The Fairness of Getting a Raise

A reader recently asked me how to request a raise when you are making more money than others in your office. Before answering this question, I would like to point out that asking for a raise is not always a good idea, and that one should know one's market worth before trying to get an increase. If you decide to ask for a raise, there is such a thing as the correct way to ask for more money. Now that I have gotten this out of the way, let me address the specific question.

What others in your office make should have very little bearing on your ability to ask and to get a raise. Businesses should be run as meritocracies, with the best performing players receiving a disproportionate share of the rewards. More importantly, you need to understand that your compensation can lie anywhere on a range of values. The top end of this range is the value that you create for your organization. No sane employer will pay you more than the value you bring into the company. The low end of the range is the minimum amount for which you are willing to show up in the morning. Any value in between those two extremes is a possible and valid outcome for your compensation. Where you actually are on this range depends on a number of factors, including:

Your Negotiating Skills - if you don't ask for a raise, don't expect one. If you don't actively negotiate your pay and effectively make your case based on market data, don't expect your compensation to be on the high end of the scale.

Office Policy - some organisations have pretty inflexible payment structures. Government and unionized organizations are the best examples of this. Take for example most public school teachers - the best ones make the same amount as the worst ones, accounting for location and seniority. In fact, that's one of the things that is so wrong with our public education system. Since people are greatly motivated by financial incentives, the lack thereof leads to mediocrity and to poor performance. That's one of the reasons that I am very suspicious of labor unions.

Your Relative Performance - note that I am not talking about your absolute performance. I am talking about your job performance as it compares to the performance of your colleagues. You may be a perfectly competent physicist, but if your co-workers are Albert Einstein and Enrico Fermi, don't expect to be rewarded based on your performance... your boss always judges your performance compared to that of your peers.

Economic Environment - in a free economy, you are an economic asset and your price is set by supply and demand. In an economic downturn, with many competent people searching for work, your price diminishes, since you are potentially easier to replace.

In short, if you are paid more than your colleagues, but deliver outsized performance, if you can demonstrate your worth to your boss, and if your organization does not have an inflexible compensation policy, what your colleagues make should have little impact on your ability to negotiate better pay.

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Is Your Job the Right One for You?

My job is the right one for me. This realization dawned on me a few weeks ago, and I can't tell you what a relief that was. I mean, I have been pretty happy in my job ever since I joined the company about 10 months ago, but there is more to it than that. The job that's right for you does all of the following: makes you happy, takes you to the next step in your career, teaches you new things, expands your options, rewards you financially and more. Let's discuss a few of those and how they relate to my current position:

The Job Makes You Happy - everyone has their good days and bad days at work, but if your job is right for you, the good days are much more frequent than the other kind. A good sign that you are happy in your work is that you find it easy to go to work in the morning and you don't mind working hard. I have never been someone who is in love with their job to the exclusion of all else, but my current position makes me happy.

The Job Takes You to the Next Stage - career path is one of the most important things about a job. If your position is not taking you in the direction you want to go, it is not the right job for you. Don't get me wrong - many people find their jobs completely satisfying knowing full well that their positions don't offer too many opportunities for advancement. That's a very legitimate attitude, however, for career oriented professionals such as I, taking a job that doesn't move your career in the right direction is simply a bad choice. In this sense, my current position is superb: I am getting a great deal of exposure, I have been given a great deal of responsibility and I have no doubt that come the time, if I perform my job well, I will be able to use my current position as a springboard to my next executive position. That's probably several years in the future, but I am certainly getting properly trained.

Your Job Teaches You New Things - here is my philosophy: if you don't feel at least a little like a fraud each day at work, you are not in the right position for you. The right position for you is one that makes you stretch and do things you have never done before. When you get up in the morning to go to work, you should be feeling at least a little nervous. One of my business school professors used to say "knowledge makes a bloody entrance". I say, bring it on. At least several times a month, when I am on my way to work, I wonder if I will be able to pull off the task I am expected to accomplish that day. For example, over the past few weeks I have been negotiating a deal that is critical to the survival of my company. If I make a serious mistake,  my company will be in big trouble. How's that for pressure? I love it. However, it is important not to take this to the extreme. Never take a position for which you do not have the qualifications to succeed. Utter failure does not exactly advance your career.

Your Job Should Expand Your Options - when you finish school you have a huge number of options open to you. You can choose to become a doctor, an actress, a yacht captain. Hell, you could decide that juggling is your life's calling. The further you progress in your career, the fewer options remain open. I mean, if you have been working as a chemical engineer or as a nurse for 20 years, you are very unlikely to be hired as a museum curator in your next gig... so what do I mean by "expand your options"? I mean that specialization is good, but pigeon holing is bad. If you are a marketing professional that has been doing only PR for your last three jobs, your options aren't expanding very much. Chances are your next job will be limited to PR as well. In that sense, my current job has opened up a sea of options for me. My career has been mostly in business development and law. In my last position, I used my business development expertise to grow into a marketing role and eventually led my company's outbound marketing activities. In my current position I get to use every business skill I ever developed. I negotiate large contracts, I have a central role in business strategy, I own our outbound marketing efforts. I am also involved in many areas which I have never dealt with before, such as finance and operations. In this sense I am becoming a more rounded executive and this will allow me to fit into a larger number of future positions.

Your Job Should Reward You Financially - duh! But there's more to it than that. Even if everything else fits, taking a position that does not offer the financial rewards you need, is not smart. I am not advocating that job seekers never accept a lower paying job. However I am suggesting that for better or for worse, most of us use our paycheck as a measure of our success. It may be an imperfect measure, but it is the only objective way for us to compare our position to that of our peers. I also believe that if people don't feel that they are being properly compensated for their efforts they find the experience de-motivating, and ultimately there is a good chance that their performance will be impacted. On paper, my compensation in my current position is about 20% higher than it was in my previous position. However, in practice my cash compensation is roughly the same as it was previously even though my responsibilities and title are substantially increased compared to my last job (that, however, is a topic for another post). 

I would like to acknowledge Brip Blap, whose post "How to Succeed in Your Job" has inspired me to write this post. 

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Asking for a Raise? Consider Context

If you are going to ask for a raise, the context for your request is almost as important as the rationale you are going to use to justify your request. Here are a few important things to consider:

1. Don't Ambush - asking for a raise is not something that you should do casually and it's not something that you should surprise your boss with. If you plan to ask for a raise, make sure that your boss is aware that this is the intended topic of the conversation or bring up the issue during your periodic review, when your boss is probably anticipating such a request. If you ambush your boss, you risk out of hand rejection.

2. Find the Right Time - if everyone is racing against time to complete a project or working around the clock to meet a deadline, it is probably not the time to ask for a raise. Schedule your conversation in advance at a time you know is going to be less hectic. Give your boss the opportunity to listen to you calmly and at length.

3. Consider the Circumstances - if your company is struggling or times are tough in your industry, think twice about asking for a raise. An untimely request may be considered unrealistic or even position you as someone who simply doesn't get it. 

4. Consider the Boss - your chances for success are higher if your boss is in a receptive mood. If when the time for your salary discussion comes you notice that your boss is agitated, under pressure or otherwise distracted, consider asking that the meeting be postponed.

If you are interested in this topic, you may also be interested to learn how to NOT ask for a raise and how to ask for ANOTHER raise.

Want to Know What Everyone in Your Company is Making?

Earlier this week I received via e-mail an Excel file that I needed for a project that I am working on. When I opened the Excel, I noticed that it contained many more tabs than I was expecting, and one of those tabs listed the salaries of EVERYONE in my company, including every executive and the CEO.

Could you resist taking a look? I couldn't. Here is what I found out: I am the lowest paid executive in the company, which is not surprising given that this is my first executive position. What surprised me was the fact that the difference between my pay and that of the highest paid executives (other than the CEO) was fairly small - about 25%. Interesting.

I also found out that some of the engineers in the company make about the same salary that I make. Once again, this does not surprise or dismay me. Some of these guys are very, very experienced and fill positions that are in extremely high demand. The only discovery that really surprised me was that a particular individual - who the CEO last week proposed to add to my team - is making more than me. If he does end up on my team, and I would officially be told his compensation package, I wonder how the CEO is going to explain the fact that one of my team members is more highly paid than me.

The real benefit of getting this information is the fact that per my employment conditions my salary will be reviewed in 5 months from now. I now know exactly what compensation I should be negotiating for. If you are about to ask for a raise or enter into salary negotiations, and do not gain such serendipitous access to internal documents, check out this post about how to find out what your market value is.

Do you think I crossed an ethical line by looking at the document?

She Makes More Than Me

I have noticed that some men have a problem with their wives making more money than they do. What a crazy notion that is. Some women feel bad about making less than their husbands or feel that their pay check may not be worth the effort. That's just as crazy. Here is the way I see it: marriage is a partnership. You share the responsibilities, the obligations and the rewards. If one of you does well, you both benefit. However, feelings are feelings and it's tough to ignore them, so here are some techniques you can use to make both parties feel better about the relationship and about their earning power:

1. Acknowledge the Facts - unless you have a magic wand you can wave around to change your respective earning power or fundamentally change the circumstances that brought you to where you are today, you are going to have to live with reality. One of you makes more than the other. Put that fact on the table and find a way to make peace with it.

2. Understand that Things Can Change - "for richer or for poorer" is not just an empty statement. Things in life change. Today you are making more than him, tomorrow something happens and the roles are reversed. God forbid, the higher earning partner could fall ill, lose their job or decide to accept a lesser paying job with more job satisfaction. The situation you are in now is not permanent. The important thing is to understand that your partner is a part of your financial foundation - a sort of diversifying asset, if you will. Isn't it a great thing to know that if things go badly for you, you can rely on someone close to carry you through?

When I was getting my MBA my wife was raking in the dough. This was at the height of the dot com bubble and her stock options were worth a nice chunk of change (no, we did not sell at the right time). She made much more money than I could generate from my measly teaching assistant gigs. She also contributed much more than I as I was going through law school. Now things have changed for us, and who knows, they could change again.

3. Trick Yourselves a Bit - who said trickery is a bad thing? The better earning partner can bear more of the deductions to allow the lower paid partner to bring home a bigger check. For example, the higher paid partner could ask for a higher withholding level, which would allow the lower paid partner to claim more deductions and increase their take home pay (as long as you end up withholding the correct amount - IRS penalties and interest suck). Similarly, the better paid partner could bear the costs of the family health care and any flexible spending accounts, again increasing the other partner's take home pay. If you decide to go this route, make sure that you are not opting for worse or more expensive medical coverage or for lesser benefits, just to make yourselves feel better.

4. Consider Your Full Contribution - I make more money than my wife these days, but she spends much more time with the kids and that's worth a bundle. It is frequently the case that the lower earning partner contributes more around the house or with other responsibilities. Make sure that you acknowledge this fact and give credit where credit is due. These additional responsibilites are just as important, if not more important, than money.

5. No Extra Credit - It is also important to acknowledge the fact that just because you bring in more cash than your partner, you are not entitled to more control and have no more rights to that money than does your partner. One of my colleagues at work once told me that he "gives his wife an allowance". This statement rattled and disgusted me. If you treat your partner as you would a child, and if you do not recognize the value that you each bring to the table just because one of you is currently making more money than the other, than I am afraid the future does not bode well for your relationship. Seriously, marriage is, first and foremost, about sharing.

6. Motivate Each Other - recognize that your financial futures are tied together, as are the rest of your lives. If one of you feels unhappy about your level of income, motivate each other. Help each other network, find a new job, get a raise, start a business, get an education - whatever it takes to improve your financial situation as a couple.

As a bottom line, I would like to leave you with the following thought: marriage is a partnership, not a contest. If one of you makes more, it only means that together as a family, you have more. It's a good thing.

Stay at Home Parents Pay a Professional Price

When our twin sons were born, my wife and I faced a decision. We needed to decide whether my wife would take a break from the corporate life to stay at home with the kids. Having me leave my job was never an option since my income is substantially higher and, quite frankly, I don't think that I could become a stay at home dad and remain sane.

At the time, my wife was working her old job, and her salary was barely enough to cover day care costs for the three boys. So seemingly, the financial decision should have been a simple one. After all, why work if your entire salary gets immediately signed over to Uncle Sam and a couple of day care centers. Right? Not so fast.

Here is the trick. Parents contemplating the stay at home option tend to make the financial portion of their decision based on their current financial situation. However, there are three additional financial factors that need to be considered:

1. Loss of Experience - as your career progresses and you gain more experience, your compensation increases. Say you are thinking of taking a five year break from work to stay with your kids until it's time for them to head to kindergarten. During that period you lose not only your current income, but also any pay increases you would have gained had you continued to work. You also lose five years of experience which are directly translatable into compensation and probably into a more senior position at work.

2. Loss of Skill - the term "use it or lose it" may be a cliche, but it's right on the money. If you stay out of the labor force, your skills degenerate. Let me give you a personal example: my readers know that I hold a law degree, but I haven't practiced law in 8 years (I like to think of myself as a reformed lawyer). At this point most intelligent people would not hire me as their lawyer, and with good reason. I am so rusty and out of shape that I couldn't even credibly play a lawyer on TV. The same is true for virtually any other skilled or professional position. Your degenerating skills mean a lot less pay down the road when you do decide to jump back in the water.

3. Rejoining the Labor Force is Tough - I am currently in the process of hiring another member for my team. I am reviewing dozens of resumes, some of them sent by people with some useful background and experience but with some unexplained gaps in their work history. Now, I am sure that many of these gaps can be easily explained away, the problem is that I review a very large number of resumes and only have time to interview a limited number of candidates. Do you think I am going to choose to interview someone with a stellar and steady career track? Or someone which has some clear holes in their resume but which could potentially be explained away? Don't get me wrong, I am not saying that people with work history gaps can't rejoin the labor force, only that it is not an easy matter, and many find themselves accepting lesser positions to get back into the game.

I am not arguing against stay at home parents. However, I am suggesting that most people underestimate the long term financial implications of the stay at home parent decision. For many people staying at home with the kids turns out to be a very smart and emotionally satisfying decision, however before making that decision, be aware of all of the career consequences associated with your plan.

For those making the decision to go back to work, I have a couple of pieces of advice:

1. Don't Feel Guilty - many families feel that they are doing a disservice to their kids by sending them off to daycare at the age of only a few months. I can attest from personal experience that children of working parents can grow up to be well adjusted and happy adults. My parents both worked since we were very young and my siblings and I have all remained pretty much jail free and advanced degrees are common in my family. My own five year old is as smart and well adjusted a boy as you can hope to meet (if I do say so myself). He is a very happy child, in spite of (or perhaps because of) having started at family daycare when he was 4 months old.

2. Work to Pay for Day Care - many couples with more than one kid feel that one of them is simply working to pay for day care. Getting your paycheck and seeing that your take-home pay is more or less equal to the daycare bill, can be emotionally difficult. To cope with this, my wife and I made some adjustments. For example, we put all the kids on my company's health insurance. Health premiums are deducted from my paycheck leaving a bigger paycheck for my wife to take home. We decided that we would fund our medical and child care flex accounts all from my salary, for the same reason. Similarly, you can decide to stop contributing to your 401K for a short time, if this helps you to feel better about your salary.

These changes were more or less cosmetic. I mean after all, does it really matter which pocket the money comes from? It turns out that it matters a great deal psychologically.

3. Finally, Do what Feels Right - regardless of anything I said, or of anything anyone else may say, make the decision that feels right for you. You will not hear this frequently from a personal finance blogger, but to hell with the money. Happiness and your family are the most important considerations. Make the decision that will make you happier in the long run.

Coincidentally, Trent, from The Simple Dollar is apparently considering this very issue right now. Check out this very interesting post about his greatest financial concerns.

How to (NOT) Ask for a Raise

Last week I wrote a post about How to Ask for (Another) Raise, which explored my strategy for increasing my compensation and my discussions about the topic with my boss. Today's article is a mirror image of that other post. It's about one of my team members asking me for a raise. This article may seem a little heartless to some of my readers, but I assure you, what I describe below is the way that the vast majority of managers think about the topic of salary discussions with their team members.

Here are some of the things that you should never do when asking your boss for a raise. Believe it or not, the team member that I am referring to has made every one of these errors:

1. Don't Give Me Ultimatums - making statements like "it's now or never", give your boss an incentive to say: "OK, never". Do you seriously think that threatening me is going to increase the chances that I will fight for your raise? If you want to leave, leave. Don't tell me you are going to do so.

2. Don't Bug Me - do you think that you are helping your case by bringing up the topic of a pay increase every time you get me alone for 3 seconds? Instead of making your case, you are simply antagonizing me. There is a time and a place for everything, and compulsively raising the issue twice a week is not the way to go.

3. Your Financial Issues are Not My Concern - a manager's job is to manage his team. One of his responsibilities is making sure that his team members are well compensated, in accordance with their performance. Notice I didn't say in accordance with their financial challenges or personal needs. Happily, we are living in a capitalist society, not a communist one. The fact that you decided to buy a house, are thinking of buying a new car or are planning to have another child, are completely irrelevant to me when we are discussing your compensation. I don't hand out raises to those that most need them, I award raises to those on my team who perform best and that I most want to retain.

4. Do Your Homework - before you ask me for a raise do your homework and figure out your market value. Seriously, have you heard of salary.com? Also, before we talk turkey, do you have a good sense of what I think of your performance? Are you considered a star performer or are you scraping by? If you are asking for higher than average market pay for your level of responsibility and performance, all I see is someone who has an inflated and unrealistic self image.

5. Don't Gossip - if another manager comes to me and tells me that you have been speaking to him about your salary negotiations, you are not going on my list of "people to help". If my boss tells me that you have been going directly to her to ask about your compensation, you are not winning me as an ally. In case you missed it, the previous sentence was an understatement.

Here is the bottom line. Finding, recruiting and training a new employee to replace a perfectly good team member is a huge headache for a manager. If your manager has come to rely on your expertise and advice, he will do everything he can to keep you on his team. That means he is very likely to fight for the raise that you are requesting. Moreover, your manager may have a personal stake in getting you the highest raise possible. If my team is well compensated, I am likely to be even better compensated. I have some skin in that game.

Simultaneously, employees should recognize that managers never have enough budget for everything they want to accomplish or for all the pay increase requests they receive. As such, managers need to make some hard choices. When given the choice between giving a raise to a star-performer, who has made a good case for his salary increase; and giving a raise to a complaining, threatening employee who goes above your head or gossips with other managers, who do you think will be getting that increase?

Asking for (Another) Raise

Last week I wrote a post about the raise that I recently received and the interesting circumstances surrounding that raise. If you read that post, you know that I did not receive the full raise I was asking for. This created an interesting challenge for me: how do I communicate the fact that I am not entirely satisfied with my raise, without coming off as greedy, ungrateful or selfish. Here is the strategy that I came up with, which I think is applicable in many similar cases:

1. Thank the Boss - as someone who runs a team, I know that if I make an effort for one of my team members, it is personally important to me that the employee acknowledge my efforts on his behalf. Even though I did not get everything I was asking for, it is clear to me that my boss went to bat for me, pushed for my interests and essentially put her credibility behind my request. Therefore, when my boss officially told me of the amount of the raise and gave me the paperwork (about a week after I received the actual raise in my paycheck), I thanked her warmly and shook her hand. I candidly told her that I appreciated her hard work on my behalf and thanked her for what she was able to obtain for me. Bosses are humans too and like every other person on the planet, they appreciate it when their work is recognized.

2. Do Not Immediately Ask for Another Raise - I strongly feel that it is not appropriate to express outright dissatisfaction with a raise you just received when speaking with your boss. That would send the wrong message. Even worse, it would be counter-productive since your boss would get the feeling that you do not appreciate his or her efforts on your behalf. Why try do to more for you if all they get is a sour face?

3. Setting Expectations is OK - although it is not a good idea to ask for another increase as you are receiving news of your raise, it is very much OK to set the correct expectations, as long as you do so professionally, courteously and in a positive manner. When my boss gave me the raise document, I thanked her for her efforts, and commented that I am very happy with my raise and did not expect that we would be able to get to my market compensation level all at once. By doing that, I believe that I both created good will with my boss and set the expectation that I do not consider my new compensation level to be satisfactory in the long run. In asking for an increase, you want your boss as an ally, not an adversary.

4. Support Your Claims - providing detailed documentation as to your market value makes salary negotiations a whole lot easier. If you provided such documentation prior to being told about your raise, you can always use those materials later down the road to support your new bid for a raise. Every professional should develop an understanding of his true market value, whether or not he is re-negotiating his compensation package. To find out more information about how to achieve this, take a look at my previous post on the subject.

Since I provided a written raise request to my boss, and supported it with extensive market salary data that I carefully obtained over several months, nobody will be surprised when I bring up the issue of compensation again.

5. Make a Plan - it is a generally correct statement that the act of making a plan substantially increases your chances for achieving your goal. Salary negotiations are no exception. I strongly recommend making a plan for where you think your compensation should be, what process you will follow to achieve this goal and when you would like to achieve it. My goal is to obtain another 15% raise within the next 12 months, and my plan? You've just read it.

Stay tuned. The next battle in the compensation war is scheduled for December, and reports from the battlefield will be broadcast on this station, with the briefest of delays.

In my next post, I will look at compensation negotiations from the other side. One of my employees has been re-negotiating his compensation package with me. I'll tell you about some of the errors I think he is making and how to avoid them when negotiating your own compensation.

A Big Pay Day for Shadox

I got a 16.6% raise yesterday. That would make yesterday a very good day on any personal finance blogger's scale. Since I joined my company slightly more than two years ago, my salary has increased by 55%. That's pretty impressive, but this large percentage increase is mostly because I was grossly under-paid when I first joined my company. If the information I have been gathering is correct, I am still about 15% below the market rate for my title, responsibilities and experience. I hope to erase this gap within the next year. How about that for an ambitious goal?

You may be wondering why I took a lower paying job to begin with. You readers always ask such great questions. I took the job because it allowed me to switch to a new industry which I really wanted to break into. In addition, my company is a major player in its field, and by taking my position I was able to join this company in a very influential role. Bottom line, I thought it was a good long term career move.

When negotiating my offer, I made a conscious decision not to negotiate my compensation and instead very aggressively bargained for my title and responsibilities. I gambled that this would pay off later down the line. This gamble seems to have worked, and if I play my cards right my title and position in this specific company could be highly marketable when hunting for my next job at some point in the future. I was also gambling that I would be able improve my pay in relatively short order. Well, it has taken me over two years to achieve this pay increase, but I think that I have made the right decision.

Before I end this post there is one more lesson that I would like to share. This lesson is all about how to avoid snatching defeat from the jaws of victory:

This salary increase has been in the works for a couple of months now. My boss has previously hinted at this, asked me what I thought my fair compensation level should be and even told me that I would be getting a raise. However, she did not tell me when the raise would come through, nor did she tell me the exact magnitude of this raise. Well, like any red blooded human, curiosity got the better of me and I tried to find out more information about this impending raise. To do so, I consulted with our VP of Finance. A few days ago he told me that my raise was approved and that I would be receiving 100% of what I had asked for.

It turns out that he had the wrong information. My actual raise was lower than what I had asked for. Since my company did not give me formal notice of my raise and its magnitude, I found out the specifics only when I opened my pay-check yesterday. Even after opening the pay-check I had to manually calculate my new salary based on my pay stub. And here is the punchline: I was actually disappointed that I got a 16.6% raise. What should have been a big happy moment for my relationship with my company turned out to be a little disappointing, because the company did not set my expectations in advance and because I obtained some erroneous information from a source that turned out to be unreliable.

The lesson of the day is this: if you are going to give someone a raise, set their expectations in advance. Surprises are highly over-rated, especially when they... don't come as a surprise. I think that this is a life lesson that goes well beyond salaries and personal finance.

Managing Your Career in Your 20's

Following close on the heels of my two previous posts titled Investing in Your Twenties & Buying Insurance in Your Twenties, today's post is all about managing your career in your 20's. Tomorrow's post will explore the pros and cons of buying a house while in your twenties.

In your twenties, your biggest asset is your career. Your career represents a large potential cash flow, that over decades you will be able to convert into hard cash. Like managing an investment portfolio, your career too must be managed and proper management will have a tremendous impact on the "cash value" of your career.

Below are a few principles for optimizing the"return on investment" that your career generates over the long term:

Focus on Your Next Job - the most important piece of advice I can offer is the following. Don't worry about your current job, worry about your next job. My reasoning is as follows: you already have your job, it's a done deal. Setting yourself up to get the next job is the trick. In your day to day work, always consider how the projects you take, the training you receive, the people you meet and so forth will impact your ability to get to the next step in your career. To the best of your ability, do only those things that will improve your chances for taking that next career step. Avoid like fire anything that is likely to damage your career.

Invest Prudently in Education - there are some professions that require a college degree. There are others where a degree is inferior to on the job experience. There are some career goals that are only attainable with advanced degrees, for other positions advanced degrees are useless. Everything else being equal, I always prefer to invest in education, but just like any other investment, always consider your ROI. What do you expect to get for your education?

My career goal is to eventually become a top marketing executive in a large publicly traded company. With that career goal in mind, getting an MBA made a lot of sense for me. Having those three letters on my resume is almost mandatory for this type of career objective.

Experiment - I subscribe to the notion that people generally excel at something that they love to do. I also believe that the opposite is true: if you excel at something you will tend to like it. With that in mind, don't be afraid to spend your twenties trying out a few types of jobs. Be sure you are finding the career path that is right for you. You may be spending decades in your career once you settle in, so be sure you are choosing well.

I followed my own advice. In my twenties I was in the military, I was a sales person, and I was a lawyer. I then decided to go to business school, after which I settled into my current career path of marketing (following a few other minor detours). It seems like a tortuous path to take, but it was completely worth it. In addition, my many past lives have given me a lot of interesting perspectives that most professionals in my field do not share. That is one of the unique values that I bring to the table.

Be Patient - experimentation is good, lack of patience is bad. A good friend of mine has been bouncing from one job to the next for the better part of a decade. He is simply impatient. Every time he has a boss that gets on his nerves, or a project that he doesn't like, he quits. With that kind of strategy your career cannot possibly go very far. My advice to you is: persevere. Keep your eye on the long term goal and ride out any short term turbulence. If you think that your current position is taking you to the next step in your career, hold out and keep focusing on your plan. In the case of my friend for example, had he waited just two months before quitting his most recent job because of a boss he disliked, the problem would have solved itself. The boss left of his own accord.

Have a Career Plan - Nothing good happens without a plan. OK, that's not strictly true. Some good things happen by chance, but bad things happen by chance as well. Your chances of getting where you want to go vastly improve if you take the time to articulate to yourself, perhaps even in writing, what your career objectives are. Don't make a federal case out of it, a simple statement will do. Once you have the ultimate goal in mind, work backwards. Where do you need to be just prior to achieving your goal? What is the step prior to that? What do you need to do to get you to each of those steps. If you don't know, find out. When you know what needs to be done, your chances of actually doing it improve dramatically.

Negotiate Your Salary Aggressively - OK. Here is where we are talking about cold hard cash. The better you negotiate the more prosperous you will be. For additional information about how to negotiate your compensation package, take a look at these two recent posts: What Is Your Market Value; and Negotiating a Job Offer.

Pay Discrimination & the Supreme Court

Two days ago, the U.S. Supreme Court released a decision in a case called Ledbetter v. Goodyear Tire & Rubber Co. I am not a regular reader of or commenter on Supreme Court decisions, however I thought that this particular decision is worth mentioning.

This court case is about a woman who was employed by Goodyear for 20 years, and a lower court determined that for years she was discriminated against on the basis of her sex, and that this discrimination resulted in her pay being dramatically lower than that of her male counterparts. How much lower? Her pay was 15% lower than the lowest paid male counterpart and 29% lower than the highest paid male equivalent.

To make a 47 page long story short, in a split 5:4 decision the court ruled against Lilly Ledbetter, not on the basis that she was not discriminated against, but on the basis that she did not file her suit within 180 days from the date in which Goodyear started discriminating against her. At best, the majority judges did not consider the implications of their ruling. At worst they are intentionally trying to gut employee's ability to sue a discriminating employer. I tend to believe that the latter is the case.

As the four dissenting Justices point out, the court's ruling essentially means that to get away with pay discrimination, all an employer has to do is successfully HIDE from the employee the fact that he or she is being discriminated against for a sufficiently long time. The clock starts ticking from the time of the violation, not from the time that violation is discovered... hmmm...

Justice Ginsburg (page 30):

"...Comparative pay information, moreover, is often hidden from employee's view. Employers may keep under wraps the pay differentials maintained among supervisors, no less the reasons for those differentials..."

If an employee is unjustly paid less than his co-workers, is he supposed to find out about it within 180 days from when this violation started? How exactly? Take me for example: I have been with my company for two years, and I have no idea what my peers are making.

This is bad law. The majority Justices are the usual suspects: Alito, Roberts, Kennedy, Scalia and Thomas. Although I consider myself an economic conservative, these guys make me look like a complete communist. Apparently, if it were up to them (and it frequently is) they would hand the country over to big business, and damn the little guy. Efforts are already on their way to get Congress to overturn this horrible decision. That would be exactly the right thing to do.

Employee Stock Purchase Plans: Free Money, No Risk

Yesterday I wrote a post about the pros and cons of investing in your own company stock. My conclusion is that investing in your company stock is a serious financial mistake. However, this rule has at least one major exception: employee stock purchase plans (ESPP).

Many publicly traded companies offer their employees the chance to purchase company stock at a discount. The program typically requires that employees designate a percentage of their after-tax income, which is automatically deducted from their pay check. The money accumulates for a certain period of time, at the end of which it is used to purchase company stock.

Under the terms of my wife's ESPP (at her old company), an offering period would start and end twice a year: Feb 1 and Aug 1. The 15% discount would apply to either the price of the stock at the begining of the offering period or the end of the offering period, whichever was lower. For example, if the price on Feb 1, 2006 was $10 and the price at the actual purchase date on Aug 1, 2006 was $12, you would pay $8.5 per share: 15% below the Feb 1 price. You are guaranteed a 15% return on your money, you have absolutely no risk, and your upside is unlimited. What is there not to love about this program?

Readers who have read yesterday's post understand that I am very much against investing in your own company stock, and true to form the strategy we used with my wife's ESPP was to sell the stocks immediately upon purchase, take our minimum 15% gain and use the money to buy index funds.

Of course, to calculate your real profit you need to take into consideration the opportunity cost of having the cash locked up in the ESPP for three months on average, and factor in the short term capital gains tax which you have to pay on the profit from selling the shares. Even when these are taken into account there is still a large amount of free money involved. If anyone asks, I'll be glad to share the calculation in a comment to this post.

Another benefit of our ESPP strategy is that it is a forced, regular savings plan. The money is deducted directly from your salary, and if you start the program as soon as you join the company, the money never appears on your pay check, so you do not miss it. That money adds up pretty quickly, and twice a year you get a very nice, tidy sum deposited directly into your brokerage account.

In summary, if your company offers an ESPP that includes a discounted stock price, take advantage of it. My advice, however, is to not be tempted to hold on to the stock once it is purchased in the hope that it will appreciate further. Sure, the stock may go up. It can just as easily go down. Sell your discounted stock as soon as you can and use if for a more diversified investment.

How to Negotiate a New Job Offer

In my post from two days ago I wrote that my wife accepted a job offer from a new Silicon Valley tech company. The new salary she was offered was literally twice her current compensation, however that was after she negotiated an increase from the company's first offer. Here are some of the principles we used in renegotiating the offer:

1. Never Take the First Offer - as someone who has both hired people and who has received an offer or two in his life, I can tell you with a high degree of confidence that the first offer you receive from a company is never the best you can get. Hiring managers expect you to negotiate, and for that very reason leave some room for concessions. My wife was worried that if she tried to negotiate she would lose an offer she was really interested in. If you follow the strategy proposed below, losing your offer is a very remote possibility.

2. Negotiate Only if You Intend to Accept the Offer - always negotiate in good faith. If you have no intention of accepting the offer anyway, don't waste everyone's time by making demands. Say "no" and move on. Negotiating without intent to accept is unfair to the hiring company who gave you an honest offer.

3. Be Honest - Do not lie. If you don't have another offer, don't pretend that you do. If you have multiple offers, don't over-sell them. The last thing you need is to start with a new employer on the wrong foot.

4. Ask for What You Want to Get - don't sell yourself short. Ask for what you think is going to make you happy, not what you think the new company will agree to. I would even say that if the company immediately agrees to what you are asking for, you are probably asking for too little. Of course, don't be ridiculous in your demands. In our case, the new company immediately agreed to my wife's request for an extra $10K in salary, which basically tells me that we should have asked for more. Nevertheless, my wife is very happy, and that is the MOST important thing.

Keep in mind that getting a better offer before you join the company is much easier than getting a raise once you have already joined the company. Before you accept the offer, you have all the power and the company is courting you. After you accept the offer and start working, the company knows that switching jobs is not a simple task, and therefore will be less inclined to agree to your requests. How easy do you think it would have been for my wife to get a $10K increase to her salary within six months of her start date? Extremely hard is the right answer. Getting that "raise" before starting to work was a breeze.

6. Be Matter of Fact - when asking for the improved offer, be matter of fact. Don't threaten, don't plead, explain what you want and then shut up. For example, consider something like: "Thank you for the offer. I currently have two offers to choose from. I prefer your company over the other one I am talking to, and will accept your offer if you increase the salary package by $3,000". Don't over-explain your request. Give the company a "carrot" by making it clear that you will accept the offer if your requests are met.

7. Don't Paint Yourself into a Corner - Don't say that you will walk away from the offer if your demands are unmet, unless you really intend to reject the offer in that case. Regardless, doubt is a much more effective tool than an ultimatum. Rather than saying you intend to walk away unless you get what you want, consider saying that getting what you want will simply make the decision much easier for you.

It took some convincing, but after my wife agreed to my suggestion that she should negotiate her offer, she not only got the $10K increase she wanted, she also got an increase in her expected bonus. Since her compensation package stipulates a 10% bonus, the increase in base salary will also translate into an extra $1K per year in expected bonus payments. An outstanding return for a 15 minute phone conversation.

The Job Market and Your Compensation

After many years of an iffy job market, it is finally safe to say that the job market in Silicon Valley is very strong. My wife has been with the same technology company for more than 9 years. Much of that time her compensation was handsomely augmented by stock options that she got and that we sold for respectable profits. However, when the options finally ran out, it was very clear to both of us that she was under-compensated based on her skills and experience.

Because she really liked the company and didn't want to leave, my wife has been trying to convince them to bring her salary up to market rate for the past 18 months. Finally, about four months ago, it became apparent that the company would not come to its senses, and my wife began to quietly search for a new position.

We knew that the job market was pretty strong, but were both surprised by how easy it was for her to get interviews and job offers. She got two or three interviews each week, all with solid tech companies, and took her time picking the right offer. Last week she made her decision and accepted an offer with a publicly traded tech company. In the next day or two I will write a post about the negotiation process, but the bottom line was that the final offer she accepted literally doubled both her salary and her bonus.

I have three comments about that whole story:

1. Whooooppppppeeeee!

2. Now that the job market is hot again, employees have much more power in salary negotiations. Employers are searching for qualified candidates and are not shy about making offers. It is time to press the advantage and ask for that salary increase. It is not clear how long this hot market will last, and I think that the economy is headed for a much cooler patch and possibly even into a recession.

3. How stupid is my wife's former company? They had a very loyal employee who consistently got top rated performance reviews. The employee repeatedly complained (and showed evidence) that she was under compensated, yet they refused to bring her compensation up to market rate. Now that my wife is leaving, the company will have to hire someone at market rate and train them from scratch. Does that make any sense to anyone?

Two days ago my wife announced her resignation. That same day the VP of Marketing called my wife into her office and proposed to match her offer if she would stay... naturally my wife refused.

What is Your Market Value?

Before you ask for a raise you must be able to answer one critical question: what is your market value? While you think the place would fall apart without you, your boss is probably thinking of you as something akin to a commodity, and as a commodity you have a market price. Figuring out what your boss perceives this market price to be, will allow you to negotiate from a position of power and to get the highest raise possible.

Here are some tools for identifying your market value:

1. Online Salary Comparison Tools - the easiest and fastest way to get a good idea of your market value is to check-out sites such as Salary.com and Payscale.com these free sites provide a great deal of information regarding salaries in your specific industry. They let you compare yourself to others working for similar sized companies, with similar background, title and responsibilities. Salary.com also offers a paid service which supposedly provides you with even more customization. I did not use this paid service so I cannot recommend it. Starting at these sites you will not only be able to benchmark your salary, but also compare your bonus, benefits and so forth to those typical in your industry. Both of these sites not only provide the average salary for someone in a position similar to yours, but also the bottom and top of the salary range.

2. Industry Salary Surveys - if you work for a company big enough to have an HR department, be aware that those groups often make salary decisions based upon industry salary surveys which they purchase from specialized consulting companies. I was recently able to get my hands on a salary survey for the Silicon Valley and boy, was that survey enlightening. Getting your hands on such a survey may not be easy. The best way may be to reach out to friends and acquaintances who work in finance or HR positions in other companies in your industry to ask if they have access to such data. This data is likely the same data that your employer is using to make salary decisions and as such it is invaluable.

3. Friends & Acquaintances - it is never easy to speak to people directly about your salary. BUT, if you have contacts you can trust in your industry (especially if you work for different companies) consider confiding in them and asking for their input on your market value. One method that I find particularly effective is reaching out to former bosses (who already know your past salary as well as your background) and asking them to estimate your market value. Another method that may work is reaching out to former colleagues from your company, and asking them what they had previously earned when working for the company. Since this is not current data, some may be willing to share the information.

4. Headhunters - headhunters are an excellent source of information, and many of them will be glad to speak with you, especially if you can do something to help them. For example, a few weeks ago I got a call from a headhunter that was looking to fill a certain position. I referred the headhunter to a great contact I knew, and then asked if she could return the favor by giving me some information. She was only too happy to oblige.

5. Interviewing - yes, this one is resource intensive and risky, but the best validation of your market worth is what someone else is willing to pay for you. If you get a written offer from another company, that is the ultimate testament to your value. Nevertheless, I don't recommend this strategy unless you are really interested in exploring opportunities with another company. For one thing, it is unfair to take up the time and resources of this new company. For another, by taking this approach you may be creating a bad reputation for yourself in the industry by needlessly interviewing. Lastly, there is always a risk your employer will find out you interviewed with another company and will react badly to this information.

Instead of guessing what you are worth and brazenly asking for a raise, base your request on facts. Find out what your market value truly is and you'll be able to negotiate from a position of power, while understanding your full range of options.