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JOBTALKS

JOBTALKS. Negotiating. Indiana University Kelley School of Business C. Randall Powell, Ph.D. Negotiating. "We make our fortunes and call them fate." Benjamin Disraeli "Final offer: something a veteran negotiator makes just prior to making concessions." Jim Fisk and Robert Barron.

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JOBTALKS

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  1. JOBTALKS Negotiating Indiana UniversityKelley School of BusinessC. Randall Powell, Ph.D

  2. Negotiating "We make our fortunes and call them fate." Benjamin Disraeli "Final offer: something a veteran negotiator makes just prior to making concessions." Jim Fisk and Robert Barron

  3. Negotiating The toughest part of the job search process is negotiating. • We have been taught not to discuss money • Your negotiating skills are vital

  4. Title Slide Negotiating

  5. Process of Negotiations Negotiations mean that someone has something you want and the other party wants something you have. • There is a mutual desire to reach an agreement • Both parties must have something to gain and something to lose

  6. Cooperative Negotiations Negotiation for a job is not necessarily the same as negotiation for a corporate merger or even buying a car.

  7. Three Principles of Negotiations 1. Know your market value 2. Know what you want and what you are willing to settle for 3. Let the other party open

  8. Find Out Your Worth Find out what you are really worth. • Use trends and projections • CPC Annual Survey of Salaries • Occupational Outlook Handbook • American Almanac of Jobs and Salaries • Specialized surveys • Salary results from similar schools • Compare apples to apples

  9. Obtaining Salary Information Other ways of obtaining salary information:1. Call fifteen people in similar positions Ask for salary information; starting and current2. Find someone in personnel

  10. Determine Your Worth Determine what you want and what you are willing to settle for. Caveat: Many of the numbers for market value may be exaggerated.

  11. Lowest Acceptable Position Establish your Lowest Acceptable Position (LAP). • The bottom of your negotiating range • Make it firm • Never give away your LAP

  12. Always let the Other Party Open • "To determine a fair salary figure, I would need to know more about the responsibilities of the position." • "Salary is one component of a compensation package. I would need to hear more about the total benefits offered before I would want to discuss salary separately."

  13. Always let the Other Party Open • "Salary is not an important factor to me. The job I would be doing is more critical than what I would be paid." • "Everything I have heard about XYZ says you are known for compensating your people appropriately. I trust you to offer me a salary that is appropriate for the position and responsibilities."

  14. Always let the Other Party Open • "Pay isn't an issue I have examined too closely. What is the usual salary for a position like this?" • "I realize that as a new graduate I don't have overwhelming leverage in dictating salary. I leave it to you to offer a fair salary." You don't have much negotiating power in these situations.

  15. Timing for Negotiations Follow Half's rule: • "Wait for the offer before you start talking money." • And its corollary: • "Withhold your final decision until compensation is settled."

  16. The Secret of Negotiating Well Keep from discussing salary until the second or final interview and only when the company brings it up. The best time to negotiate is when they desperately want you and you haven't made a commitment yet.

  17. The Waiting Game You are at the company's mercy if you wait until you have fallen in love with the company before trying to negotiate. Waiting puts more power in your hands.

  18. Keep a few Options Open • You need to have more than one option cooking at a time • Don't get caught with only one alternative • Let the company know that they have competitors for your services

  19. Wait... Waiting until the last minute to negotiate salary has its advantages.

  20. A Little Something Extra Use timing as a way to get "one for the road." "Throw in an extra week of vacation after 6 months and you've got a deal."

  21. Tactics for negotiating Ultimate goal in negotiating is "aim high, settle high." • To accomplish this use "anchoring." • By mentioning a higher number, you get the company thinking in those terms.

  22. Exercise Time

  23. Raising the Stakes A survey was given to a group of auditors using the numbers 10 in 1000 and 200 in 1000, they came back with averages of 16.5 and 43.1. They responded with higher numbers. Mentioning higher numbers when asked about salaries will have the company thinking in those terms.

  24. Anchor with a Higher Number Especially in response to an initial offer. "That is a generous offer. To give you an idea of the range I have been looking at: the market value of I.U. MBAs in this field is $XX,XXX to $XX,XXX."

  25. Other Tactics • You can use... • Your previous salary • Cost of living • Other offers • An estimated revenue stream

  26. Framing Framing involves the context where the transaction takes place. • For example, would you expect to pay more for a beer in a fancy hotel or in a run down bar? • You can frame yourself by discussing the MBA rankings.

  27. Pleading Ignorance Another tactic is pleading ignorance. Perhaps you were trying to buy a used car from someone who knew absolutely nothing about autos. When he kept telling you "I have no idea -- what do you think is a fair price?" You eventually became so frustrated, you offered a fair price!

  28. Cooperative Negotiations The best way to go about negotiating is to approach this as a cooperative effort.

  29. Building a Cooperative Strategy 1. Build trust. Share information with the company. People trust you more when you share. One student was concerned about an offer he received. He really wanted to work for this company even at the lower price. Instead of saying he wanted to negotiate a better deal, he let the company know he was considering their offer, but was concerned that the salary was less than market value. He left it at that.

  30. Building a Cooperative Strategy 2. Ask lots of questions. Ask about information that will help you in a trade-off. "How long does it take for you to fill a position like this?" Listen for responses.

  31. Building a Cooperative Strategy 3. Make Multiple Counter-Offers Simultaneously.For Example: 2 percent share in the revenue you bring in Performance bonuses in the form of stock options Working on a contract basis for 6 months Trading off some of base salary for larger commission possibilities Even if the company rejects each, ask which is the closest to acceptable.

  32. Building a Cooperative Strategy 4. Assume some of the risk. For Example: • "Review me after 6 months. If I am not worth what I'm asking, I will resign at your request -- no severance pay, no unemployment claims. If I am worth what I am asking, pay it to me." • "Pay me what I ask for 6 months. If I'm not worth the money, you can reduce my salary down to what you offered."

  33. Building a Cooperative Strategy "Employ me on a contract basis. If I haven't added any value after 12 months, don't renew my contract." "Pay me what I am asking and if sales in my territory aren't at $4 million annually, put me on 100% commission basis."

  34. Building a Cooperative Strategy 5. Search for a novel solution not currently under consideration. Perhaps the company is in a cash crunch. You negotiate an end-of-the-year bonus rather than a signing bonus.

  35. Both Sides WIN! The goal of cooperation negotiating is for both sides to win. Everybody must feel they gained something out of the process. Always be flexible for compromise. You have to "give something up." Never give away your "LAP" -- especially AFTER negotiations.

  36. Overcoming Objections A significant component of negotiating is overcoming the objections raised by the other party. In negotiating, you often get the chance to deal with specific objections to your salary request.

  37. Determine Validity of Objection First determine if it is a genuine objection or one raised to keep from telling you the real reason. You can never overcome a false objection.

  38. Dealing with Objections The best way to deal with an objection is to turn it around in the form of a question. • Company: "We aren't willing to pay that salary!" • You might respond: "Are you saying that the salary is outside your salary range for this position or that I am not worth the money I am asking?" Use lots of "Why" questions.

  39. Isolate the Objection Make sure that the objection is the only one. • Ask: "If we are able to structure a deal that better fits within the salary range for the position, then do we have a deal?"

  40. Play the "Cooperative Game" Let your cooperative negotiating partner know you can see things from his point of view. • "I understand your position perfectly. $53,000 is a lot of money and it seems like a lot to pay for someone just out of grad school..."

  41. Avoid the Deadly "But" Use a more positive approach such as "Yes, and..." • "...and a number of highly successful companies, and might I add, many of the competitors you are trying to catch, are more than willing to pay this salary based on the potential that Indiana graduates show."

  42. How Might You Handle this Objection? "I don't pay my current financial managers that much."

  43. Possible Solutions: • "What education or experience do your current financial managers have?" • "Why is that?" • Throw out multiple options

  44. How would you respond to: "That's too much to pay for someone with your background."

  45. One possible response: "Certainly those numbers are substantial and can be a bit surprising to someone who hasn't recruited in this market before. The numbers are based on a variety of very successful companies coming back to I.U. again and again to get the very best management talent. Is it the fact that the salary is too high for my background or that the salary is outside your normal salary range?"

  46. Another Response Might Be "What other factors besides salary can we discuss that may compensate for a lower salary figure?"

  47. Enlist an Ally Ask your networking contact or original recruiting contact for some assistance. For example: • "I am very interested in working for XYZ and I am excited to get an offer. I do have a question about the salary offered. Is $XX,XXX a usual salary to offer for someone with my background? Is there any negotiating room?" You then have an ally working behind the scenes.

  48. Mistakes in Negotiating Mistake #1 Dealing only in terms of salary. Use benefits such as...

  49. Vacation

  50. Relocation

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