Recently I had the privilege to work with two brilliant candidates for two separate searches. The amount of due diligence these guys (who do not know each other) poured into the assessment of their respective job opportunities was mind numbing.
One guy went to Kellogg. The other to Harvard. But that doesn't matter. What matters is the level of intellectual curiosity and academic rigor that each brought to his salary negotiation. They questioned e v e r y t h i n g.
For example, both candidates' compensation packages were linked to their ability to drive return on equity (ROE). But my Harvard candidate reminded me that there are only five ways to impact this number:
- Increase asset turnover (the ratio between sales and assets)
- Widen operating margins
- Pay lower taxes
- Increase leverage, and
- Use cheaper leverage.
To earn more, broaden your span of control.
Both candidates realized early in the discussions that since ROE was going to impact their paychecks, they needed to widen their jobs' span of control beyond what had been specked in the original job posting. They did not negotiate for more money. They negotiated for more responsibility.
In particular, my HBS candidate looked for ways to impact the growth, efficiency and capital optimization of the entire company in ways that were directly and measurably attributable to him. Although not in a selfish way, he took a fifty thousand foot view of the company and brought it down to a granular level as it applied to his personal paycheck. It was a magic show, let me tell you.
So: Aside from encouraging you to become financially literate, I would also advise you to remember that in salary discussions ...
You get what you negotiate.
Salary discussions are essentially one big contest of wills, and to win you need to be hard on the issues and soft on the people. You must do your homework and check your ego at the door.
To that point, the January 2006 issue of CFO magazine featured a nice article in which several top sports agents revealed their secrets to handling big-time salary contract negotiations. Click here to download it now.
