was offering, since Employer 2 was quite nice. Employer2 flat out refused, then agreed to insignificant raise, then just like with the first one, having a fallback option I went somewhere else for 9X. Told Employer2 I'm leaving, Employer2 panicked and offered random raises - Which made no sense - it was an act of despair not reward for good work.

Expectation for the future: I expect this situation to repeat itself quite a few times. But as long as you have alternatives you don't need to fear being underpaid. At the same time, your demands must be justified by your skill set and validated by the market's current job offers. Pulling out salary requirements out of the blue is not a sustainable approach.

What does the engineered process look like?

1. You set your own goals and levels to grow through.
2. You challenge yourself really hard every day to be better.
3. You inform your employer accordingly about your intentions and progress throughout your employment.
4. You have a positive impact on the business.
5. If employer isn't willing to pay you what the rest market is willing to, you're being paid less than you're worth - feel free to switch jobs.

What approaches to avoid?

I find that anecdotal approaches like "ask for twice as much as you want to, and hope you get at least 50%" or "say you're leaving while youre really not" are really dishonorable and more importantly unsustainable and unpredictable in their outcomes. They backfire a lot - an employer will understand if you want to do better at your job and be better paid - but he won't be sympathetic to shenanigans used to trick him.

Are my demands too high?

As a seller of services, your goal is to maximize the price for the goods you're selling. It's okay to feel a bit overpaid at the beginning of employment, because as time goes by you will inevitably reach a point when you will be underpaid, as long as you continue to improve. It's okay at that point to consider a renegotiation

Conclusions

So for those of you interested in sustained career growth the plan is simple: Aim for the next position in your field, grow as an employee to be able to do it, then ask to be paid accordingly. Be honest and transparent to your employer and he will appreciate it.

Note: Do not be an asshole to colleagues while trying to achieve your goals. Career growth is almost always about being better yourself - and should never be about defeating others. Politics gets in the way of developing yourself and replaces skill growth with hate and manipulation. Being nice to peers is critical to sustained career growth.