Salary Negotiation: A Case Study

By Joan Stoia

Director of Career Services

University of Massachusetts at Amherst

 

When Dan Butler graduated from college two years ago he took a job in wholesale sales as a territory manager for a company in the health industry. Prior to accepting the offer, Dan researched the company in much the same way as other new graduates. Using the Internet, he looked up the web page, read the annual report, followed the stock price for a few weeks, spoke with alumni about life as a wholesale sales representative, and used wage and salary information available in his college career office to evaluate the monetary aspects of the opportunity.

In the process of exercising “due diligence,” that is obtaining as much information as possible in order to make an appropriate decision, Dan discovered that the figure he was quoted was about $3,000 lower than the regional average for the position. When he relayed his concerns to the hiring manager of the company, she assured him that the company's bonus and salary progression schedule would bring him up over the regional average within 12 months. She indicated that if he met the sales goals that were set for him, Dan could expect a 3.5 percent raise at the end of his first 12 month review period in addition to a cash bonus that would be tied to performance. The picture she presented was one of a growth-oriented, forward thinking company that invested in people and was committed to bringing in talented new graduates like him in order to breathe life and ideas into a moribund sales force. In June of 2001, Dan accepted the offer.

During the first year, Dan's region suffered the worst economic downturn since the early 1980's and, despite his own stellar performance, company sales fell far below earlier projections. While he received a favorable review and a small cash bonus for his efforts, his manager informed him that, unfortunately, no one in the company would receive a raise that year. Dan's salary level was now several thousand dollars lower than his classmates, but he had gotten a bonus. He sustained himself with the fact that he enjoyed the work and agreed with the “core values” espoused by the company, such as honesty and integrity. Despite the economy and rumors about the company's stability that swirled continuously throughout the sales force, he applied himself and achieved his second year sales goals.

With economic recovery in full swing, Dan approached his 24-month review with optimism. Instead of a raise, Dan's manager delivered the news that since the time that he had been hired and the current review, the company had changed its compensation policy. Instead of salary increases for everyone who achieved their goals, the top performers would be assigned “points” and only those who received the highest number of points would be eligible for a salary increase. Unfortunately, she said, Dan's point total did not place him among the winners. Twenty-four months out of school, his salary lags a full $10,000 behind his classmates and he is re-evaluating his relationship with his employer. Where did Dan go wrong?

Salary negotiation is one of the least understood aspects of the job search. As Dan's case amply illustrates, what candidates fail to determine during the process of evaluating and accepting job offers can cause a great deal of anguish down the road. Experts agree that, ultimately, salary growth is more important than starting salary. It is also the hardest thing to predict. How much information about salary progression is available to candidates and how hard can they push without placing that all important job offer in jeopardy?

Conversations with recruiters reveal that there is very little that companies will commit to in writing with regard to salaries beyond the dollar figure listed on the offer letter. Even if Dan had insisted on a written offer, it would probably not have contained any reference to his prospective employer's performance review and reward system. Nevertheless, a written offer, which documents the new hire's starting annual wage and the presence or absence of benefits, is a must for anyone considering a job offer.

Aside from the salary figure and a statement about health and related benefits, the content of offer letters differs from employer to employer. They may include information about important non-monetary incentives

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