Negotiation Game

William Wong Dec 2018

Brokering your way into a Nash Equilibrium

Hashing out compensation requirements with candidates is one of the most enjoyable aspects of Staffing, albeit having the cards stacked against us.

We broker the delicate balance between what the Hiring Manager believes the candidate deserves, the amount a candidate desires, and the price your competitor is dictating. As if that wasn't hard though, all of this needs to happen within the confines of company budgetary constraints.

"With great power comes great responsibility". I'm not sure who said it best (Voltaire or Uncle Ben), but this holds true in the world of staffing. We have the ability to directly influence employment decisions that will impact the future of the company. Be diligent in your negotiations because the one you lose out to your competitor may very well be the second coming of Bill Gates.

Cardinal Rules

Regardless of whether you're chasing the contract game or placing perms, keep these principles in the back of your mind as you go about your negotiations.

[ 1 ] It's Not Me, It's You!

When I first got into this business, my mentor warned me "We're in the people business; where people, sell people, to other people". What he was trying to tell me, is that our product (people), is the only one in the world that actually has a brain of it's own. It's important to come to grasps that the product (our candidate) will always act in his/her own best interest. The sooner I recognize this, the better I was able to telegraph their actions and plan for counter measures.

Candidates are also more receptive to ideas that are their own instead of yours. When you're battling any type of resistance, instead of shoving your ideas down the candidate's throat, try coaching them to come up with the same solution together. This is where you utilize your StaffingIQ to recognize the problem, determine the path you want your candidate to walk down, and then guide them down that path as if it was their idea.

Managers utilize a motivational technique called the LIFT method to get the results they want from their staff, and the same principles can be utilized as part of your candidate control process. Engage the following with your candidate:

LIFT Method

Listen to obstacles: "What are the obstacles getting in the way of making progress (ie. submission, interview, acceptance, etc.)"
Identify obstacles you can influence: "Which of these obstacles do you most need to overcome and why?"
Facilitate - the solve it question: "What are your suggestions on how we can fix this?"
Test - for acceptance: "What do I need to do/get to make this happen for you?

[ 2 ] Price != Silver Bullet

Money is not the end all solution - it's only part of the equation. You'll quickly find that there's always going to be someone else with a deeper wallet. Your goal is to figure out all your candidate's hot buttons in order to deliver a comprehensive close that addresses as many items on their wishlist as possible. Veterans don't sell with price, they close with a package.

Triggers

Company (public image, growth, success, industry)
Career growth / bigger title
Work environment and the people (boss, coworkers, leaders)
Logistics (location / flexible schedule / WFH)
Company culture and values (vision, mission, social responsibility, ideology alignment)
Perks (reimbursements, benefits plan, loads of vacation, child care, free food, free shuttle, etc.)

[ 3 ] Never Low Ball / Overcharge

Undervaluing a candidate's pay and/or gouging the client simply does not pay off in the long run. I see this quite often in the Contingent Workforce space where Recruiters try to min/max their way into a bigger margin. Yes the Recruiter can enjoy a fat spread temporarily, but remember that this is a free market, and tend to find a way of equalizing itself out in 1 of 2 ways:

You place a candidate who's normal pay is well below the market rate for the role. Instead of adjusting the Bill Rate down to reflect this, you maintain it at the original amount. This min/max scenario provides you with a huge spread. The expectations of the role is at the higher Bill Rate, but the performance of the candidate is at the lower Pay Rate. The manager is simply not getting the production that he/she is paying for and fires your consultant.

You were able to reduce a candidate's pay well below their normal rate (either to stay within budget or to make a killing). The candidate may be willing to work at the reduced rate, but you're not the only job in town. They will get hit up by other companies and eventually leave (or worst yet, stay and become toxic). * possible solution is to provide incremental pay raises.

Consequence

Churn has a lasting effect and goes beyond the financial loss of procuring and employing that person.
You also have to account for lower overall productivity (other individuals spent time training this new hire), overburdening remaining employees with more work and lost knowledge.
This leads to lowered morale, delayed deliverables and missed opportunities.

[ 4 ] Apples to Apples

Compensation packages vary greatly from one candidate to another and from company to company. Just because a candidate tells you they make a salary of 200k + 25% bonus doesn't mean their comp plan ends there. Failure to identify all other items in a package will result in a flawed closing strategy. Arm yourself with a good understanding of different comp plans and how they stack up to each other. Keep in mind that many states and localities have banned us from asking for prior pay history so it is a good practice to avoid this question all together. Instead, aim for what the candidate wants to make, your role's pay scale/range, and what your competition is offering. Below are some elements that you will encounter in a package.

Hourly / Daily / Weekly Rate

Identify type and calculate annual earnings.

401k

Does the company provide matching? Consists of percentage of matching and a limit.

For example, a company may match you 50% up to 5,000. This means if you contribute $10k, the company will match $5k.

Equity Vehicles

Popular types include Stock Options, Restricted Stock Units (RSU), and Employee Stock Purchase Plans (ESPP).

Base Salary

Take care when interpreting what your candidate tells you. For example, they may tell you 100k.

Is this 100k base salary? Base + bonus? Base + everything? Drill into this.

PTOs / Sick Pay

Amount varies - find exact number. Some may offer unlimited PTOs. Speak on Pros and Cons.

Some states and localities mandate Sick Pay. If your package offers more then highlight it.

Benefits / Insurance

Some employers subsidize more than others. Identify number, type and cost of coverage.

Calculate cost differences between your offers and be prepared to compensate for the delta.

Bonus

One time deals include sign-on or completion.

Reoccurring involve personal and/or company achievements

Holidays

Some companies provide extra days before and after a major holiday, so don't assume every company offers up the standard 10/11 per year.

Also take note if there are any shutdown periods - these can be paid or non-paid.

Pension

These are funded by the employer. This may be an important element to the deal if the company is a destination employer that your candidate wishes to hang up his/her hat on.

Conversions

As if it's not hard enough comparing one perm package to another, we often find ourselves playing with a mixture of perm and contract scenarios. At times we may need to flip a permanent employee into a contract gig. Other times, we find ourselves in the opposite by needing to convert a consultant into a permanent employee. Because packages are so difference in the FTE and Consultant world, it's best to take note of these differences before attempting to offer up any numbers.

Perm to Hourly: If you are hiring someone that's currently working perm and placing them into a consultant role, you need to understand how to convert their perm package into an hourly equivalent.

Hourly to Perm: Consultants should earn more per hour than a typical perm employee. If you are attempting to converting a consultant into a perm employee, be mindful of these scenarios.

Negotiating Contract Rates

If one of your team member is new to the world of contract recruiting, then consider using this training guide as a jump start. It provides several scenarios to test your wits as well as a flowchart to help visually explain the thought process.

It's Not Me, It's You!

Price != Silver Bullet

Never Lowball/Overcharge

Apples to Apples