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You Will Earn $614,783 Less if You Don’t Know This Secret.

By: Tom Mercer – MEM, ’11

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Dear MEM & MEng Students –

I am going to try to teach you how I’ve lost more than $20,000 because I had a certain belief, and how, after I learned about one little secret, I earned more than $10,000 in ninety minutes.

If you’re lucky, you already have a job or internship lined up for the summer. If you don’t have a job yet, what I’m going to teach you is even more urgent. If you have a job, you’re probably going to change jobs within a couple years, so it’s important to internalize this belief before then.

Two months ago, I was standing on the edge of an arch in Arches National Park, looking out over an awesome view while standing inches from a 500-ft cliff. I was talking with my friend about his future job at the most progressive law firm in our home state. The partners of the firm have argued and won several of the major cases the state’s Supreme Court has heard in the last 20 years. Our conversation turned to our student debt (law students have LOTS more) and our starting salaries and benefits.

I found that I was going to earn substantially more as an entry-level analyst than he would as a fully-credentialed lawyer at the most prestigious firm in the state, so I asked him about how he negotiated the compensation.

His response shocked me. “I didn’t want to ask for more money, because these are the people I’m going to be working with, and I don’t want them to think I’m selfish.”

My friend and I both have excellent degrees (and you do too, or you will soon). What caused this massive difference in starting compensation (>$20,000)? A single belief and less than ninety minutes of effort.

The last time you got an offer, how did it make you feel?

Were you excited?

“Yes, that’s great, when can I start!?”

disappointed?

“Is that all?”

Or did you feel something else?

I’ve felt these emotions when I received offers in the past, and I just accepted the offers because “I just need a job” or “This pays more than my last job”.

But the last 3 offers I’ve received, I’ve done something different, and I want to explain it in detail because, with respect to money, this is the highest-impact activity you will ever do.

What’s the most you’ve earned per hour? I’ve earned >$21,000 in three long days, and >$2,000 in 2 minutes and 14 seconds. None of these compares to the $20,000+ I’ve earned by negotiating for a few minutes.

OK, that’s great, you say. How do I earn this $?

First, there is a mindset. You invested the time and money to earn a graduate degree from Duke. Based on that, I can say you are among the top 10% most valuable potential employees to any firm.

You are a top performer.

Top performers contribute disproportionately to teams. Google and other companies spend billions of dollars every year attracting and retaining top talent, because, while a top performer may cost twice as much, they often contribute more than 10 times more value![1]

Now, if you approach salary negotiation from this mindset, there are some behaviors you’ll naturally do differently.

I’m going to explain them in painstaking detail. I promise that if you take that first brave step toward ACTION, when you invest an hour in this research and send the email or make the phone call, you will 1. see that it works, 2. start to believe it, and 3. get better at it, until you’ll internalize the core belief, and then you won’t need these scripts.

Top performers do all of this naturally.

When you get an offer, DO NOT STATE A NUMBER FIRST.

When you get an offer, DO NOT STATE A NUMBER FIRST.

After the other side makes an offer with a number, do not say, “YES! When can I start?” nor, “Is that all?”

Both of these responses indicate you are not a top performer, and that you are not professional.

Instead, say, “Hm. That’s interesting. I’m sure we can work out a fair compensation package that’s agreeable to both of us.”

[Attitude: We’re in this together. We’re going to find a FAIR compensation, TOGETHER. You, the company, will get a top performer who delivers disproportionate value. I, the worker, will get extra compensation.]

Understand that the first offer you receive is for suckers. It’s like the sticker price on a car or a retail price for a contraption in SkyMall magazine. Only this is far more serious. The first offer is the ‘sucker’s price’ on 3,000+ hours of your life, every year, until you retire or die.

Unexceptional performers accept the first offer. Just by asking, you set yourself apart.

Company #1: I was offered <$38,000 to work at Contactology in Durham. Just by asking, I got $40,000 (and I knew very little of what I’m about to share, and had not yet internalized the ‘Top Performer’ attitude). That’s $2,000 for writing a two-sentence email.

Now, $40k is not much compared to my student loans, and you’re probably not impressed. But many MEMers haven’t even asked. They are giving up $2,000 to avoid asking.

I’m going to share 2 more case studies where I had the Top Performer attitude, where I see myself as a Top Performer who contributes disproportionately high value. Once I combined the courage to ask with this Top Performer mindset and the “we’re in this together. Let’s work out a FAIR package” attitude, I began to see much better results.

Company #2 Initial Offer: $58,000 + stock options on a 1yr-4yr vesting schedule

Company #3 Initial Offer: $63,000

This time, I was prepared. To both offers, I did not state a number first. DO NOT STATE A NUMBER FIRST. (It’s ok to explain your past compensation, but it’s also ok not to. The employer is only going to use any numbers you provide them as a way to offer you less.) *The career advisors may not agree with me about this. My super-successful career aunts and uncles, and my parents disagreed with me on this one.*

But let me repeat, DO NOT STATE A NUMBER FIRST.

Once they made these initial offers, I did my research.

(Let’s say $Company is offering you $Role in $City.)

$Role at $Company on glassdoor.com

$Role in $City on glassdoor.com[2], indeed.com[3], salary.com[4]

NACE[5] for $Role in $City

When you’re finished with this research, summarize it neatly:

The median salary for $Role in $City is between $68,145 and $72,450, according to glassdoor.com, indeed.com and salary.com.

According to glassdoor.com, $Role_s at your company earn between $X and $Y.

The NACE compensation calculator, which is more accurate for well-educated by under-experienced candidates like me, suggests the $City market will offer approximately $68,400 for $Role with my education.

Take that summary and explain it over the phone or email it to the person negotiating salary with you – often this is a hiring manager, or a person from HR, and not the person you interviewed with or will be working with.

If the offer is low (and it usually is), say “according to my research, $Your_Offer is low for $Role in $City”.

If the offer is good or even better than your wildest dreams, say “$Your_Offer is less than what I had in mind. Is there any flexibility with that number?”

At this point, Company #1, #2 and #3, said they would seek “approval” from a manager or VP or CEO, then would come back with ~10% more. Company #2 also offered a “Senior” title at this point.

Maybe the person negotiating with you won’t offer more salary at this point, and they’ll say something like, “the economy is tough” or “Our budget is tight” or “My manager/VP/CEO wouldn’t approve that”.

Agree with them. Sympathize. Successful negotiation is not confrontational. Say something like “yes, the economy is tough” or “I understand you have budget constraints” or “I understand your manager/VP/CEO wouldn’t approve it”

Then do 3 things.

1. Remind them about another high-value skill you have, how valuable it will be for them, for their company. [6]

Ask gently again if there is any flexibility with their number.

2. When you are satisfied that they won’t offer more base compensation to hire you…

(There is a fine line here, and it goes back to what my friend was feeling when we were discussing salary negotiation on top of the arch. At this point in the negotiation, you don’t want to be selfish to the point of sabotaging the work relationship over a small amount of money. You’ll know when to stop.)

…ask for this in writing: you’ll have a performance review on a shorter term (6 months), and set expectations that if you can deliver X value, then by 6 months from now, the company will offer you Y compensation.

This creates the impression that you’re going to work hard, and be worth many times what they pay you.

And you will work hard, and you will always create/give more value than you are given.

3. Suggest that “maybe there are other options to make the total package more attractive.”

Then, ask for:

In-the-money stock options

More vacation

Work-from-home

Other fringe benefits

Now, the person negotiating with you is ON YOUR SIDE, you’re WORKING TOGETHER to put together a FAIR total compensation package. Good things will happen.

Company #2 offered 10% ($5,800) more and a senior role.

Company #3 offered 10% (6,390) more, and more bonus.

I think I did OK, but I didn’t ask for stock options. I still made 10% extra salary in less than 90 minutes of effort.

More powerful effects resulted from this negotiation than just a one-time $6,000 raise, however.

I’m going to earn 10% more.

My bonus is 10% larger.

My 401k match is 10% larger.

I’m going to earn even more than 10% more over my career, because each future raise and inflation-adjustment will stack on top of this larger compensation. A quick calculation (http://www.calcxml.com/do/ins07) suggests I will earn $614,783 more over my career. I believe the effect will be much larger.

My employer’s initial impression is that I’m a top performer, and that I believe hard work and positive results are rewarded with higher compensation. <— THIS PAYS AND PAYS.

Please negotiate your salary. If you succeed, share your success story in the comments here and on the MEM facebook page. Share this with a friend. If all of us learn to internalize this belief and do this research, we will earn more than $100,000,000 [7] more over our careers. More importantly, we will contribute at least an extra $1,000,000,000 more in value, because we will be healthier, happier, and enjoy greater job satisfaction and engagement over the years.

RESOURCES:

[1] http://www.youtube.com/watch?v=XY5SeCl_8NE I don’t recommend you buy Ramit’s $2,000+ courses, but I watched this video three times to memorize the scripts and internalize the beliefs and attitudes of a top performer.

[2] http://www.glassdoor.com

[3] http://www.indeed.com

[4] http://www.salary.com

[5] http://www.jobsearchintelligence.com/NACE/jobseekers/salary-calculator.php

[6] http://www.kalzumeus.com/2012/01/23/salary-negotiation/


7 Comments

  1. Excellent advice! It’s also important to keep in mind that there is ALWAYS room for negotiation when it comes to a job offer. As an MEM student, I applied to a large consulting firm that’s known for not negotiating on salary offers. I knew that directly asking a recruiter for more money wouldn’t work, so instead I lined up a job offer prior to my final interview, and then made the recruiter aware that I had another job offer on the table (“I have another offer that I need to reply to, would it be possible to get an answer before ?”). This showed that I was a desirable candidate, and placed some indirect pressure on the recruiter to make a better offer. Using this method, I received an offer ~$10k higher than what other MEMers were offered for the same position.

  2. This is an amazing point. I have not negotiated for jobs but I did negotiate for positions/ projects and like you said, positive attitude+ambition are always well received. I will definitely keep your tips in mind whenever I get a job offer.
    Thank you so much Tom!

  3. Great advice Tom. Negotiating is absolutely expected, and if you don’t do it you’re selling yourself short. I used the method you describe and increased my first salary out of MEM by $12k (which, like you say, compounds with all future jobs).

  4. Knowing the value you bring to the company with your skill set AND your Duke brand is what will give you confidence. I have negotiated every single job offer (3 in total) I have had after Duke successfully and have thankfully been constantly ‘climbing the ladder’. I have even respectfully rejected offers considered very attractive by others because I calculated two things 1) The company can afford to pay higher 2) I am worth more than what they are offering

    Or you can just go with the ‘safe’ option and say yes to whatever is thrown your way.

    Great article Tom!

    • Yes, Shoaib!

      I am in India, and reminded daily of your negotiating skills as I barter for food and transportation every day here.

      Story:
      One time Shoaib and I needed furniture. We found a craigslist ad for chairs, tables, bed, everything. The ad featured a ridiculously low price, like $150 for everything. We selected about 80% of the items, and then Shoaib rubs his hands together, and says, “now, we begin bargaining”. The (American) couple and (American) I were sort of uncomfortable at that point, assuming the deal would be the price on the ad, because it was obviously a great bargain at such a low price. I think we walked away with couches, tables, and chairs for $80 that day.

      When I wrote this article, specifically the part “Now, $40k is not much compared to my student loans, and you’re probably not impressed. But many MEMers haven’t even asked. They are giving up $2,000 to avoid asking.” I was remembering that day.

      Shoaib actually showed me the negotiable nature of the world, just like this guy was famous for talking about it: http://www.youtube.com/watch?v=GHAJhosbWiM

      I think Americans especially need to be reminded to negotiate, because American culture normalizes buying new cars at sticker price, fixed prices in all stores, and so on.

  5. Thanks Tom for this excellent piece of advice. I always knew that negotiating your first offer is the right thing but your methodology makes it so much easier to do.

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