Keeping your employees happy is critical to your business’s success. But how can you keep your employees happy when you’re meeting at the bargaining table? Moments of negotiation – when you and your employee have to align around compensation, job responsibility, accounts under management, leaves of absence, and paths for growth – can be nerve wracking. Here are five tips for how to successfully manage employee negotiations:
- Know when you’re negotiating. This may seem simple, but it’s a critical first step. Although there are times, like during annual performance reviews, where nearly every employee is negotiating for a title bump or raise, there are others when it may not be as clear. This is particularly true when someone is setting themselves up for a strong negotiating position in the future, which often happens if an employee develops a strong relationship with one of your important investors or accounts or when an employee asks for more responsibility. Be aware that asking for greater responsibility now will almost certainly lead to negotiation later, and consider this when evaluating your employee’s request for increased opportunity or responsibility. Finally, sometimes negotiation is not clear because it’s not related to compensation. Requests for leaves of absence or title changes, for instance, are types of negotiations.
- Develop frameworks that support your negotiating position. If you provide clarity and transparency in your hiring documents, internal procedures, and team communications, your employee negotiations can be more defined and will likely be more successful. Here are some great ways to accomplish this:
Know what you can give and communicate it effectively. This is critical when going into any employee negotiation, but especially ones related to compensation changes. You must first understand the full range of what you can give – what you can afford and how it fits into or is an exception to your policies (pro tip: if it is an exception, review your internal policies to ensure that you are not being discriminatory or violating policy in making this exception), and how it supports your company’s business goals to work with the employee on this request. Next, even if the employee has requested the meeting, you want to communicate first in the negotiation, a technique known as anchoring. This will allow you to define the scope of the negotiation, and bring it in line with what you are able to give. Finally, you need to know your reservation value, or the maximum you are able to give to the employee in the negotiation. Having clarity about this will allow you to know how to proceed with the negotiation – if you will be able to reach an agreement or will need to walk away.
Know what your employee actually wants and needs. When you finally meet with your employee, start by asking them to explain their needs to you, using an open-ended question so they can explain their request in detail. Then, listen and pay attention to what they are saying, their tone of voice, body language, and any other details of their behavior. You will often find in these situations that employees are asking for increased compensation when they really want something else – a title bump to recognize their efforts in building a product over the last year, a LinkedIn recommendation or other public acknowledgement of their importance to the team, or a flexible work schedule that allows them to work from home two days a week so they can go to their kids’ soccer games. Identifying in a collaborative way what your employee actually wants or needs allows you to create an open conversation that can be more productive while protecting the bottom line.
Find a win-win. Once you are in the conversation with your employee, armed with the clarity of your policies, the knowledge of what you can give, and what the employee wants, it’s your opportunity to find a win-win situation. This may mean a provisional raise that is tied to very aggressive delivery goals, so the employee feels acknowledged now, but you and the employee are in agreement that if the employee does not meet the increased responsibility, the compensation is temporary. It could also be giving the employee several soft options in place of a compensation change, such as a title bump plus a flexible schedule. Another option is creating a new method of communication, like a weekly 1:1 meeting between the employee and manager to ensure that the employee feels heard and valued. Clarity and communication are the keys to both of you leaving the table with a renewed commitment to your shared professional and company goals.
- Include compensation practices in your Employee Handbook, such as salary bands, when performance reviews are conducted, your company’s standard cost-of-living and merit-based raise percentages or amounts, when bonuses are evaluated and paid, and clear metrics for measuring bonus and merit-based compensation.
- Design meaningful paths for growth. These paths will show your employees that you have thought about how they can move forward successfully within your company. If creating a growth path doesn’t make sense, talk to your team members about how they can develop professionally by acquiring new skills and experiences while building your company. In either case, attaching planned milestones or metrics to compensation or title changes will provide a path forward with less negotiation on both sides, as the path is already defined.
- Celebrate your team in other ways. Acknowledge wins in team meetings, invest in a team culture that makes employees want to come to work, and have parties for the successful completion of projects. Happy employees ask for less.
When in doubt, consult with your Human Resources or legal teams for support in employee negotiations, but the best thing to remember is the golden rule - treat others the way you would want to be treated.