Heads up. This is a bit long winded / ranty.
I’ve said before that it’s a good idea to find one’s way to the top of his / her pay grade as soon as possible. This isn’t being greedy… it’s simply acting with an understanding of the reality that the employer and employee are 1. There are a few companies that pay at p90+ (true pay leaders), but as a general rule companies will only pay you what they have to for services rendered. You shouldn’t begrudge employers for this – it’s simply good business. naturally in conflict where it concerns extrinsic reward. 1
Making one’s way to the top of their pay grade is easier said than done, though. Generally speaking, there are only four ways to quickly make it to the top of one’s pay grade (the slow way is to be in the same job forever):
A. Be an extremely high performer (in which case large merit increases and discretionary bonuses should move one along pretty quickly).
Ideally, however, if one is performing at a high level a preferable outcome is being promoted (it’s better to be at the midpoint of a job paying 100k- 2. This of course begs another question. How quickly after stepping into a new pay grade / receiving a new promotion should one expect to find themselves at the top of the grade? This depends on a number of things (the width of the pay grade / job band, performance etc.). My general rule is that if a rival employer would pay an employee at the top of their grade (and the work adds similar value to the respective organizations), so should the current employer. Of course, there are other things to life besides money, so keep that in mind when applying this principal. 150k than to be at the top of a pay grade with a range of 75k-100k 2).
B. Nepotism (this isn’t a recommended path to more money for lots of reasons that I’ll get into another day).
C. Get demoted (Typically not the outcome one is looking for).
D. Negotiate up.
This last methodology (negotiation) is what I want to talk about today, and mastering it requires an understanding of one very simple principle:
Whether one is asking for a raise internally or (conversely) negotiating an offer in the external market, the Best Alternative To a Negotiated Agreement (BATNA) is the primary driver in what compensation an employer will pay for services rendered.
Every job has a pay range, and the typical employer will look to pay employees as low in the range as possible (while maintaining both internal equity and adhering to the organization’s pay philosophy). The important thing to remember here is that every job has a range (and at some companies pay ranges can be fairly wide). This leaves a lot of room for negotiation.
Unfortunately for employees, employers have gotten very good at negotiating the minimum increase possible. When extending an offer (internally or externally), an employer will most often look at the applicant’s prior salary and then (in an overwhelming majority of cases) offer an increase of (anecdotally speaking) between 5% and 15% above the present base. Getting more than this requires that one is either grossly underpaid relative to one’s peer group in an employee population, or else that they have a better alternative to a negotiated agreement with the employer that compels it to make a stronger offer.
…And therein lays the challenge: If companies everywhere are operating within a very narrow range as it concerns salary increases, the potential wage increase an employee can get via going out into either the external market or being promoted internally is fairly limited.
Do not despair, for there is good news: For top performers the market is fundamentally different. If one has an in demand skill set *and* insists on not disclosing prior salary via the negotiation process, it is possible to see a realized pay increase significantly above what is typical in the market.
When job hunting with the highest possible compensation package in mind, the 3. This does *not* mean interviewing with a company expressly to get a job offer you intend to leverage against another. I’m a strong believer in candidates only applying and interviewing for jobs they’re legitimately interested in. You don’t *have* to do this, but in my opinion it’s best practice to interview in good faith. key thing to remember is that you are collecting offers. 3 You need only one employer to extend an offer based around your desired (fair market) salary as opposed to you current salary. At that point, for the purposes of negotiation with other employers your prior salary is now irrelevant. Your best alternative to a negotiated agreement (BATNA) is no longer your prior /current salary – it’s the highest salary offer you have from another employer.
…With all that said, I want to close by pointing out that from a compensation perspective everyone can’t be at the top of their pay grade – it just isn’t tenable (pay ranges are called ranges for a reason – incumbents fall at various places within them).
On the other hand, in a true pay for performance environment top performers should be paid at or near the top of their pay range. Ergo, if one is a top performer and isn’t being paid commensurate with their fair market value this is some advice that should help them get there.
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