Negotiating For Entrepreneurial Talent

Backout is the most dreaded word in the search and recruiting industry. It also strikes terror in the hearts of entrepreneurs seeking candidates for growing companies. I know. I’m an entrepreneur, having founded four companies. What’s more, all have been in the human resources field, and my current firm, Talent Management Group, is in the recruiting business.

by Greg Moran
Talent Management Group entreworld.org

Spend any amount of time in an executive search firm office, and you will hear about the peril and horror. A "backout" is defined as losing a strong candidate who has completed the screening process and been selected for hire at the time of negotiation.

Think about it: your company has fully committed itself to this chosen candidate emotionally (you already can imagine how much he or she will deliver), financially, and, most importantly, you have invested your time and the time of your staff. After this commitment has been made, the candidate is gone. This terrific new hire you have been imaging is not to be, and you are back to square one in your search.

Before you start negotiation, here is one tip. Make sure you are negotiating with the right Talent – and that’s Talent with a capital "T." We always advise our growth company clients to hire at their prospective growth level, not where they are today. For example, if you are a $3 million company in need of an internal accountant today, but plan to be at $10 million within three years, hire for the $10 million CFO instead of the $3 million accountant. Why? Comfort level. The $10 million CFO knows how to maneuver a $10 million company and is comfortable working at that level. We rise to our comfort level. Enough of these people will drive your business forward. This may cost more today, but top performers eager to move your company forward always do.

Now that you know whom you are negotiating with, here are some steps to keep you on the right track:

Step 1 – Don’t Delegate

A former client of mine in the financial arena had a proven process for dealing with candidates who were selected for hire. Unfortunately, the process was proven faulty every time. The candidate would go through the screening process and, when chosen by the manager as the next hire, would be ushered to Human Resources. That department, in turn, would take weeks to make the offer and even longer to negotiate if necessary. Typically, phone calls from the candidate went unanswered. The reason? The staff was too busy. The candidate takes another offer and back to the drawing board we go.

Delivering the top performer is not nearly as critical to anyone as it is to you as the CEO and your immediate managers. Managers should be assessed on their ability to attract and land strong hires and, as such, the process must say under their control.

Step 2 – No Low-balling

"We said he needed $75K to take the job, so why on earth did you offer him $45K?" we implored. "We were negotiating – it’s supposed to be give and take. We planned on giving it to him if we needed to," this client responded. The third candidate in a row was lost for no good reason.

You must not treat candidate negotiation like buying a car. He who gives most does not win. Candidates just get their feelings hurt and feel taken advantage of. We always remind our clients that, for better or worse, you are measuring a portion of an individual’s self-worth when discussing salary. Great care must be taken to ensure that a fair offer is made while feelings and emotions of those involved are considered at all times. Even if the candidate should ultimately accept an offer, considerable damage can be done to the trust that candidate has in your company.

Step 3 – Don’t Over-negotiate

Along the same lines as low-balling, over-negotiating can create long-term damage to this relationship, even if the candidate accepts. Over-negotiating is needlessly dragging out discussions to gain an edge or break the willingness of the other party. The same warning as above exists – remember this is an emotional time for a candidate (particularly if he or she is unemployed) and sensitivity must be taken to not treat this as a win/lose negotiation.

When the candidate appears to be instigating drawn-out negotiations, it is usually a sign of low commitment. Often, candidates who intend to turn down the position will draw out negotiation and use a small detail resulting from this negotiation as an opportunity to decline the job. Usually, they never fully intended to accept it.

Step 4 – Don’t Assume Good Faith (Lock Down Constantly)

"Where is John? He did not show up this morning?" inquired our client. "Not sure," we responded. "I am sure there is a simple explanation. Let me check." Said the candidate’s wife (when we called): "Job, what new job?" What a mess. We had a client looking for the candidate who had accepted the job offer, and we had no candidate. It turns out that this individual was simply looking for a raise from his current employer and wanted to use an offer letter as leverage.

Unfortunately, not all candidates are coming to you looking for a job. Many are looking for something else or are not sure what they are looking for at all.

So ask this: "Assuming we reach a financial agreement, is there any reason that you would not immediately accept the offer?" In the recruiting industry, this is called the "lock-down." It is asked after every contact during the negotiation. Any hesitation probably means a lack of commitment.

You must use your gut at this stage. Ask yourself: "Is this what I would be doing when trying to land a job?" If the answer is no, there is a problem with your candidate. Address it directly and immediately to avoid any wasted time and resources. Lastly, watch for any changes in behavioral patterns or negotiation styles. If these change suddenly, take it as a warning sign and discuss.

Step 5 – Consider all Factors

I have mentioned this repeatedly, but this is a complex time for candidates. There are many influencers involved in the job search process: spouse, children, family, friends, current employer, church, and so on. If relocation is involved, the picture becomes even cloudier. When negotiating, make sure that all influencers have been dealt with. Have family discussions been had? Is the spouse willing and approving of a move? Does the job change have negative financial consequences for the short term? Do the children need to change schools? All of these questions must be asked and answered. If they are not, they could break your deal and the candidate will be lost.

Here is one rule of thumb: if the decision seems too easy for your candidate, there is a problem.

Step 6 – It’s Not Just the Money

Think of your financial and personal life that emanates from your work. Salary, vacation, retirement, medical, dental, paid sick leave, insurance, cell phone, laptop computer, and all else. Rarely, from my experience, does salary alone break a deal. More often, it is the "little things" that create the problems. Within the past year, a client lost a very strong, in-demand candidate because the company was unwilling to match her current three weeks of vacation. It offered 12 days – 2.5 weeks. (See Step 2 regarding delegation).

When negotiating, you must take the time to understand the candidate’s motivations and desires. On multiple occasions, I have seen candidates take demotions with less money in order to gain more free time. Until you understand the whole picture in the life of the candidate, you will be leaving negotiation to chance.

These six rules could be summarized easily. Remember that you are dealing with human beings who have complex emotions, personal lives, financial lives, hopes, and desires. Understand that complexity is exacerbated because yours is an opportunity at an entrepreneurial – and thus untested – company. Make sure that all interactions take this into account. The best Talent for your growing venture will require you to reach but will not be evasive. Continually use the "gut-check" to assess if this seems right. If not, keep looking. The right one is out there.

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