by Kathy Sweeney, NCRW, CPRW, CEIC, CCM
When you sit down to negotiate compensation
- either at a current employer or a new one - don't be surprised
to hear that your future pay package will be pegged less on
what position you hold and more on how well you perform your
job. Incentive-based pay is becoming popular among employers
as they seek new ways to enhance bottom-line profitability
and better productivity from employees.
To competently negotiate
an incentive package, keep these ideas in mind:
1. Simplicity and clarity
are essential. The less complicated the formula and parameters,
the easier understood by all parties.
2. Negotiate like a PRO.
Before you start negotiating the terms, get all the information
possible about the position. Talk to other coworkers to gauge
the situation (don't tell them your package). Focus on total
compensation, not just the money issues. Most importantly,
be friendly and grateful that you have an opportunity to work
for the company. Humility and professionalism will help your
wishes come true.
3. Set minimum and maximum
compensation limits. Sometimes spelling out "worst case and
best case" scenarios does much to dissuade hurt feelings on
either side in the future. Knowing the minimum helps you to
gauge your own economic situation; can you "afford" taking
the job? On the other hand, you need to evaluate if the maximum
limit is realistic, or just wishful thinking.
4. Consider informal resolution
steps. By their nature, performance-based plans lead to more
disagreements than do base salaries. To prevent the many horrors
of litigation, suggest that disputes be handled by a disinterested
third party such as a minister, a mediation company or an
alternative dispute resolution organization. You should find
out the procedures before accepting the offer.
5. Beware of the median
vs. average trap. Many incentive compensation formulas stipulate
using a "median" or "average" figure. These are very different!
A median is a middle number in a sequence, while an average
is the sum of the numbers divided by the quantities of the
numbers added. In the sequence of numbers 1, 1, 1, 7, 10,
the median is one, while four is the average. The difference
between earning $100,000 and $400,000 is quite considerable!
6. Insist on awards which
are prorated. In case you leave earlier in the year, this
will guarantee you receive the compensation you are due. This
applies to other compensations that are in the pipeline, such
as commission on sales the company has not collected yet.
7. Always ask for the agreement
in writing. It seems obvious, but get all of the facts in
writing. Memories fade, and bosses leave for better positions.
Sometimes oral agreements and good faith are scarce.
8. Seek win-win. Incentive
compensation is at heart a win-win proposition, so always
make sure that's how it is structured. An example of a win-win
proposal is offering to take part of your compensation in
company stock. By offering to accept such an arrangement,
you'll show an employer that you are willing to shoulder the
risks and share in the rewards.
Being a skilled negotiator
will payoff in the long run; you will be paid for your efforts
and the employer will gain a more productive employee who
contributes to the bottom line profitability of the business.
Starting right, knowing you have obtained the best package,
will yield many years of rewarding employment.
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