Better Mondays - Chapter Four | Part Two
Yes, Money Matters
Here’s the next Free Chapter of Better Mondays.
Sign up today to receive each new chapter of the book as soon as it’s published!
Chapter Four | Part Two - Yes, Money Matters
What about using third-party leverage to boost your income?
Right up front, I want to say that I don’t recommend this. Yes, I’ll admit this method has the potential to immediately raise your income after other methods have failed. However, the process is risky, and if your real intentions are discovered, you can damage your reputation and even lose your job.
That being said, I know there are plenty of readers who are going to try it, so I’ll give you an overview of the process and point out as many caution flags as I can.
Here’s how it works:
The goal is to generate an offer from a competitor and use it as leverage to get your current employer to match it. You shouldn’t consider this tactic unless you’ve been with the company at least three years, have an outstanding track record, and your compensation is significantly behind the norm for your industry. In other words, the company has refused to compensate you commensurately for your productivity and needs to be “shocked” into the reality of what you’re really worth.
Here’s your first red flag, and this is vital: Never reveal that you went “shopping” to produce an offer. Your manager must believe the competitor approached you—not the other way around—and the offer came to you out of the blue. Ideally, you’re trying to create a bidding war to drive your compensation as high as possible. However, in reality, that rarely happens. About the best you can hope for is that your company will match the competition’s (higher) offer. This assumes your current employer wants to keep you and recognizes your value as a long-term asset.
How do you generate an offer from a competitor? By letting the competition know indirectly that you would entertain the idea of leaving your current job. One way to start the ball rolling is to casually mention it to neutral third parties—customers, distributors, end-users, and OEMS who are always in contact with the competition. An off-hand comment to their purchasing group, salespeople, or internal management is an excellent way of passing along your interest. Just make sure to convey your interest in a subtle if not subliminal way.
Here’s an example of how to drop the hint: “I’ve noticed the folks over at XYZ Corporation seem to be happy with the compensation program and like the direction the company is headed. I’ve also heard the local branch has a great manager. It’s always good to hear about a company that treats its people right.”
Your goal is to solicit a question or comment similar to this: “I happen to know the manager at XYZ, and if you’d like, I’d be glad to mention you to him.”
Your response? “I’m always interested in talking to great companies. Of course, I’d appreciate it if this remains confidential, just between you and me.”
If you want to push the envelope and be a little more aggressive, convey your interest to someone you trust and who has a personal or business relationship with a competitor. Simply ask them to communicate your interest while stressing the absolute necessity for confidentiality. And remember, you’re never looking for a job, you’re in the process of re-evaluating your career. The key is to always have plausible deniability in the event your current employer discovers you’ve been talking to the competition.
If you’re well-known and well-liked in your local market, it’s not unusual to receive a phone call from a competitor inviting you to lunch or to have a drink after work. Thank the caller for the interest, accept the invitation, and say nothing else on the phone.
During the meeting, keep your comments light and social. You don’t need to sell yourself. The competition already knows about your skill and ability. Otherwise, they wouldn’t be talking to you. Ask a few questions: What are their most critical needs in the local market? Are there any future plans for reorganization? Will upcoming promotions or vacancies create changes in the local office management? Preface your questions by saying you understand if they can’t provide specific answers without a working commitment, but they’re subjects to talk more about as both parties move closer to a decision. Also mention that your relationship with your current employer has been positive; however, you believe it’s a good time to take a look at the current opportunities in the industry.
If the competition has a place for you (or can create one), it’s not unusual to see an offer within a week or two. Express your appreciation as soon as you receive it, then ask for several days to think it over.
Next, schedule a meeting with your manager as soon as possible. If your boss questions you about how the offer was originated, or how much contact you’ve had with the competition, downplay your answer by saying, “I ran into the XYZ regional manager at one of our distributors a couple of weeks ago. He was cordial, and we exchanged a few comments about the weather. I understand he asked the purchasing agent a few questions about me. I think they have a vacancy they need to fill, and the urgency of the situation prompted them to approach me.”
If you have an inside staff job, say that a business acquaintance recommended you for a vacancy and the competition’s interest has taken you entirely by surprise.
Now it’s time to talk to your manager about money—indirectly. The emphasis should be on how much you enjoy your present job, the working environment, and especially the relationship you have with your boss—she’s your mentor, champion, and friend. Add that you had always imagined your career advancement taking place within your current company, and this new offer has resulted in some sleepless nights.
Then it’s your boss's turn to talk. Don’t interrupt. Don’t contradict. And don’t ask for her opinion (what would she do?). If she wants to keep you, she’ll express how valuable you’ve been to the company. She’ll also express how much she wants you to stay. And initially, she’ll probably do it without offering to meet the competition’s offer. It’s her job to retain talented, productive employees and do it as inexpensively as possible.
By the end of the conversation, if your boss fails to offer a monetary consideration to entice you to remain with the company, mention how the additional money isn’t everything, and yet, it’s a consideration you can’t ignore. Your sights are on the long term, and that includes a rewarding financial relationship with your employer. If there’s room for negotiation, you’d like to discuss it.
Then shut-up and listen. What your supervisor says next will offer clues about your perceived value to the company and what future plans, if any, they have for you.
Now, let’s look at the other side of the situation. What if the competitor’s offer is so good you’re tempted to consider it? Keep in mind there are other benefits to be gained—other than a salary bump—by staying with your current employer. By turning down an offer from a competitor, without an increase in compensation, you’re displaying your loyalty and commitment. Corporations love that kind of dedication, and yes, a few are willing to pay for it—in the long term.
Others, however, are not.
Either they won’t be pressured into a game of “match the offer or lose me,” or the current corporate policy makes it impossible to pay more for the job function, regardless of the employee’s productivity. That’s why you can’t always expect a counteroffer to stay. Keep this in mind if you’re tempted to “play hardball” in negotiating a salary increase. You might inadvertently negotiate yourself out of a job you really wanted to keep.
Finally, make your decision on how it will affect the next five years of your life—financially, emotionally, and yes, even physically. Don’t forget to evaluate the opportunities for advancement a new employer can offer that can’t be matched by your current company. Keep in mind that if you make the decision to leave, and you inform your boss of your intentions, you’re done. Be prepared to walk out that day. Once you make it clear you’re moving on, you’ll be considered an unwelcome competitive influence that must be removed from the working environment as quickly as possible.
Now let’s consider the rare situation of being overpaid! Up until now, we’ve talked about a chronic shortfall in compensation as compared to others employed in the same industry and performing the same function. But what if it’s the other way around? What if the math indicates you’re being overpaid?
First, be thankful for your unusual good fortune. But before taking the weekend to celebrate, you need to determine the reason. If a higher salary resulted from accepting a move to a different location, or as compensation for taking on more responsibility without a commensurate promotion or title change, that’s fine. But if you’re getting an extra twenty grand a year because of some vaguely construed relationship—the boss has more than a professional interest in you, you married the vice-president’s daughter, or you were hired for a job paying a higher level of compensation, then transferred or reassigned to a position of lesser perceived value—there’s a good chance the discrepancy is going to be questioned by those whose job is to bird-dog those kinds of inconsistencies.
Do companies ever adjust your compensation downward to correct the “irregularity?” It’s extremely rare. HR knows a financial demotion is demoralizing, and most employees never recover from it. Regardless of the reason for downsizing an employee’s income, it becomes a point of endless contention, and the employee seldom lives up to their professional potential afterward. The usual resolution is termination, either by managing out, layoff, or offering the employee a mandatory transfer to a location they know will be unacceptable.
Unfortunately, there’s seldom a reasonable compromise or alternative in these kinds of situations, and if you find yourself on the receiving end of an unrealistically high amount of compensation for your job function or position—and there’s not reasonable, long-term justification for it—you should consider your longevity with your current employer at risk.
Think I'm a bit of an alarmist?
Corporate truth: You will NOT be allowed to receive compensation that is significantly more than the defined maximum for your job position. (At least, not for very long.)
Quick story: Around my eighth year with Acme, my co-worker, Mr. Split, another sales engineer, decided to leave the company to start his own business. During his last two months with Acme, he spent most of his time negotiating with Arthur Electric, a prime potential customer for Acme’s electrical panels and circuit breakers (the metal box on the side of your house where electricity is received from the power company).
At the time, Arthur was one of the largest electrical contractors in the country, which translated into a lot of panels and circuit breakers. Especially circuit breakers—at least a million units a year. With this kind of volume, Arthur expected the absolute lowest price. And after weeks of negotiating, it appeared our company would not be able to meet Arthur’s “magic” number.
Essentially giving up on the deal, Mr. Split turned his attention to preparing for his transition from Acme. As the only remaining sales engineer in the office, I inherited the Arthur account as a matter of course. However, I didn’t give it much thought since Acme had made it clear they were unable to meet Arthur’s bottom line price.
While Mr. Split and I had dismissed the possibility of booking Arthur’s business, the wholesale distributor salesman—“Danny,” an extremely likable guy who could sell sawdust to a lumberyard—wasn’t ready to quit. His company, we’ll call it ABC Distributors, would stock the merchandise, deliver Arthur’s orders, and process the billing paperwork. In exchange, ABC would receive a profit in the form of a mark-up. (At the time, most if not all orders from contractors were handled by distributors, who purchased from Acme and re-sold to the final customer.)
Danny was already making regular sales calls on Arthur, selling them conduit, wire, receptacles, and other electrical components. The opportunity to sell panels and breakers to Arthur represented a large potential boost in income, not only for the distributor but for Danny personally. For example, for every nickel the distributor added to the price of a circuit breaker, they would generate at least fifty thousand dollars in annual income, (based on selling a million units).
About a week after Acme had made it clear they were unable to meet Arthur’s prices, I received a phone call from Danny. He asked me if I would make one final presentation to Arthur. He specifically wanted me to pitch the quality of our product and the distributor’s commitment to provide a back-up stock to prevent shortages of material. He wanted to stress the value of those two benefits when calculated in reduced warranty calls and elimination of work delays from back-ordered components.
After a few phone calls, the purchasing agent agreed to meet with us. I advised Mr. Split of the new meeting, and he told me to “give it my best shot,” adding, “but you’re probably wasting your time.”
After an hour-long presentation, Arthur’s purchasing agent was impressed. The idea of saving money by reducing warranty service calls and the elimination of back-orders was appealing to him. Not only from the financial aspect but from the hours it would save in paperwork and administrative follow-up. Rather than being forced to process a predictable number of additional job orders due to component failures with brand X, he could expect a much lower number of warranty call-backs, customer service problems, and reorders by switching to Acme.
He gave us his bottom line number. It was a few pennies higher than the previous price target, but still very low. The distributor salesman was disappointed. He knew the price-point was probably unattainable. But I was familiar enough with our company’s production costs to realize there was an opportunity for Acme to benefit from economy of scale. Adding another million circuit breakers to the company’s existing production had the potential to raise the profit margin across the board—for all circuit breaker orders.
I presented the numbers to Acme’s product manager; emphasizing Arthur’s use of Acme breakers would make them a default endorser of Acme products. I topped it off with a pitch to his ego, adding that having the nation’s largest residential electrical contractor as a customer would entitle upper management to a lot of bragging rights at future industry conventions.
It took two more weeks of meetings, phone conversations, and number crunching at the corporate level. In the end, the company decided to meet the price and take the business.
Now, here’s where the story gets dicey. As a sales engineer, I was paid on a salary plus bonus plan. The amount of my bonus was calculated as a measure of dollars sold against an annual quota. For example, selling a million dollars annually against an assigned quota of the same amount meant you were performing at 100% of quota—acceptable, but not a stellar performance by any means. The amount of bonus generated from meeting a million dollar quota was also rather meager, producing a bonus of about six to eight thousand dollars annually.
However, as sales exceeded quota, the numbers improved substantially. With the additional sales credit I would receive from the new Arthur business, my performance (compared to my quota), would shoot through the roof. Instead of receiving a bonus of ten to twelve grand that year, my bonus would be closer to fifty thousand.
But I didn’t deserve it. I had picked up the ball where Mr. Split had left it—at the ten-yard line. I had simply carried it over the goal for the touchdown. But Mr. Split was leaving the company before the bonus payout and would not receive any financial benefit from the new business.
In one of our last conversations before he left the company, Mr. Split recommended I take fifty percent credit for the new business—a more realistic representation of my contribution. I would receive a very nice bonus for my work, and the company would not have to pay the full amount—a fair compromise since the business was un-anticipated and came to me as a windfall.
I suggested this to my manager, explaining my rationalization. He agreed, and complimented me on my “reasonable” approach to the situation, adding that my decision would not only add to the financial benefit received by Acme, I would also be remembered for doing it.
Over the next two months, the first of Arthur Electric’s orders began flowing into the system. My next bonus statement showed over fifteen thousand dollars in bonus earnings to date.
Even though I knew I could have received a much higher payout by insisting on full credit, I was happy. I would enjoy a nice financial boost, and I was certain my performance had caught the attention of upper-level management.
I was right. I was receiving plenty of attention. But it was all the wrong kind.
The next month, my bonus payout estimate was reduced by half—even though Arthur’s business continued to increase. A week later, a revised estimate showed the payout to be a few thousand dollars, and by the end of the month, any bonus consideration from the new Arthur business had been removed from the report.
“Why?” I asked my manager. “What’s going on? I didn’t think it was possible for the company to manipulate the sales numbers to lower a bonus payout. Is that even legal?”
My manager, let’s call him Mr. Robert Doty, didn’t try to soften the blow. “The company thinks you and Mr. Split are in collusion, and that you plan to pay him half of your bonus under the table. They don’t believe you had anything to do with booking the new business and shouldn’t be paid anything. In fact, there are a few people who think you should be fired for trying to misappropriate bonus money that doesn’t belong to you.”
I went home early that day—unusual for me. Previously, I’d thought nothing of working at my desk until seven pm or coming in on a Saturday for a few hours to catch up on paperwork.
But I knew as I left the office and walked through the parking lot, the days of putting the company first were over. I had just brought the company over a million dollars in new, repeating business, and in exchange, they had branded me a liar and a thief.
I didn’t take it lying down. I complained. I asked for an explanation. I pleaded for an opportunity to present my side of the situation. Mr. Split even wrote a letter verifying my participation in negotiating the final numbers and putting the contract together. He added that I was entitled to receive the money and confirmed there were no illegal or unethical arrangements between the two of us. Even the distributor salesman, Danny, called my manager, wanting to know if he could help clear up any confusion about whose efforts were responsible for booking the new business.
My boss called to deliver the final answer. In this case, he was simply the messenger, as the decision originated from his boss, the regional manager (we’ll call him Mr. Regional). It was short and to the point. “If Reid doesn’t drop this issue, I’ll fire him.”
“Mr. Regional is a real asshole.” I said it out loud.
I couldn’t think of a more appropriate response. While my boss didn’t respond to my comment, I got the feeling there was a big part of him that agreed with me.
Still not ready to throw in the towel, I asked my manager what he thought about me talking directly to the vice-president of sales. After all, I’d just been tried and convicted without being able to tell my side of the story. And I was damned sure Mr. Regional was enjoying his increased bonus as a result of the new business.
My boss strongly advised me to drop it, especially if I wanted to keep my job.
It was difficult to walk away from a situation that was nothing more than a malicious fiction, created to cast a negative light on my intentions and actions—especially when I was being threatened with termination if I tried to defend myself with the truth. But I knew the regional manager’s motivations reflected a personal agenda, and without knowing his end-game, I was at a huge disadvantage.
For every employee that eventually leaves the corporation for greener pastures, there is a turning point, an event or situation that reveals the intolerable truth about the relationship they have with their employer.
This was mine.
Acme had burned the bridge connecting my future with theirs, and they’d left no doubt about who’d struck the match. Discovering that management could give a rat’s ass whether I stayed or left was disheartening, and it made me realize it was time to turn my attention to other priorities.
My change in attitude was fueled not only by the arrogance and self-interests of the regional manager but by the discovery that my performance—as measured in dollars and cents—had a limited effect on my compensation. Although there was a supposed correlation in the bonus plan, I’d realized the system was subject to manipulation and was as about as far from a dollar-earned, dollar-shared relationship as you could get. Instead of “paying more for doing more” (management’s motivational mantra at the time), my compensation was controlled by two things:
(1) A negatively weighted, inversely proportional formula
(2) The subjective whims of management
And that made the unofficial policy very clear: No matter how much business I did, or how much profit I made for the company, my compensation was based on the average amount the company was willing to pay for someone in my position who adequately performed the responsibilities associated with the job. I could only assume this was true regardless of how far up the ladder of management I climbed. And after the Arthur Electric fiasco, I was sure that wouldn’t be very far.
There are very few secrets when it comes to employee compensation. Company owners and “purse-string” managers must stay ahead of the game. They take great pains in designing compensation programs to make sure employee income trails productivity. While they may justify this rationale with their “commitment” to a long-term, economically secure relationship (I just heard some of you gag), their real motivation is based on maximizing their return on investment—the one they made in you—and maintaining a specific limit on the amount of company profit they are willing to share with non-owner employees.
Here’s the bottom line: Once you’ve become a regular fixture within the system, management expects you to continue to perform at acceptable levels. Surpassing those levels with exceptional performance will be noticed and perhaps acknowledged, but it will not be recognized as the result of a super-extraordinary effort on your part—because you’re a captive asset. You’re part of the company, and it’s your job to do everything you can to contribute to its success. From their perspective, your outstanding achievements are not exceptions, they are what the company hired you to do, and becoming exceptional is an indication of your long term value.
In other words, continue to do outstanding work, and you get to keep your job.
Coming up next from Better Mondays: Chapter Five: Your Boss - The Care and Feeding There
Thanks for reading,
Roger A. Reid, Ph.D. is a certified NLP trainer with degrees in engineering and business. Roger is the author of Better Mondays and Speak Up, and host of Success Point 360 Podcast, offering tips and strategies for achieving higher levels of career success and personal fulfillment in the real world.
Thanks for reading Better Mondays! Sign Up Now to receive new chapters every week.