Prepare For Impact
Prior to the actual negotiation, you ought to be clear on three things:
1. Your Maximum Plausible Demands (MPD)
2. Your Minimal Feasible Requirements (MFR)
3. Your concessions strategy
All three aspects will determine the success of the negotiations. They can make all the difference between you coming out of the negotiations beaming while hovering above the ground or like a beaten dog carrying your head under your shoulder. It is key to be specific and as precise as possible on all three of them. The more you are aware of what you want and what you don't, as well as what you are willing to sacrifice, the more you'll be able to make an impact at the negotiation table and to achieve your goals. For now I will focus on the first:
Maximum Plausible Demand - MPD
In a job interview, whether with a headhunter or with some staff member of your potential employer it is likely they will ask you for your desired salary or to share information on your current salary. Be careful here, as this is an opportunity to set the scene for further negotiations but also bears the risk to start off with a concession from your part without any reward. You should rather understand the question as "What do you think would be your worth to the company, if you would fill that role?". It is entirely ok to make a bold statement here. There's still plenty of opportunity to lower your initial demand. You can see it as an initial estimate and also the amount of bargaining chips you bring to the table. This does not mean that you can come up with any fantasy figure. The only limit here is your own imagination: you should be able to give a plausible explanation, why you think that number is right for you. This is how your MPD is different from a mere wish or some fantasy out of the blue: you can give a logical, comprehensive explanation how you arrived at exactly that figure. For example, when you apply for the role of a senior consultant at a consulting firm, you could say, your price is 100k €/year. The next question almost always is "Is that with or without a bonus?". I suggest you go with your fixed salary only, because the bonus programmes of companies can be very diverse. Also this way you don't have to make a lot of assumptions and will be able to settle for the part of your salary with which you can plan.
Your MPD represents your value to the company
With that stated, how do you create your specific MDP? Since we took 100k/year as a MPD, you could argue, that there are 220 work days in the year, you'll be billed on average 60% of the time (which is not too optimistic a figure) and the average rate your company can bill the client according to your level of expertise is around 1500€/day. That leaves your company with 198k €/year as a baseline. The upside could even be significantly higher. Not too bad a margin even after your salary and expenses, right? Your counterpart might reply that your assumptions are not realistic. Great: then you're already entering into a different discussion. The focus will have shifted from your demands towards your assumptions and how to calculate a more realistic figure. This can be a great way to gather all kinds of intel for further negotiations: e.g. what could be a realistic daily rate for the company to charge their clients? What could be a realistic figure for utilization? And so on. Don't let yourself be impressed by whatever information is thrown at you. Chances are people will only do this to see how you react.
You go first, you lose?
There's an unwritten rule to negotiations that you should never be the first to state a figure, because this will give the other side an information advantage.
The first time I visited Hungary after my emigration to Germany, I went to buy some ice cream. I gave the man the equivalent of two Deutschmarks in Forint, the national currency, and asked him -in a very rusty Hungarian- to give me the most delicious flavors he had. I thought ok, two Deutschmarks, that must be somewhere between three to four scoops. He stared at me then at the money and suddenly started to laugh. Obviously I had missed the joke. After his colleague also had joined in and the laughing had stopped, they told me that for that money I could have twenty scoops of ice cream. If the price would have been open for negotiations, or if the ice cream man would have been enough of a crook to rip off a 10 year old, I bet it would have just been a quiet, very satisfying win-win deal.
Personally I never experienced any significant disadvantage by stating my MPD first. I routinely say something like "In that role I should have a business impact for the company of X€/year. Thus I think Y€ would be a fair compensation for my loyal services.". Companies are very anxious to disclose their salary bands, hence usually you should not be able to acquire this information easily, let alone in an application process. What the company or the headhunter might do is to bracket your MDP and say something like "That seems a little optimistic. Our senior consultants usually make around 70k/year on start/average." or "The average/entry salary for that kind of role is 80k/€." If that is the case, congratulations! You've successfully dropped your anchor and the negotiation has started successfully. Enjoy it from here. Use this precious opportunity to work on your skillset and learn to be a better negotiator.
In the next post, I will tell you why and how you should define a minimum feasible requirement (MFP) prior to negotioations. This is the point where you will not make any more concessions in negotiations.
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