How aggressively should you negotiate the terms of a job offer, especially in a tight job market like this one? It’s a question that leading business schools in the UK and Europe are attempting to answer for their MBA students, in the wake of complaints from on-campus recruiters.
Apparently, some of the candidates who received job offers pushed too hard for fat salaries, ignoring other areas of compensation for which companies often have more flexibility.
Now the schools are expanding their classes on negotiating skills, to help candidates get better deals without annoying prospective employers, according to an article in the Financial Times.
Shifting the focus from basic salary can help both sides. First, because employers don’t like to set precedents when it come to base salary. Second, because other perks, from transportation to wardrobe allowances, relocation and housing expenses, and even private school allowances for kids, can often be more personal and meaningful (and easier to grant).
Of course, the biggest mistake you can make is not negotiating at all. When times are hard, candidates tend to give in more quickly, according to Daniel Porot, who teaches salary negotiations at IMD in Lausanne, Switzerland, and the London Business School. But this sends the wrong message. You should instead be emphasizing your unique abilities and the specific value you bring to the firm. Some other tips from the article include:
Seize the day: you’ll never have as much negotiating power as the moment you receive your investment banking job offer. Employers expect you to negotiate, and will not balk if you ask for a couple of days to think about things.
Do your research. Make sure you know what type of compensation other professionals in your niche and with your experience are earning.
Do not attempt to bluff an employer by claiming you have a competing offer, if you don’t. However, if you have a high-paying offer for a job you don’t want as much, you can make a strong case for matching that amount.
Practice your negotiating with a friend. Ask a friend or colleague to role-play as to how the discussion might go.
Don’t obsess over salary. As mentioned above, it’s often easier for an employer to be flexible on the perks rather than base salary.
Finally, think about negotiating to negotiate later. If you can’t get everything you want, one option is to agree to a compensation review at the six-month mark, after you’ve demonstrated your value to your new employer.
As major banks get set to hand over billions of dollars in bonuses to employees, despite much public indignation, the Times Online UK examined whether these types of incentives really do what they’re supposed to: namely, prevent top employees from leaving.
The article quotes Geraint Anderson, the author of Cityboy: Beer and Loathing in the Square Mile, and a former utilities research analyst at Dresdner Kleinwort, offering the traditional viewpoint: “The simple fact is, you go into the City to make money. Firms are hiring at the moment and staff will leave if they are not given bonuses. The banks will show staff no loyalty in bad times, so why should staff be loyal in return?”
However a new book by Boris Groysberg, an associate professor in organizational behavior at Harvard Business School, suggests otherwise.
Groysberg analyzed 1,000 “star” analysts at 78 investment banks, along with 20,000 non-star analysts at 400 firms. His surprising conclusion: “Exceptional performance is far less portable than is widely believed. We found that mobile stars [bankers who leave one company for another] experienced an immediate degradation in performance that persisted for at least five years. Thus their exceptional performance at their prior employer appears to have been more firm-specific than is generally appreciated … Banks behave as if stars deserve and should appropriate all the value they generate, but stars without the companies they work for might not be stars.”
Jeremy Batstone-Carr, the head of private client research at Charles Stanley stockbrokers, goes a step further. He suggests that bonuses ” are paid out not when a company is doing well but when it looks as if a company is doing well; they reward short-term performance; they reward people who are just lucky to be in the right place at the right time; the “performance” element of a performance-related bonus is entirely subjective; bonuses cease to be effective after a while because people come to expect them, like a salary.”
Nevertheless, bonuses are not likely to disappear from the banking industry anytime soon. Not because they’re deserved, but because bankers, even if they secretly admit they are grossly overpaid, understand that if they don’t grab their share, somebody else will.
As a friend of the article’s author notes, “With only a very few, seriously deluded, exceptions, no one believed that we were worth the equivalent of 100 teachers or 50 doctors … We all knew it was absurd … but if we didn’t take as much of the cake as possible, someone else would. It all came down to the size of the bonus pool.”
What a difference a year makes. Just 12 months after many banks were drawing up lists of people to fire, now those lists are more likely to identify the star staff they want to lavish bonuses on.
Here is the City reports that many investment banking firms are being proactive about retaining their best employees this season. They’re carefully picking out the stars they can’t afford to lose, and increasing their salaries, bonuses and perks to make sure they don’t walk in 2010. They’re also taking steps to make their stars feel emotionally attached to the firm, such as more communication and sharing of information about the firm’s future plans.
If you’re not a part of that top group, however, don’t expect much coddling. Many firms would rather let a journeymen move on to another organization in order to make room for fresh investment banking talent.
