Compensation

Hello!

I hope you’ve had a good week.

I'm sorry that you've had to wait a month (!) for the next instalment of my "weekly" newsletter (following the last instalment sharing Steve Vamos' CEO wisdom). I spent most of April in Asia with my colleagues and our clients there, before properly downing tools for some time off with my family.

Since coming back, I've really enjoyed resuming my Friday career advice sessions - your chance to ask for 1-1 guidance on your specific questions / issues. The breadth of questions we've covered has been really energising!

One of the topics that routinely comes up on a Friday, is compensation. So I thought it'd be helpful to dig into that this week.

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 Work to live. 

The vast vast majority of us work to live.

Yes, we might derive huge personal satisfaction from our professional achievements and progress. We may well enjoy spending time with our colleagues too.

But being paid is a ('the' for many people) reason to work. A means to afford and enjoy life outside of work. 

It's all too easy to get caught up in the stresses, strains and long hours of professional life. So in turn, in can be all too easy to forget that we work to live.

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 Write your resignation letter.

Just refocusing on "work to live" for a while, can - in itself - help us take a different approach at work.

A useful exercise - shared in my guest interview with Shruti (UK MD of Meta) - is to behave at work as though you've resigned (to do this, actually write your resignation letter and put it in a drawer).

Interestingly, more often than not, that behaviour you might associate with "leaning out", actually leads to periods of the fastest career progress - in learning and often in pay too.

The shackles come off and you often cut through in a more compelling and noticeable way.

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 3 most common mistakes I see made.

As I look forward to welcoming Matthew Wright (former CEO of Russell Reynolds) to run a compensation masterclass next week, I thought it'd be helpful to share my advice against the 3 most common mistakes I see made as people consider compensation at their current employer or look to negotiate an offer elsewhere.

By the way, if you'd like to join the session with Matt, just reply to this email and I'll send back the details.

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 1. Not knowing your worth.

The key starting point in any potential compensation negotiation is not what you're currently paid. Rather, it's what the market would be happy to pay you.

If you're trying to re-negotiate at your current employer, it's crucial to benchmark what you could be paid elsewhere. You can then frame the comp differentials as "creating a reason to consider leaving" when your preference is to stay and continue to add the value you've been adding.

Sadly, sometimes this requires you to go get another job offer. I know of some organisations who rarely budge, unless they're forced to counter-offer at the last minute to stop someone jumping ship. 

For most organisations however, presenting your case referencing a number of market reports for triangulation (Movemeon produces these for example) can lead to the right outcome.

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 2. Overly focusing on next year's basic salary.

Having placed over 10,000 professionals in over 5,000 organisation worldwide, this often shows up as an issue. There are a number of good reasons to think more broadly:

• Organisations (particularly larger ones with salary bands) often have LEAST flexibility to negotiate year 1 basic salary. The role will have been budgeted into a salary band and often into the first half of the band to allow for in-band promotion. It's often far easier to land a sign-on bonus than a big year 1 salary bump.
  
  
• As you become more senior, annual basic salary often becomes the least material part of a package. Bonus and stock / LTIP in particular, can materially eclipse salary. Negotiating these well is likely to make the big difference in the longer run.
  
  
• Compensation progression has more impact than year 1 package. Don't get me wrong, both are worth knowing and negotiating. I encourage coachees to build a simple 5 year view in a spreadsheet and ask for the information to fill in the "5 year total compensation based on good performance" picture. No organisation is going to sign that into your contract. But it's useful to be able to reference back to that conversation and data, if you feel your package is being held back after the first year or two.

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3. Not knowing exactly how much you NEED to earn.

Remember "work to live"?

It's easy to over-estimate how much you NEED to earn. 

When I ask my coachees this question, two things are common:

1. They don't know the number.
2. They over-estimate the number.

This can create a scenario where you feel "trapped" into a career / role to earn a certain income that you don't actually need.

An exercise I suggest coachees do (which everyone finds powerful) is to go away and build a spreadsheet (with their other half if applicable) and forecast their income needs. Factor in outgoings & how they might change, lifestyle desires, savings, potential windfalls etc etc. 

When people come back to me after running the numbers, more often than not what they NEED to earn is materially less than their initial guess.

That realisation buys you choices:

• Perhaps you want / need to work fewer hours? Or none at all?
• Or pursue a career in an industry you're passionate about but potentially take a step down to do that? 
• Maybe the social sector has always been a calling you've overlooked due to financial constraints.
• Time off might become feasible - potentially to start a business, venture out on your own as a freelancer, spend time with family or just take time to take stock.

None of this is to say that you shouldn't earn really well and pursue - or continue with - a career of that nature. The point is rather, that the realisation you have choices can bring a clarity to your career that is easy to lose in the daily grind. 

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 So, perhaps ask yourself this question: How clear are you about how much you can and need to earn?

Giving that some thought (and spreadsheet time) is - in my experience with coachees - time that can be transformative.

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I hope you enjoyed this edition. 

Wishing you a great weekend and do let me know if you'd like to join for - or access the recording of - the Compensation Masterclass with Matthew Wright next week.

All the best,

Rich