Know when to hold 'em: the more information you have, the better off you will be in salary negotiations - Employment & Staffing - includes related article

HR Magazine, August, 2002 by David Fiedler

You have a position to fill and have interviewed a number of candidates. You finally get to the step in the process where you've narrowed it down to the perfect person for the job, and it's time to make the offer.

Here comes the dance: the salary negotiation. You don't know if the candidate will be floored by your company's perceived stinginess or will gleefully accept a much higher-than-expected offer. Sometimes the negotiation process can feel like a high-stakes poker game. No one knows what cards the other holds.

The best way to handle the situation is to avoid it in the first place, says Donald M. Herrmann, SPHR, who has held numerous senior-level HR positions during his 22 years in the field and is now a consultant in Dayton, Ohio.

"Everybody loses in a situation like this," says Herrmann. "Without adequate preparation and communication during the hire process, the employer can miss out on a potentially great person, and the candidate also will lose the opportunity to take on a position that would have been an excellent fit."

It's not always possible to have all the information, of course, but the more you know about a candidate's expectations and your own company's flexibility--both with the salary that can be offered for a position and the noncash options available beyond that--the better off you will be when it comes time to make and to negotiate offers.

Establish the 'Value Framework'

Before you even get to the table, you must determine one thing: What is the position worth to your company? Knowing what that is and then finding a candidate whose expectations are aligned with that amount is the critical first step in any negotiation process because it establishes the parameters for bargaining.

Overlooking this part is what turns the negotiation process into that wild poker game, with dramatic differences popping up between a candidate's expectations and what your company plans to pay. When that happens, look for frustration, wasted time and squandered opportunities for both you and the candidate.

However, getting a candidate to open up is sometimes easier said than done. Candidates are often coy about revealing either present or desired salary, fearing that disclosure will put them at a disadvantage by allowing the company to offer the lowest salary possible.

Eileen Levitt, SPHR, president of The HR Team, a Baltimore-based HR outsourcing firm, believes that a candidate's salary information is critical and to proceed without it is foolish. Accordingly, Levitt has little patience with candidates who hold back such information.

"You really need to know how much a person is looking for. Otherwise, you risk being far apart on salary and not finding that out until the end of the process when the offer has been made," says Levitt. "If someone wants to play games and not tell me what their expectations are, I just say, 'Listen, I've got a position to fill and I need to know if this is even a possibility.' I don't want to waste their time or mine."

Both Levitt and Kevin Wilson, SPHR, a consultant at Newton Centre, Mass.-based HR consulting firm PeopleResources.Net, recommend "trying out" an offer at least twice before it is officially made.

"You definitely want to say something to the candidate like, 'Well, if we were to offer you 560K, how would that compare to what you are looking for?"' says Wilson. "That way, you find out if it is in line with expectations and also get the person to conditionally accept the offer before it is even made. This eliminates surprises and makes sure both parties are in the ballpark with a job offer."

Disclosing the Range For a Position

on the other side of the negotiation table, the candidate may be wondering what the salary range is for the position. Some companies disclose the complete range in the beginning of the process--sometimes in the ad itself--while others don't. HR professionals differ on this issue.

"It can be a disadvantage for the company to release the range for a position. More than likely the top of that range automatically becomes the candidate's target," says Wilson. "If you say that a position pays between $80,000 and $90,000, the candidate will say, 'Sure, $90,000 is good for me."'

Others, including Levitt, say HR should definitely disclose what a position pays. Not only does it seem fair for candidates to have that knowledge--especially if you have asked about their salary histories- but sharing that information is also an advantage to HR, she says.

"Communicate it up front," says Levitt. "You want to weed out the people who are looking for too much money."

Herrmann suggests a happy medium: Disclose only the bottom half of the range.

"Any organization with traditional compensation structures--ranges with a minimum, midpoint and maximum-should do this with all of their positions," says Herrmann. "This protects the upper half of the range, reserving it for seniority, merit increases, promotional opportunities, etc., while filtering out those whose salary expectations come in too high."