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Getting a raise: The negotiation — Pop Economics

Getting a raise: The negotiation

by Pop on August 12, 2010

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Make more money without leaving a bad taste in your boss’s mouth.

Ready to make more money? As I’ve written before, getting a bigger salary matters more than your asset allocation. It matters more than avoiding ATM fees. Heck, it matters more than your savings rate. If you can get a 20% bump today, you put yourself on the path to a huge difference in wealth 20 years down the road.

And the benefits just multiply. As you negotiate for raises, you’ll get better at it. You’ll get better in other kinds of negotiations too. Worst case scenario: You get shot down. But that’s not any worse a position than you’re in now. If you don’t ask, the answer will always be “No.”

In part one, I explained why “now” is a great time to ask for a raise. The economic environment is bad, but not so much that you’ve lost all negotiating power.

However, let’s not abandon tact. Getting a raise is a lot different from negotiating a job offer. Before you start a new job, you can take an offer or walk, and presumably still have a salary at your old place. But when you ask for a raise, you’re putting at stake a carefully cultivated relationship that you’ll probably have to live with no matter what happens.

That changes the power dynamic a lot. The key to a successful wage negotiation is to get more money without making your manager unhappy. If you don’t get more money, you lose. But if you do get more money, and leave your boss feeling like he or she was forced into it, you still lose! He might grow resentful or doubt your respect for the company. If you threaten to walk, he might think you’re not dedicated and are just a mercenary looking for any chance to jump ship for more pay.

Walking this line, while still maintaining a position of power, is crucial.

But before we get into the actual conversation, let’s do a quick review of where power comes from in a negotiation. According to a rather famous power framework, there are five kinds, listed here in no particular order:

1. Reward power: You have this when you can help your boss’s cause, and he knows it.

2. Coercive power: You have this when you can hurt your boss, and he knows it.

3. Expert power: You have this when your boss thinks you have some sort of special knowledge or expertise.

4. Legitimate power: You have this when your boss thinks you have the law on your side in influencing him.

5. Referent power: You have this when your boss likes you, thinks you can make him happy, or gets some sort of other pleasure from having you around.

I’ve seen and heard of all types being used in a raise negotiation, but as you can guess, flexing some of those muscles is not ideal.

Take legitimate power, for example. Sure, if you have a good case of being discriminated against because of your race or gender, you can probably get your boss or boss’s boss to increase your salary. Or how about coercive power? Walk up to your boss with a competing job offer, and he’s threatened with losing a valued employee and the thousands of dollars and hundreds of man hours that come with recruiting someone new.

But using either of these is a mistake. In the first instance, while totally a strong reason to ask for a raise, you’re still left at a workplace that apparently has biased coworkers—now who have additional reasons to resent you. In the second, you’re left with a boss who will forever remember the time you coerced him into giving you a raise. Guess who’s getting the ax once it’s time to cut expenses.

So when it’s time to ask for a raise, you’re best served by focusing on the three remaining ways of exerting influence: showing how you can help your company, displaying unique expertise or attributes that are impossible to replace, and generally, being a decent guy or gal to work with. Let’s tackle all three.

Setting the stage.

In part one, I went over how to decide when to ask. In short, you want to have just finished a great, memorable accomplishment, but also be in a time of the year when your boss actually has the power to grant a raise.

Assuming you’re in such a blessed position, set an appointment with your boss during a time of the week or month when he or she is facing the least stress and time pressure. You don’t want him to have an easy excuse to wait until a project closes or a report is put together. Hopefully, he should be able to get on the phone that evening or the next day with HR or the relevant office to get a raise approved.

Don’t just waltz into his office and ambush him with a request—ask for 30 minutes at least a day or two ahead of time, and if asked, say you’d like to talk about your performance on your last couple projects. A smart boss will know exactly where this conversation will go.

Get all your research on salaries in your field together. Type up a single page of bullet points you want to mention, noting your past accomplishments with measurable ways you’ve added to the bottom line and bring two copies (only give it to him if he asks). Remember to bring a notebook.

It’s important to have at least a general idea of where the conversation might go before you walk into the office. Is he going to mention budget issues? Is he going to mention the nice raise you got last year? How likely is it that he gives you the most dreaded response in raise negotiations possible? (More on that later, but hint: The dreaded response isn’t “No.”)

Practice how you’ll respond to each of his doubts. Sure, times are tough, but you’ve greatly helped the company’s budget woes by shaving 10% off project expenses this year. Yes, you got a raise last year, and you’re thankful, but since then, you’ve increased your sales lead production by 20%.

Ready for an uncomfortable, yet extremely profitable, conversation? Let’s walk into the office.

Remind your boss that he likes you.

Well-liked employees get raises. It’s as simple as that. Of course, your performance matters the most. But deep down—on a much deeper level than the part of the brain that’s concerned with company performance—your boss is attuned to the psychic rewards you give him with your respect, loyalty, and friendship.

The first part of your talk will probably contain the moments with the highest tension, when your boss is waiting for you to begin what he’s probably convinced himself will be an uncomfortable conversation. So it’s critical to get the tone right from the outset. You’re not in his office because you think he’s slighted you (even if you do actually think that). You’re in his office because you have a challenge that, together, you can both overcome.

“But wait,” you object, “aren’t we adversaries?” There’s no doubt that you are. You want more money. Your boss wants to keep costs low. But projecting an image that you don’t view him as the bad guy changes the conversation from “who will win” to “how can we win together.”

Researchers from Cornell and Cal State-Long Beach have found that bargainers who view a negotiation to be a threat are more likely to be hard-nosed and less likely to be creative than those who see it as a “challenge”.

The challenge, in this case, is that you’re a kick-ass employee who is concerned that you’re not being compensated for your awesome contributions to the company. So as you start to slide from the small talk to the crux of the issue, make sure you say things such as “There’s one problem I was hoping we could solve together” or “Something’s concerning me and I was hoping you could help me think through it”. You don’t want to use language like “You’re underpaying me” or “My results aren’t being appreciated.” That automatically sets an adversarial tone, and even if you win, in the long-run, you lose your boss’s good will.

Bringing out your evidence

As you (hopefully) did when you first got offered your job, follow your boss’s lead. Ask him how he or she thinks you’re doing or how you did on that last, amazing project. Let him make the case for a raise for you.

Assuming he or she “forgets” one or two major accomplishments, reference your list to give the high-impact, measurable goals you accomplished and detailed earlier. Make sure you give the team as a whole respect too—you don’t want to make a group effort seem like it was solely your individual accomplishment. That’ll just make your boss skeptical.

Whatever you do, don’t make it personal. You don’t want a raise because your rent just went up. You want a raise because you’re contributing more to the company. You’re not upset at your boss for not appreciating your effort. You’re showing your boss a way he can keep one of his top performers happy.

Your boss will see that you’re reading from a list and might ask for a copy. And it’s extremely important you give it to him (or that he write down your accomplishments). Because even though you’re trying to convince your boss to give you a raise, you’re also helping him build a case to his boss that his payroll budget should be increased to accomodate you.

Don’t bring out the PayScale or GlassDoor data you discovered. At least, not yet. That sets the tone that you’re threatening to leave and can put your boss on the defensive.

Time to get down to the numbers.

“And that’s why, I’d like you to consider raising my pay,” you finish breathlessly. Congratulations, you’re in the midst of a heart-pounding conversation that will be more important to your earning power than any other you have over the next 12 months. Just being in this position is more than most of your colleagues can probably say.

What now? For one, let your boss speak first. Let him propose how much the raise should be. He might come up with a figure that’s even higher than what you hoped for.

But let’s say, he doesn’t. Step one: Don’t fall into the trap of anchoring bias. Anchoring is our tendency to rely on an initial piece of information given (“How about a 3% raise?”) to make subsequent decisions and guesses. “Oh crap,” you might think. “If he’s thinking 3%, maybe I should only ask for 6%.” Bam. All your research that says you should really be looking for a 15% to 20% bump goes out the window.

In truth, you should meet whatever your boss says with a look of disappointment. Career coach Jack Chapman calls such a tactic “The Flinch”. Here’s a video of him demonstrating it:

When I first saw this video (thanks Get Rich Slowly!), I thought it was the most awkward thing I had ever seen. You repeat the salary or raise offer slowly, and then just sit silently, while your employer is left to surmise your extreme disappoint at what he thought was a generous offer.

But it turns out, Chapman’s on to something. You see, in tests of negotiation tactics, professors from the University of Pennsylvania and Ben Gurion found that expressions of anger and disappointment immediately make the other party in the negotiation more likely to make concessions and raise their offers. Not sure about you, but I’d keep it professional and hold off on the anger. That leaves the appearance of disappointment as one way to turn the odds in your favor.

Your goal in the ultimate offer will be to push as close to the top of that salary range you discovered at GlassDoor as you can. Pull out that research if your boss seems to be clueless as to what the market for people with your skill set is.

If you win a raise, awesome. Make sure you get information on timing, and recap the meeting in an e-mail when you get back to your desk.

But what if you don’t get an immediate yes? I’m willing to bet that if you’re a top performer, your boss won’t say “No.” Instead you’ll get the most dreaded response in the history of raise negotiations…

“Yes, I agree you deserve a raise. No, I can’t give it to you now.”

Could any response be more cruel? Your research worked. You made your case well. Your boss agrees. And yet, he or she cops out and defers to budget or timing issues to put your well-deserved raise on semi-permanent hiatus.

To me, this is even worse than “No.” If you get a “No,” you can naturally ask how you can change the answer into “Yes.” What metrics does he want you to achieve? What does an employee who deserves a raise look like? When can we revisit the discussion?

But either through genuine budget issues or a desire not to hurt your feelings, your boss has punted. What now?

This has happened to me before. In fact, I was foolish enough to leave the meeting feeling really good about how it went. My boss thinks I should be promoted! And I did get promoted…five months later.

Step number one: Ask for a specific timeline for the raise. If not now, when? As in “The Flinch”, the key emotion for you to project is disappointment, not happiness that your boss apparently acknowledges your worth.

Whatever timeline he proposes, make him feel that your raise needs to be addressed more urgently. Ask, “Is there any way we can make it happen sooner?” or “Is there any way I can help you with HR or payroll to process things more quickly?” Don’t come to the point of threatening to leave, but such questions will automatically make your boss dream of situations where his top employee starts fishing around for a new job.

And finally, ask to revisit the issue at least a month before whatever timeframe your boss gives you. The last thing you want to happen is to remind him of your discussion in six months, only to have him say that he’ll “start the paperwork” or some other nonsense that takes even more time. Make sure to document the conversation in an e-mail.

Of course, if the boss’s promises never materialize, it might be time to walk. You could come back with another offer for leverage—a prime example of “coercive power”—but even if he caves, that’s liable to sour your relationship.

Whatever the outcome, you at least gave it a shot, which is more than 3/4 of employees can say in this economic environment. And just having the practice will pay dividends. I can’t remember where I read it originally, but when it comes to dealing with awkwardness, there’s one piece of advice I live by: Your success directly correlates to the number of uncomfortable conversations you’re willing to have.

This post was an Editor’s Pick at the Carnival of Personal Finance at Live Real, Now. Thanks Jason!

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{ 1 comment… read it below or add one }

Bret @ Hope to Prosper August 16, 2010 at 1:26 pm

Pops,

This is some very comprehensive advice, with some great negotiating information.

I have found the best tactic for getting sound raises, is to work for professional companies that respect and appreciate their employees. A lot of companies are taking advantage of the recession to freeze salaries, which will cost them good employees when hiring picks up again.

My last company worked me like a dog and didn’t give me a review or a raise for over two years. This is despite the fact that I completed a couple of key projects that brought in a lot of revenue for them. And, it wasn’t just me, they didn’t give out raises to anyone. Employees had to come begging for raises, often threatening to quit.

I quit that company two years ago and received a much higher salary, walking in the door. I have since recevied two pretty generous raises, without begging or threatening. I have also had some recent calls from headhunters and I tell that I’m not interested in leaving.

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