The Power and Limits of Negotiating at the Time of Hire or Engagement

Executives seeking a new role who have made it past the first hurdles of CV, short-list and interview(s) eventually confront the final obstacle: Negotiating an acceptable job offer.

This makes many people nervous, especially those with jobs that don’t regularly involve negotiation.

Experts advise you should be excited to negotiate. If someone is extending you an offer, that means your skills are in demand. Unlike simply getting a raise at your current position, where you might bring in an extra 5%, negotiating a new job offer is one of the greatest opportunities in your career to significantly increase your salary.

That negotiation is a good idea doesn’t mean everyone’s doing it. In 2013, job site CareerBuilder found that half of all workers don’t negotiate their salary when applying for a new job. Other surveys have shown that 15-20% of people never negotiate or make a counter-offer when taking a new position.

Negotiation isn’t a dark art; it can be learned. The purpose of this blog isn’t to teach negotiation, but suffice to say, there are plenty of salary negotiation sites and even courses that can advise on the basics of negotiation.

Contrary to what you may fear, your prospective employer won’t be offended if you negotiate. They may even be impressed! Norms and practices vary by industry and job function, but even so, no matter the role, it’s probably worth not accepting an offer on its face without at least trying to better it. Even if it sounds good to you, the client may have ample room to up their offer and still consider you a bargain.

What actually happens in negotiations? Is it possible to quantify the effect of negotiation on outcomes in hiring? Each hire is a unique situation, and the very nature of negotiation is that neither side is likely to disclose their intentions – their “walk away” price or their “Batna” (“best alternative to a negotiated agreement”) – to anyone, during or after the fact. However, by looking across many recruitment projects and seeing how the salary or day rate achieved differed from what the client envisioned at the beginning, we can begin to get a picture of what happens, what percentage of the time.

Looking at executive recruitment projects Executives Online has executed over the past 10 years, and comparing the expected salary range described at briefing versus what got placed, we see that:

  • In 61% of placements, the agreed-upon salary was within the range originally stated
  • In 24% of placements, the agreed-upon salary was above the range originally stated
  • In 15% of placements, the agreed-upon salary was below the range originally stated

It’s reassuring to see that a comfortable majority of placements happen at salaries which meet the client’s original expectations. This means that the client (perhaps with the recruiter’s guidance) understands the market for talent and has priced the role properly to begin with.

It’s probably appropriate that, if there’s to be a deviation from the salary range quoted at the outset, it’s more likely to be in the candidate’s favour – 24% of placements occurring at higher salaries than envisioned at the start versus 15% below. This is because when briefing an agency, most employers probably avoid over-stating what they’d be willing to pay, in the hopes that good candidates can be found within range – as, 61% of the time, they are – and to keep the recruiter on their toes. Also, it shows that employers prefer flexing on salary to walking away and making no hire; once they've identified the right person for the role, they're willing to go above the range they initially envisioned to get the person on board.

The dynamics appear similar for interim executive roles. If we look at interim management assignments Executives Online has delivered over the past 10 years, and compare the expected day rate range described at briefing versus what got placed, we see the following:

  • In 54% of placements, the agreed-upon day rate billed to the client was within the range originally stated
  • In 31% of placements, the agreed-upon day rate was above the range originally stated
  • In 16% of placements, the agreed-upon day rate was below the range originally stated

The fact that interim management is often a “crisis hire” is likely to be what’s driving the higher percentage of projects placed at rates above the client’s initial expectations. The candidate has more power in such situations.

That the price paid differs from the client’s original expectation indicates that negotiation – or in any case, discussion of that deviation – took place somewhere in the process. Of course, many things besides the candidate’s direct efforts to negotiate can affect that process. The client may change the scope of the role mid-process, necessitating the recruitment of a more senior or more junior candidate. The recruitment process may turn up a true “rising star” or “diamond in the rough”, a candidate who is less expensive than others for any number of reasons, yet possesses the relevant experience and cultural fit to be successful in the role. In rare occasions, a top-end candidate may come along who makes the client see what they can do for the organisation and motivates the creation of a bigger role.

Here’s what we think these numbers mean for managers and executives seeking a new role and the employers or clients who might engage them:

Executives seeking a new role: Always negotiate. You may be among those who secure remuneration that is higher than the client expected, or you may move your pay upwards in the band the client always felt willing to pay. However, do be realistic: Consider when applying for roles whether your desired remuneration generally aligns with the stated salary range, because it’s most likely to end up there, not above. Also, use your executive search consultant. They have information you don’t and you can mine them for clues as to the client’s willingness to pay. Bear in mind that in most cases their primary loyalty is to the client, and that there is probably information they can’t share outright – such as what other candidates for the role sought, and whether there are candidates being kept “warm” until you’re over the line.

Employers looking to hire: Ask your executive search firm how they perform in delivering candidates who are hired within or near the pay ranges specified by their clients. We doubt many recruiters are aware of how their work results in hires and placements that meet the client’s expectation as to price, other than via anecdotal stories. But it’s still worth asking. Contact us to learn how Executives Online can be of help finding your next executive employee or interim manager.

Executives Online is grateful to Jim Hopkinson of SalaryTutor.com for the germ of an idea that led to this blog post, and for some of its content.

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