A New View on Compensation
By Danice Kowalczyk, Managing Partner, Laurence Simons, North America
Danice Kowalczyk launched Laurence Simons’ New York office in 2010 and is the Managing Partner for North America. Prior to Danice joining Laurence Simons, she gained a solid foundation as an attorney with White & Case, as well as serving as Managing Director for a top legal recruiting firm in the US.
As stated by my colleague, Carey Bertolet, in Part I of this series, when we meet lawyers who have risen through the ranks to Partner, General Counsel, Chief Legal Officer, or other C-Suite roles, we always try to understand what strategies they've employed throughout the course of their careers to get them to that pinnacle of success. Last week we profiled one of the most common threads, namely "flexibility on relocation" (See Part I of this blog). Today, we profile a second thread -- flexibility on compensation. Some of the most successful candidates today handle the topic of compensation with careful aplomb, and that has made all the difference to their future success.
Part A - Compensation Discussions in the In-house Sector
Let's begin with the basics. What did compensation discussions represent yesterday? How does that differ from today? Two or three years ago, compensation was a topic which came up at the end of the interview process. It was the last hurdle to cross before the drafting of the offer letter. However, anybody who still believes that compensation should be addressed at the end of the job hunt is fooling themselves-- and just made a very costly mistake. Today, compensation is one of the first topics addressed. If it is not addressed by your recruiter, it will be addressed by the corporation with whom you are interviewing before you even walk in the door. In fact, they will ask you this question the second you submit your resume.
Most applicants become unnerved by this employer action considering it either "untimely" or "inappropriate." In the past, that might have been the case but because we are now in an ever-uncertain economy, compensation discussions are addressed at the get go. In fact, they are often used as a vetting tool. If you name a dollar figure that is too high, they aren't likely to call you in for the interview. Is this a bad thing? No. It's reality.
Corporations, just like law firms, have a budget. Right now those budgets are tight and employers want to hire talent -- but only talent that they can afford and talent for whom they have adequately budgeted. The most successful candidates know this, and they come prepared to answer that question. The most inappropriate answer is to give a point blank number with no flexibility. The second most inappropriate answer is to say:"We can talk about that later when it's more appropriate." Both responses will score you zero points, and the latter statement may actually come across as condescending to some employers. Successful candidates know this fact. So, what do they do? They come prepared with a response but first undertake some personal diligence.
What does that mean? First, it means that before you go looking for a new in-house role, understand yourown budget. What is your hoped for compensation? Moving from that ideal, what is your mid-range compensation? Finally, what is the number below which you absolutely cannot go? You must know these three numbers, or you will not negotiate effectively for yourself.
Second, you must be willing to give up your current compensation figure to the employer, if they ask. A lot of candidates do not like to do this because they feel that it tips their hand in the negotiation process. That may be the case, but the advantage to you of playing your cards close to the vest is marginal, and you will be in the minority. The overwhelming majority of candidates are very clear with employers about their current base compensation and related package add-ons (bonus, LTIP, stock options, etc.).
Thus, while you don't have to tell a potential employer about your current compensation, bear in mind that your competition for the role is likely to be completely transparent. That clarity works in their favor because employers know exactly where they are coming from starting from day one. So if the employer's package is higher, they have somewhere to go. If the employer's package is lower, they will inquire as to the candidate's flexibility on compensation to move to the employer's lower level. If the candidate can do it, now is their chance to put that reality on the table.
Some may be asking, "Why would I agree to go down in compensation?" The answer is multi-faceted. Many people agree to go down in compensation to join a group where their upward career trajectory is more clear, to obtain a more significant title, to relocate closer to home or family, to secure a position which is more interesting or challenging, and/or to land a role in a corporation with stronger financials and fiscal accountability. There are any number of reasons why people take pay cuts so as to fit into a proscribed "budgeted" role -- and the reasons are all valid. In contrast, if a candidate cannot take a pay cut, now is their chance to leave the discussion.
Successful candidates know this, and they approach compensation discussions with a clear voice, and avoid murkiness. They put everything out there, and they see if they can make it work. They have a clear picture of their current package breakdown, they have a clear picture of their three personal points on the compensation spectrum, and they have an awareness of the market and its affect on how talent is valued. Today's corporate employers appreciate it when a candidate avoids any opaque commentary on compensation, and they respond accordingly.
Similarly, if an employer asks for a compensation "number," but they won't give you their budgeted compensation target, the successful candidate knows what to do in this instance as well. They don't punt the question or play games--even if it feels like the employer, itself, is hiding the ball. Instead, they say what they would like to make (this comment is for you), and that they have flexibility on that front (this comment is for the employer since you have no idea what they are thinking)...understanding that the economy is tight and budgets are tighter.
Again, there are three key points here--you, them, the market. Successful candidates then invite the employer into the discussion so that they can have a frank reciprocal dialogue about where the employer wants to be and where the candidate wants to be. A great number of candidates avoid doing this because they think having conversations about compensation at this level and/or stage is "taboo," but it is not. Other candidates avoid doing this because they do not like the fact that the employer is being a little unclear, themselves, about dollar figures.
Regardless of the reason for possibly avoiding the conversation, it is a question which requires an answer, and those that are afraid to approach it and clear the air on this topic right from the start are at a disadvantage as compared to those who grab the bull by the horns and look it in the eyes.
The bottom line is this: Corporations are a business. Businesses have budgets. Budgets are squeezed, and many are unmovable--especially in Q1 and Q4. These are three truths that aren't going to change any time soon so the sooner you adopt these truths as your own, the sooner you approach compensation discussions with a more relaxed eye and move past them.
Successful candidates know this, and they act accordingly.
Inherent in all of the above rhetoric is the fact that candidates also need to be mindful of the fact that what they were worth five, six, or seven years ago may not be the same as what they are worth today. The market dictates value so you may not actually know what you are "worth" on the market today until you get out there and see what folks are paying for someone at your level and with your credentials/experience. Be mindful of this overriding fact. Successful candidates are quite mindful of this reality, and, once again, respond appropriately. They factor this reality into their compensation discussions quite readily -- further adding to their flexibility and open-mindedness. If everything else lines up, in-house employers respond to this self-awareness with an invitation to interview.
To be continued....lookout for Part B - Partner & Associate Compensation next week.
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