Imagine that you are poking around in your company’s payroll website when you stumble upon a mutable and persistent input field labeled “Market Rate Salary”. You naturally give yourself a 10x adjustment (because you’re that type of engineer of course) and you go about the rest of your day as usual. Your heart rate spikes as you login to your bank account on payday and sure enough, there is the typical amount you normally get paid… but with an extra zero on the end! Wait what!?! It worked, you’re rich! Or you will be soon if this gravy train keeps rolling. How long has that input field been there anyway?
You show back up to the office on Monday and half expect there to be chains on the doors now that you’ve broken their bank, but it appears to be business as usual. You are greeted at your desk by your manager, who seems genuinely glad to see you and who seems unaware that overnight you’ve become the highest paid person in the company. After some small talk about your weekends, she starts to walk away but turns back to say, “Oh and by the way, I just put a meeting on your calendar for later this morning to review your recent salary adjustment. Please come prepared with evidence to support your new salary as a justifiable market rate”. The reality of the situation begins to sink in.
Hyperbolic as this story may be, it’s representative of the mental model many of us carry around when it comes to negotiation or asking for a raise. We’re frequently paralyzed by fear of retribution when asking for more money, the wrong amount of money or doing it in the wrong way such that we undersell ourselves relative to our market value as a top engineer. Some of us just tell ourselves we’re lucky to have a job, shelve our feelings of under compensation and just persist with life as usual. Others of us protest in silent defiance and continue to feel underpaid or undervalued while doing nothing about it, hoping that someone in management will notice our hard work (or our pity party) and proactively reach out with a stack of cash. Not likely.
The reality is that in all likelihood, while it may not be 10x of your current salary, you might currently be giving up hundreds or thousands of dollars every paycheck. Money that could be deservedly going into your bank account is instead left on the table. Money that your company is likely more than willing to give to you, but won’t for one simple reason: you haven’t asked for it. Most of us are uncomfortable talking about money, so we don’t. In an ideal world, the value of your contributions would be recognized and proactively compensated in real-time. This ideal is the theory behind the concept of Motivation 3.0 but most companies are not yet operating under this model. Most companies tend to be much more reactive than proactive when it comes to equitable compensation for their employees. If you are a top engineer, you are more likely to be offered a raise when putting in your two weeks than if you are pumping out mind melting code on a daily basis and waiting to get noticed. Why? Your manager’s default behavior is to assume that all is well unless they hear otherwise through you directly or through a co-worker. Negotiating for your market value is more than just about earning more money, it’s about signaling confidence in your status as a top contributor and being more valued as a result.
It’s time to realize that it’s up to you to grab the bull by the horns and get what you deserve. Don’t sit around expecting management to read your mind; instead be proactive and control the conversation. When the time comes, you better be prepared. Fortunately, no matter your social disposition you are armed with a highly coveted skill set and some incredibly powerful tools and resources you can utilize to balance the scales of compensation in your favor.
When to ask for a raise
It doesn’t really matter when you have the raise conversation, what matters is that you’ve done extensive research and that you are prepared going into the negotiation. You can either be proactive and set a time with your manager or you can wait until your normal performance review. Either way, in order to get disproportionate results you need to have a game plan going in that you are prepared to execute to perfection. There are a lot of factors that go into predicting the success of a salary negotiation, but almost all of them take place BEFORE the conversation ever occurs.
The key to a wildly successful raise negotiation is leverage. You could have the most leverage in the world but if you are unprepared to use it when the opportunity arises or your fail to execute on your plan due to lack of preparation, it’s not likely to help you. Just this week I had a conversation with an engineer friend of mine about his recent raise negotiation which came up unexpectedly in his 1 on 1 with his manager. Despite the fact that he did have some significant leverage in the situation and that he knew what he should have said after the fact, he was not prepared for the conversation, and ended up taking what was offered without negotiating he likely left tens of thousands of dollars on the table.
Identify your leverage
The easiest way to think about leverage is “What is your BATNA?” (best alternative to a negotiated agreement). Put simply, your BATNA is your next best option if things don’t work out at the bargaining table. An example BATNA would be another job offer that you could take if the negotiation were unsuccessful. The first rule of any negotiation is to always be willing to walk away from the deal. The better your next alternative, the easier that is to do.
While it is essential that you identify your BATNA before any negotiation, you must also realize that your company also has a BATNA. Just think about the costs that were associated with hiring you, training you and the costs that would be incurred if they had to find and train your replacement. The higher you understand those costs to be, the more confident you can be that you’ll have some significant leverage when heading into a salary negotiation. It’s easier for a company to give you the extra money than to face these costs. More important than thinking in terms of costs is thinking in terms of productivity loss. As one of their best engineers, your productivity value to them should be clear and the prospect of losing access to your talents should be frightening.
I was recently closing a compensation deal with a prospective employee when she tactfully but abruptly walked away from it. Even though there had already been some movement in base salary, the numbers still weren’t working for her and she was confident in her value in the market place. Her walking away from the deal quickly brought things into perspective and suddenly things which seemed non-negotiable were very much now in play to keep the deal in tact since even with those concessions, it was better than my BATNA. She ended up with a deal we were both happy with and there was no resentment on my end whatsoever, in fact I probably subconsciously value her more for it.
A generous raise represents a major difference in your life and but it most likely represents a fraction of a percent in the company’s bottom line. It is almost certainly less expensive for them to retain than to face the costs of you leaving. This is a seller’s market and you likely have a large amount of leverage without doing anything at all, though it’s essential to have a clear and accurate understanding about the best alternatives of each party when approaching a negotiation.
The key takeaway to the question of “When should I negotiate a raise” is simple: When you have the most leverage. Regardless of when you choose to have the conversation, you should be preparing now by taking proactive steps by doing your research, working with your manager to set goals and role playing the conversation with a coach, mentor or friend over and over again until you have it nailed.
Do your research
In the hypothetical story about the salary adjustment at the beginning of this article, if you are like most people you probably felt a bit of anxiety during the part of the story where you would have to justify your 10x adjustment to the market. The reason for that anxiety is simple, you can’t ever really know what your objective market value is and you certainly can’t do it on the spot without research. There will always be some company willing to pay you more depending on hundreds of different factors and your perceived value to them on any given day. Your perceived value varies depending on your interview performance and skills match to their needs. It’s impossible to boil your value down into a single number. The best we can do is to try to come up with a range.
As a current employee, you likely already have the inside scoop on the company’s current situation and what their challenges and objectives are. Understanding their challenges can help you to identify their BATNA but understanding their objectives can help you to craft the perfect negotiation pitch that is tailored to show how you will help to accomplish those objectives, and thus justify your increased compensation. Think in terms of what your manager wants. Now figure out solutions you can implement to solve them. Frame your negotiation in the context of things that they want and how you have already delivered value around these needs in the past. Provide specific ways of how you will continue to deliver even greater value in the future. When executed properly, your manager will go to bat for you with upper management if needed. Why? Because you’ve reminded her how you make her life easier. Poke around the office and try to figure out what the hiring situation looks like from a high level if you don’t already have visibility into this. Have they been trying unsuccessfully to hire someone for your position for 6 months? Is the role you are filling in the team particularly critical to the success of the company/product? What you are looking for are pain points the company is experiencing that you can leverage in your negotiation.
Establish your target compensation range
When negotiating a job offer at a new company, the conventional wisdom is to never say a number until an offer is made. The idea is that you don’t know the number in their head and it can only hurt you to go first. If you say a number lower than what they were thinking then they just got a discount and you’ll make less. If your number is higher than the number in their head then you might price yourself out before the offer even comes. Refuse to provide the first number and you are always better off. Recruiters are trained to pull numbers out of candidates and they’re usually successful at it because candidates tend to give them more authority than they actually have. Candidates will typically just do whatever they’re asked in order to appear cooperative and easy to work with, even when compliance is very bad for them. When negotiating a new job offer, never providing the first offer is one of the best pieces of advice that someone can follow. The same principle applies when entering a raise negotiation.
Just one of the many powerful things about being a software engineer in the current market is that there currently is a plethora of hyper-relevant and up-to-date compensation data at your disposable that you can use to strengthen your case. AngelList alone can be your best friend since a large percentage of the time your exact position is listed on the site with a salary and equity compensation range. Companies are often much more transparent on AngelList than they’d like to be, but since they’ve got to compete for the top talent they cough up the information. Top Engineers can filter opportunities by compensation ranges and thus know ahead of time how competitive a company is relative to others in the same market. AngelList is just yet another example of how we are currently in a seller’s market where engineers hold more leverage than most other forms of labor in the market. If no such data exists on AngelList, check out Glassdoor.com and Payscale.com to identify competitive salary ranges based on similar job titles in your geographic market or at your company.
You can also talk to your friends who work in similar roles at similar companies. From my experience, people are usually pretty comfortable talking about their compensation if you tell them why you are asking. Your goal from this research is to have a specific compensation range in mind going into the negotiation, and having a Kelly Blue Book for software engineering jobs can sure make it easy to hold your ground without being adversarial since you are just appealing to the objective data so you can know if you are getting a good deal. You should do some scenario planning of the most likely outcomes to your negotiation attempts, create a plan to obtain the best outcome in each scenario and practice them each ahead of time until you nail your approach.
Valuing your equity and negotiating for more
In my exit interview at one company, the VP of engineering wanted to know why I was leaving so close to a vesting event since it seemed logical that I’d want to stick around a little longer to reach my cliff and cash in before leaving. The answer was simple, it just wasn’t enough money to keep me around in the face of other great opportunities I was looking at. I didn’t even think twice about this aspect of compensation when leaving. After I told him what the equity number was that I had received with my original offer, he was upset to learn how low the number was. He wasn’t upset because I was making less than I should have been, but because the compensation vehicle wasn’t set up properly to do its job, to keep me there. He promptly offered to multiply my equity stake by a significant factor, but he knew it was too late. I illustrate this example to make one point; it’s easy to negotiate for more equity or stock because it’s almost always mutually beneficial for you and the company to have the golden handcuffs in place. If you are at a company that you love and want to be for a while, your goal should be to align your long-term incentives with theirs by sharing in the upside of success. Stock and equity are powerful retention tools for companies and are an extremely important part of your compensation package. With the current cost of living in the Bay Area, it is essential to take some equity bets in your career in order to be able to afford to live here. Since equity bets are vested over time, you can only make so many bets in a single career as an employee. Thus, you might as well make them each as large as you can while you are at it. Once you’ve established a ballpark range for how much equity you have and that you feel is within reach, craft a specific strategy to obtain it in your negotiation.
As long as you are armed with accurate data and reasonable expectations, the actual process of negotiating for more equity is pretty simple. Mainly, you are interested in aligning your long-term interest with the companies by sharing in the upside. The belief is that you will work harder and stay longer since you have more “skin in the game”. This is the very reason companies give equity to employees in the first place. Emphasizing your equity ask in the context of your faith in the company is a no-risk angle to take since that is what they want anyway.
Negotiating for other things
There may be other small things you could negotiate for that would improve your negotiation outcome, like extra vacation days, a new computer, a standing desk or the ability to work from home. These are typically very humanized requests so it’s pretty easy to justify them during a negotiation. You might actually consider starting your negotiation with these smaller requests before moving on to the bigger demands like more salary or equity to get them warmed up and comfortable saying yes.
Frame your requests in a context of how it will benefit them to give you what you want. If you need an extra Thunderbolt monitor, do some research about how additional screen real estate increases productivity. If you want more vacation days, you can reference studies about how more balanced workers tend to be more effective and productive when they are actually working. If you want to work from home, be proactive about addressing the concerns your manager is likely to have and take the concerns off the table before they even come up. The key is to get what you want by framing it in the context of how it also gives them what they want. This is really easy to do with these small little requests.
Establishing your BATNA
We have previously discussed the importance of identifying your BATNA before a raise negotiation, so let’s now address some of the tactics that you can use to improve your BATNA before you go get there. The most obvious but time-consuming way is to interview at other companies and actually receive an offer. If you are on the fence about staying, this can be a very healthy exercise because it can put your current situation in perspective and help you to determine if you want to stay or go. If you are in a good situation, it will become clear after interviewing at a few places. However, when opening yourself up to consider other opportunities to determine your market value be careful not to get sucked into the first thing that a recruiter sends your way that pays more or to cave into pressure to accept an offer that’s not a significant improvement for you. Assuming you want to stay at your company but now have another offer for significantly more money than your current salary, you are in an ideal negotiation position. The easiest way I’ve personally found to improve your BATNA and discover your market value without actually having to do a ton of work interviewing is through Hired.com. This is a platform where you can have companies make you soft-offers based on your profile and experience. In order to turn them into real offers, you still need to actually set up an interviews and pass them. However, two to five of these “soft-offer” data points can give you everything you need to both use in your negotiation and give you the confidence that you are worth what you are asking for in your raise negotiation. It can also help you to craft your narrative and value proposition as a engineer for use in your negotiation.
[Disclaimer: The link to Hired.com is an affiliate link. I personally used their service to land my job at OpenTable and I know of dozens of others who have had success on the platform to either increase their BATNA for a raise negotiation or find a new job.]
A word of caution
Don’t be a jerk. It’s as simple as that. You may have the strongest leverage in the world, but that doesn’t necessarily mean that you should always exercise it. Be tactful and use just enough pressure to get what you want. Be careful not to over assert yourself and damage the relationship unnecessarily such that you end up with a pyrrhic victory. It is possible to win the battle but lose the war.
Before you go in for the hard sell, it is a good idea to dip you toes in the water to see how your manager reacts to the conversation. This is an essential part of the research and information gathering and you should listen intently to what they have to say to gauge their responsiveness to the suggestion. You will always learn more by listening than by talking. This is the no-risk way to get ready for the real negotiation where you can use the data from their response to craft your approach.
How to craft your raise negotiation pitch
From your research, you should now have a deep understanding of what your manager values and the goals and objectives they’re working towards. Now it’s time to put it all together and craft your approach in the most compelling way possible. Just like how we got into the mindset of our company when we were thinking about their BATNA, we need to do the same when we craft our negotiation pitch. Everything should be framed in terms of your value to your manager and to the company. When referencing your awesome past performance, don’t speak in terms of tasks completed but instead speak in terms of value created. Get them excited about the contributions you will be making over the next 6-12 months as framed around the objectives that your manager cares about. Get them to create a mental picture of the future where you are making their life exponentially easier and they want to make you as happy as possible.
It can be helpful to structure your pitch before heading into the negotiation. This is just and example of a high level structure of one approach you could take:
- Establish your track record as a top engineer. Cite specific and quantifiable results you’ve accomplished in areas that your manager values and cares about. This become easier to do the longer you’ve been proactive about communicating your track record in 1:1’s and team meetings.
- Lay out your specific future plans to solve their burning problems and objectives. The more specific you can be the better. You can even go so far as to write out a proposal and present them with a hard copy of what you’ll accomplish that they can take to their manager when requesting your raise.
- Give a brief description of your problem of under compensation as supported by objective data. This is not always necessary since ideally you’ve established your value to the company such that it’s obvious you are being underpaid. Whatever you cite, keep it impersonal, concise and objective. You are just citing data, not how you feel about that data.
- Make your clear and concise negotiation attempt. Lay out exactly what it is that they should do to give you what you are asking for. This is not to to say you have to provide them with specific numbers, but make it clear that it is now their job to come back to you with more of whatever it is you asked for.
- Say nothing and wait for a response. Once you’ve made your request clear and concise, don’t undo what good you’ve done by mudding the waters or saying something stupid to hurt your cause. You’ve laid it out there, now just see what happens.
What matters most in this conversation is that you are not adversarial but are as collaborative as possible. Your actual ask should be a clear and concise statement at the end that leaves them with no confusion about what it is that you are asking for. The whole pitch should be no more than 1-2 minutes of you talking before stopping to look for feedback and preparing to address concerns.
Practice, Practice, Practice
You should practice your raise negotiation at least a half dozen times. It’s even better if you practice with several different people. Gather feedback about both the strength of your arguments and the social triggers you display with words like “maybe” or “I was thinking”. One of the most powerful things you can do to get rid of these things is to video record yourself and watch it back, putting yourself in the mind of your manager. How would you perceive the conversation if you were them? Would you be confused and defensive or impressed and inspired? Practice and iterate until your pitch is concise, confident and persuasive.
A great mentor or career coach can be the difference between failure and success. Feel free to e-mail me at [email protected] if you are looking for coach recommendations.