April 2, 2008

How much money should I ask for?

Filed under: Interviewing, Making money

A reader wants to know how much money to ask for:

“I’m considering a position, but I have no idea how much such a position ought to pay. My last employer compensated me at approximately $60K plus stock options, etc. How can I figure this out?”

You’re asking about a specific position, but the approach I’m about to describe applies to all sorts of positions when you’re trying to decide what kind of compensation to ask for.

There’s no way to determine what to ask for until you know more about the work this company wants you to do. What you earned at your last job has little to do with what you’re worth to this company. And that’s really the key: what are you worth to this employer?

To answer that question, you’ve got to do your homework.

First, you must learn what people doing this job are paid. You won’t learn that in salary surveys; you have to find companies that have such positions and ask the people who hold them. (Get introduced to the people who are close to such jobs.) Even then, the value of the job will vary with the specific businesses and with the skills of the employees. So, what I’m really saying is, even though you can get a sense of the potential salary range, the only way to set your own desired salary range is to figure out what you’re worth to this company.

This means you’ve got to find out how the position figures into this company’s business. How does it contribute to profitability? What is the manager expected to do to maximize this contribution? How strategic is the role? What more could you bring to the job to increase its value dramatically?

I know you’d like a specific figure, but there isn’t one to give you. Even if I knew that this particular company wanted to spend $60K-$70K, I’d never tell you to ask in that range. You need to learn all you can about the work and the company — before and during your interviews — and to estimate how you can do the job in a way that will make their eyes light up. Ask what they’ve paid in the past, and for what constellation of skills. (What kinds of people have held the job in the past? How were they paid? Bonuses? Incentives? How successful were they?) This will form the basis of your presentation when you discuss compensation. The key is being able to justify what you ask for. That’s what gives you control in the negotiation.

For example, you could handle your presentation this way: “Some companies pay $60K for this job. You’ve paid $55K-$70K in the past. Based on what you’ve told me, the department’s customer-satisfaction rating has been 60%-70%. By using my skills A, B and C and doing X, Y and Z over the next 12 months, I think I can raise your satisfaction ratings to 90%, help you deliver 50% more projects on time and reduce complaints. That would put me on the edge of the compensation curve in terms of my worth to you, and I believe that justifies compensation at the high end of your range…”

That’s obviously a mock-up. But it’s a lot of work to prepared this kind of presentation. And it’s going to be a lot of work to do this job if you win it. So, you might as well start now. I wish you the best.

One Comment on “How much money should I ask for?”
By Charles
April 2, 2008 at 10:00 pm

Nick also wrote a great article about not divulging your salary history titled “Keep Your Salary Under Wraps”. Click my name to jump to that article.

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