April 23, 2005

Salary Negotiations (tip to CH)

After reading this excellent and lengthy New Yorker article on medical costs and reimbursements, I have an important but unrelated point to make. The article essentially begins and ends with a doctor naming his desired salary for his new job (an excellent starting point for the discussion it spawns).

For anyone who finds yourself in such a situation: don't say anything. Avoid saying anything. Don't even ask for a minimum. Make them say it first. Why? Because it weakens your negotiating position and it spoils your starting point.

I say this drawing on my mother's experience as a re-employment consultant for executives (companies hire people like her organization to place their laid off employees in new companies, and she does it for friends and family). I'm not just shooting my mouth off, in other words.

If you say a salary, you potentially lower yourself to a salary below what the employer would have paid. You screwed yourself, in other words. If you overshoot intentionally to a very high salary, you can look unreasonable (perhaps even being rejected for employment in a few situations). Screwed again.

Make them say it, because they won't undershoot too far most of the time - it could risk insulting you. If they do undershoot, which they will at least a little, you can still say "Well, I was expecting something more like X" or otherwise explain that they need to crank that up a bit. They will not overshoot, by necessity.

I recall one story my mom recounted of a woman who REFUSED to take this advice (perhaps because my mother was being paid by the former company, and not the woman, so she didn't fully establish the payment-advice connection) because she had to know they could pay her enough. She was insistent that the employer be able to pay her a certain salary (which if I recall was somewhere in the low six figures, plus benefits). She was so concerned they wouldn't be able to meet it that she was very specific about the number.

The company was more than happy to pay her that amount - since, as she learned later, the normal salary for people in her position paid at about twice the salary she had named. Simply saying the number would have been bad enough, but she painted herself into a corner by basically saying she would settle for that number. She screwed herself because she wouldn't take my mother's advice and wait for them to start with a number.

So were I in the position of the author of the New Yorker piece, I would have requested that the employer make an offer or two, which I could then review. If he needed, he could take a few hours and fax something over. Assuming he continued to push, I would have been polite but insistent that he give me an idea of the salaries they work with, and what they typically offer to people coming in with similar qualifications and in a similar slot. It's not like he's going to just say no fifty billion times; eventually he'll give you an answer.

The good doc did not have access to this sort of negotiation advice, and did come up with a number. The fact that the employer agreed immediately (from what I can tell) suggests that the salary was at best average and more likely lower than the threshold.

That's the thing - these guys don't go into that sort of situation to negotiate salary without being at least somewhat informed of what's too high and what's average. They know what's lowball, what's over the top, and what's industry average. In a lot of places like health care, they probably have an actuary or accountant who actually places a number - based on anything from position and specialty to college and age - that tells them the limit on how much they'll pay.

When the doc said a number that was below or near the threshold, the interviewer grabbed on and didn't let go. He probably had some authority to authorize a hire with a salary a little above the threshold (this kind of thing changes from place to place, naturally) but I'd be surprised if he didn't have a pretty darn specific number in his head.

It's just like blackjack. If you play in your basement with family at holidays, you probably think "double-down" is some sort of sex move. If you play for any appreciable amount of money or watch celebrity blackjack on TV, then you know that there are precise moves for most hands dealt. If you're dealt a soft 16, a hard 14, or two aces, or whatever then you pretty much know your move. You can alter it to adjust to the risk-benefit ratio (say you need to win quickly or want to lose more slowly) but ultimately a good blackjack player has all these numbers in his head. Hit on X, stand above it. Double down if I get this or that. And so forth.

It's the same for salaries. If the doc said 245k, then guy knew to say yes. If the doctor had asked for 315k, the interviewer probably would have suggested a lower number ("We had something more like X in mind"), to illustrate.

The benefit is to not go first. When the interviewer says a number, which is crafted to not bankrupt his company by being too high, to not offend you by being too low, and to prepare for negotiations by being below what they'd settle for, you can just try to pull it up. I realize doctors may not like the idea of negotiating salary, but it seems awfully silly that doctors go to school for most of their youth and end up being some of the most educated and trained people on the planet and then get swindled by something that needs little more than streetsmarts and access to a JuCo-certified accountant.

This brings me, ultimately, back to markets and health coverage. Employers and insurers play hardball with doctors. It's only fair that these life-savers - forced to deal with death, charged with curing pain, expected to save life, required to sacrifice many years for education, and given to working more than sixty hours a week - should expect a very handsome return for their efforts. Don't be ashamed to push the envelope on salaries, doctors.

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