Wednesday, February 5, 2020

Considering Compensation

Recently, an investment professional, who is a CFA with five years’ experience, contacted me about compensation.  He is currently interviewing (not through me) with a regional investment advisor and came to me wanting advice on salary.  The company is pressing him to give them a salary number.  His concern was how to respond.  He didn’t want to knock himself out of the running by asking for more than their budget.  He also didn’t want to shortchange himself by not asking for enough.  Because I didn’t know his salary requirements, or the company’s or their budget, I didn’t feel comfortable giving him a hard number.  My advice to him was to look at more than just base salary, i.e. total compensation, opportunity within the company and the culture.  I also suggested that he frame his conversation around how he can assist the company in achieving their goals. 

Base salary, bonus, incentive, profit sharing, stock options / equity, 401(k), and insurance costs are all a part of compensation.  Would you rather have a) $180,000 base with a target bonus of 25% (more if you exceed goals) or b) $200,000 base with a guaranteed bonus of 10%?  Scenario A is riskier but offers more upside potential if you exceed goals.  Scenario B guarantees $220,000 annual compensation but no more.  Your choice will depend on your confidence in yourself, the company, management, and your personal situation. 

Does the company offer stock options / equity to be vested over time?  This can be a significant non-cash compensation. 

If you have a family to insure, what is your cost for medical insurance?  Do you pay $1000 a month for family coverage or $250 a month.  What are the deductibles, co-pays?  How healthy are you and your family?  Insurance can make a big difference in your take home pay and out of pocket expenses.

Opportunity has a different meaning to everyone.  For some, it’s the opportunity for training in order to learn new skills and / or deepen their skills thereby making them a more valued employee.  Does the employer pay for training, continuing education or reimburse tuition?  For others, it’s advancement involving expanded responsibilities and management.  Is the company growing?  Do they have upcoming retirements?  Are they able to offer future opportunity?  Maybe it is challenge.  Are you bored in your current position?

Culture is hard to pinpoint in a company.  Many companies have written values and a mission statement.  Your task to determine whether the company holds true to their stated values and mission statement.  Is the company family oriented?  Work / life balance?  Or, is it goal oriented requiring ten hours days and weekends?  If so, it that for you?  What are the rewards for your commitment?  Are you trading family time for compensation?  There is no right or wrong.  Look at what fits your life and aspirations.  Married with children at home?  Single, no family at home? 

Frame Your Conversation
In order to negotiate the best package for you, be prepared to express what you bring, your skills, experience and accomplishments.  Often owners / management care not only for their personal income but also the overall health of the company.  They are truly committed to the vision / purpose of the company.  How are you going to help them achieve their vision?  Are you there just for a job, to grow your career or a there to help the company achieve their vision? Tell the owner / managers how you can help them fulfill their purpose.  Look for a win-win where your contributions help you grow your career and achieve your career purpose. 

Continued Pressure*
If they continue to press you for a salary number, you could say something like, “This is my current base, I get so much for bonus, my 401(k) match is ___%, my company pays $____ for my insurance with a $_____ deductible, that totals $_________ per year.   I also get ____ days’ vacation.  I don’t know how that compares to your compensation.  I hesitate to throw out a number with incomplete information about your benefits.  I want to mindful of your budget considerations and as the same time I need cognizant of my own requirements.”  If they continue to press, say, “All things being equal, I would like a base salary of $_____.  How does that sound to you?”

Though I didn’t give investment professional a hard number, he thanked me and said I had given him a new perspective on compensation.  My hope for him is that he gets the new position and it’s a win-win for everyone.  My hope in writing this is you look at the total picture when considering compensation – salary, opportunity, and culture.  When you interview – interview from the perspective of “What can I do to make this employer successful and how will it contribute to my success?” 

*Compensation examples are for illustration purposes only.  They do not reflect the compensation of a real person or company.

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