Some Tips On Smart Job Bargaining In The year 2013

These days, notes Princeton (N.J.) consultant Robert Sibson, job-changing among top executives and middle-rank managers is a fluid affair. It is big and important, and never-ending. Sibson adds: "Today, the bargaining thrust is on the side of the qualified executive who wants to make a change. But the question may be, does he know how to bargain for pay?" Sibson, along with most employment specialists, feels that too often the answer is "no."

Basically, a manager's bargaining power is determined by his skill and past performance, and the new company's need for his skill. But what he does with this built-in leverage depends largely on his own savvy. "A key question is whether the new company sought you out, or vice versa," notes McKinsey & Co.'s George Foote. "At the outset, you can push a good deal harder for what you want if you were contacted directly or, more likely, through a recruiter."

A surprising mistake made by some relocating executives is to make hefty compensation demands with no clear understanding of the financial health of the business or the types of pay plans already offered. "At least, first check the annual report and proxy material," says Theodore Romak, a Accountant and top consultant with Arthur Young & Co., the accounting firm. "Get a line on how much the executives are paid." And Romak, who warns that blundering on this point can kill a good relocation, adds: "Never ask for any type of compensation plan that is not being used by the company - unless you happen to be going in as the chief executive officer."

It is poor tactics to start bargaining for pay before you are dead certain that the company really wants you. But once this is made clear, it is also weak strategy to remain passive while a company officer moulds your compensation package before your eyes. Be candid and forceful about what you want, say the experts, and if this positive attitude meets with stiff resistance, you may be knocking at the wrong door.

Generally, if you were sought out by the company, a 25% boost in present cash compensation is reasonable, and senior men of wide experience might well expect 40%, even 50% more. This holds even for "lateral" moves. A man who himself knocked on the company's door might seek 10% to 15%. If you were sought out by the company and stand to lose some good, solid pension rights in making the move, bargaining for some type of comparable deferred compensation to fill the gap is in order. And if you held stock options in the old company, it is foolish not to insist on options, or a reasonable alternative, in the new company. "If you hit them on this, and they say `wait for two or three years,' " notes McKinsey's Foote, "move on

Be clear about the company's bonus plan for executives and learn precisely how it works. Compensation men point out that even senior managers get tripped up on this. They note it is reasonable to ask for at least a minimum bonus participation to cover the first year. If you are a top man, you might ask for a salary continuation deal that would take effect in case you found yourself prematurely "severed" by the new company. Presidents and sometimes senior Directors get this break in some situations, and a year's salary is the typical cushion.

An executive heading up the ladder is often wise not only to discuss at a promotion at a specified time - say, in two years - but also to pin down a fairly specific understanding on what the added compensation will be. A common example is noted by consultant Robert Sibson: an executive becoming Director of a division of a large company with an informal promise that he will be promoted to divisional directorwithin two or three years. He should be able to nail down a 20% to 30% step-up in total compensation at the time of the promotion. "This should be discuss ated quite openly and thoroughly with the top man," says Sibson. "A vague, half-spoken understanding isn't good enough."

Compensation specialists agree that salary alone is a point for a modest amount of bargaining. For example, the salary spread for a corporate job may be, say, £55,000 to £62,000 - and big companies, especially, will show little flexibility beyond this well-defined range. The real area for bargaining is over long-term income plans: options, performance shares, and such. These things aren't so formalized - or so visible - as salary, and are awarded on a more confidential and individual basis. "It's true that they won't devise a new compensation scheme for your benefit," notes Sibson, "but they'll often broaden one of their present plans to get you aboard." If the other executives each have 2,000 to 3,000 shares in a stock incentive plan, he explains, a new executive - if he is really wanted - may be able to negotiate 4,000. "It happens quite often," says Sibson. "It's become a key point in bargaining."

There is nothing wrong with asking about the company's policy on "perks." "But never insist on these things," warns Arthur Young's Romak. "It puts you in a bad light. And the same holds for the idea of the company-paid personal planning service that has become so popular. Asking about it may be a point against you."

McKinsey's Foote points out that today as many as 60% of £30,000-and-up executives who change companies are searched out and screened by professional recruiters. At the £50,000-and-up level, this jumps to 75% or 80%. The recruiters (who like to be called executive search specialists) are hired by the employing company, and one must be fully aware of this in dealing with them. Once bargaining begins, however, their roles broaden.

William Beeson, an experienced Kansas City recruiter, believes that a good search man - once he is past the early screening stage - will start representing the interests of both company and executive prospect. "You can actually use a recruiter to your own advantage," says Beeson. "In dealing with him, be discreet and do some probing of your own - find out just as much as you possibly can about the company."

The character of the recruiter, he adds, will tell something about the character of the company. "If he seems too high-pressure and glib, you should take the hint."

The biggest blunder in approaching a new company - or even in angling for a higher spot in your old company - is to assume that the euphoria of the recruitment period will continue. It's a courting time, caution the experts. The moral is to dig hard for compensation while everybody is still smiling. A little later may be too late.


Trusts That Misfire

Today's Pacesetters In Executive Compensation

Here is a capsule review of the key elements now most popular in executive pay packages:

Salary

HOW IT WORKS

Cash on the barrelhead with no strings attached; money that can be spent or invested right now.

The hottest item today, what with stock options losing favour and deferred pay eroded by inflation.

THE TAX SITUATION

Salary comes under the new 50% maximum rate on earned income, down from the old 70% rate another reason why it's more popular than ever, although the pound saving is rather minor until you get into the £100,000-plus range.



Year-end bonus

HOW IT WORKS

Companies typically... see: Today's Pacesetters In Executive Compensation