Trouble with Our House Purchase...

Regular readers remember that we bought a house last month. Signed contract, mortgage, removal of contingencies and a bunch of inspections. The works. Well, turns out we're not done yet. Here's the problem. When we bought the house we knew there was a tenant in it. In fact, our contract required the sellers to give us a signed agreement for the tenant to vacate before we removed our contingency. They didn't. Instead, they asked if they could give us this written agreement before we removed our financing contingency. We agreed, but even though we removed the financing contingency, we still don't have that written agreement with the tenant.

Worse. The sellers (or rather their agent, who is also their relative) finally came clean. Apparently, the tenants have a six month firm lease for the house. The lease ends at the end of February. Our contractual closing date? October 23... Worse still, the sellers and their agent simply don't understand (or are pretending not to understand) what they have done wrong. I met with the agent on Friday, and he said "we'll just cancel the deal". I explained that we have a firm contract, and cancelling is simply not something he can do. His response: "sue me"...

It's not quite as bad as it sounds (well, it's bad enough): the tenants are willing to vacate in December, if the sellers agree to pay two months of their rent as well as their moving expenses, for a grand total of about $7,000. The seller? He's willing to pay $3,000. Period. This weekend he is supposedly negotiating with the tenants and we should have a clearer picture on Monday.

Of course, we could supposedly get this resolved by simply agreeing to pay the difference between the tenants' demands and the amount the sellers are willing to pay. However, the prospect of doing that gives me serious heartburn. We clearly have a very strong legal case against the sellers and could sue them for a lot of money. We could also file ethical complaints against the sellers' agent for misleading us. These guys knowingly entered into a binding agreement to sell us the house, while they had a conflicting contract with the tenants that would not allow them to close the deal. They did this without disclosure and without including a sellers' contingency in the contract.

On the flip side, this is a million dollar house (it's the San Francisco Bay Area, people). Is it really worth letting a million dollar deal collapse because of a $4,000? Yes, $4,000 is a lot of money and the sellers are trying to cheat us and increase our buying price by trying to make us pay for their dishonesty. The question is: should I let the deal fall through and go to court? Or should we just suck it up and get the house?

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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?

Customer Service and the Explanation for Corporate Stupidity

Moolanomy wrote an excellent post yesterday about how companies give preferential treatment and pricing to new customers, over the their long time loyal customers. That's exactly right.

There is an economic reason for this strategy, but sometimes it backfires. Recruiting new customers is difficult and expensive. To succeed companies must offer new customers something that their existing provider is not giving them. After all, why would you switch to a new provider if you would be getting exactly the same price and service? However, extending these promotions to the company's entire customer base can be a very expensive proposition for the company. For example, Comcast keeps coming out with teaser offers that essentially cut digital cable prices in half for new customers for six months. If they halved the price for their entire customer base, they may gain a bucket load of new customers, but the overall impact on their profitability would be devastating.

This strategy sometimes backfires with individual customers. One of my colleagues at work was a long time Comcast cable customer. One day he received in the mail one of those promotional rate offers and called Comcast asking them to extend him the same promotional offer. They refused since he was already a customer. He threatened to move to AT&T which has been aggressively promoting their services in our area, and which also offers aggressive introductory prices. They still refused.

Reluctantly, my friend moved to AT&T and got their six month promotional rate. When that rate expired, he moved back to Comcast and... received the new customer promotional rate. That outcome clearly did not make sense for Comcast. Comcast lost a customer for six months, and when he came back, he still got the promotional rate. Wouldn't it have been more profitable to retain him as a customer over the entire period? Of course it would have been. However, companies are banking on customer procrastination, laziness or ignorance to make this strategy work.

The vast majority of customers simply don't call to ask for a better deal. Of those that do, and are refused, a large majority still continues the service without receiving the discount. On average, the company makes more money by refusing to reduce prices for its existing customers than it would be by reducing prices to try to retain existing customers, such as my colleague. I guess they are not that stupid after all.

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.

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.