Salary Negotiations: "Why salary ranges are B.S."

I wont beat around the bush: Salary ranges are total bullshit. There. I said it.

I mean, what's the point?  When you bought your house, did the seller quote a range?  And if he did, which end of the range did you hear?  The low end or the high end?  The low end, of course, and that became your starting point in the final negotiations -- unless you're smart, in which case you started negotiating below the lowest end of the range, making the seller work you back up to his stated minimum.

Irregardless, as a negotiating concept, ranges are ridiculous and tend to destroy a deal's momentum.

Why do clients use them?  Well, because when a client tells her recruiter "The range for this position is $170K to $220K," what she actually means is "We want a $220K candidate for $170K" -- even though she might have added some nonsense like "Well, for the right person, we'd pay $220K."  Like, duh.  It's not as if you'd pay a search fee for the wrong candidate.  Obviously.

Now here's the tricky part:

How should a recruiter market this search?  Should he advertise $170-220K?  How about the mid-point, say $195K?  The problem is one of managing the candidate's expectations.  A higher number always helps to attract the best candidates, but there's always the chance that the client will low-ball any eventual offer, thereby pissing off the candidate and possibly rupturing the deal.

On the other hand, a lower number will suppress the response of the market's best candidates.  Trust me, there is a correlation between price and quality in the world of talent, and it's the recruiter's job to source the world best candidates for his clients.  Sounds audacious, but it's true.  The recruiter must protect the client from their own process.

What's the solution?

ON THE CLIENT SIDE:  The recruiter needs to make sure that his client understands that the spread between his client's and candidate's needs will be lost in the rounding of the value that the candidate will create in the new role.  Specifically, the recruiter must credibly establish how his candidate has historically increased sales while decreasing cost of goods sold, operating expense, tax exposure, accounts receivable, inventory, accounts payable, fixed assets, and accrued liabilities.

If this sounds unrealistic, it isn't.  In fact, this is what a $200K general manager is supposed to do.  Yet most executive level candidates do a lousy job of quantifying the value to potential employers.  I have several spreadsheets I use with my candidates to help them assess the cash value that they created for their previous employers -- and they can use these tools to estimate their impact on my client's top and bottom lines.  For real.

ON THE CANDIDATE SIDE: The recruiter must brace his candidate for a low-ball offer and coach him not to take it personally.  Any recruiter worth his salt simply must tell his candidate to expect the client to bounce their first pitch in the dirt.  It's all part of the game, and deals fall apart when candidates take these things personally.  (And they do.)

Beyond that, all candidate's must not only understand what the "market" is for their skills, but also what the client can fairly afford without feeling burned by the process.  To quote any economist worth her salt, "You are looking for the optimal point on the efficiency curve."  After all, candidates, you'll need your honeymoon period in the new job -- and running roughshod over your new employer in a salary negotiation will only shorten it.  Leave a few bucks on the table, but not so many that you feel cheapened by the process.

To understand what the client can fairly afford, ask your recruiter:

1. What did the last guy make?
2. Does the company feel like the last guy was underpaid or overpaid?
3. Why did the previous guy leave?  Have your recruiter find out!
4. What did he make in his new job elsewhere?
5. Are there any internal candidates under consideration for the position?

Internal candidates are often underpaid, and even if an internal candidate got a raise in the new job -- her comp would likely be less than what an external candidate (like you) would cost in terms of base salary.  As with any negotiation, it pays to do one's homework.

For future reference, please bookmark this post in Delicious.

Comments

[ugg]

I also have the same opinion with you.When we do purchase,we often meet such situations.

[Musical Instruments]

You really take some ideas for me from abstract to concrete...appreciate your insight and tips when working with a recruiter.

[Barbara Safani]

Really great points and a must read for all job seekers.

[Net Millionaire]

Oh, the perils of selling your services. I mean, really, these employers should stop being cheap, because everybody gets what the pay for, right?
Thanks for this wonderful article!

[Jaime]

I probably would've gotten more out of this post but the English major in me is hung up on the use of "irregardless." :)

[Eric]

Very helpful post H-man. Will use some of this advice in my own little world shortly.

[Chris Rainey]

Great stuff Harry - reading it for the third time right now and trying to digest everything.

[Kevin Ertell]

Brilliant post, as always, Harry. While these are all excellent points for salary negotiations, I will add that they are also excellent points for ANY negotiation. Thanks a lot for sharing.