Negotiating for Nerds
jeff covey <jeff.covey@pobox.com> - May 20th 2000, 23:59 EST
From endless semesters of CS classes and/or endless cola-filled
nights, hackers learn all the skills of their trade... or almost all.
Who sat you down and taught you how to navigate an interview to make
sure your next job is right for you? Since the answer is probably "no
one", we're presenting an editorial today from Dennis Faust, who has
spent a lot of time on the company side of the interview desk and
offers his suggestions about what he should have heard coming from
the other side.
Copyright notice: All reader-written material on freshmeat is the property and responsibility of its author; for reprint rights, please contact the author directly.
INTRODUCTION
You are in business for yourself. You just don't know it and most of
you don't act like it. I've hired dozens of engineers and have had
only a few negotiate AT ALL. Given the value of compensation packages
these days, it pays to get educated and to negotiate. This is true
even if you are happily and comfortably employed or if you have ten
good offers in hand. Never trust headhunters, hiring managers, or human
resources personnel to take care of you. All have interests which are
not perfectly aligned with yours.
The only way to make sure you get what you want is to negotiate for
it. To negotiate, you need information. Go prepared to every interview
where you might be offered a job.
Don't be afraid to ask ANY business question. If they hesitate or
refuse to answer, you have to assume the answer is bad or that they
don't trust engineers. Either way, it's not a good sign. Keep
looking. Just make sure you are asking the right person.
Chances are you won't get rich. That's not why you're in this
industry. However, you want to make sure you don't make foolish
mistakes that waste your most valuable commodity -- time!
RATING THE INDUSTRY
Is the industry the stock market's darling or whipping boy? Will it
be around in a couple of years? Is it known to treat its people well?
Do you have friends in the industry you can check with? Often, a high
salary blinds people to the number of hours expected and high burnout
rates. Ask about both! Are you likely to be asked to move, travel, or
work with out-of-date technology?
RATING THE COMPANY
For this discussion, I'm going to assume the company's stock is not
publicly traded. Public stocks are relatively easy to value. Look in
the newspaper and keep in mind that you only make money on options if
the stock price increases! How likely is that?
For private companies, you must feel good about the sources of
funding. Why? Because if the funding dries up, you're unemployed. It's
happened to me several times. Best is if the company is profitable
enough to fund itself. This is rare in startups; most are venture
funded.
Venture capitalists are professional investors. They crave the huge
returns possible with successful software companies. Usually, they have
a number of companies in their portfolio. Ask about the company's
source(s) of capital. How much capital does the company have on hand?
How long will it last? This is the 'burn rate'. Check it out.
Find out the success rate of the company's investors in this
industry. Do they pick sure winners or are they new to the game? Have
they stood by companies during lean times in the past? How big is
their fund? When do they expect to get their investment back and in
what way? This is known as the 'exit strategy'. What is it? Keep in
mind that only two or three of every hundred startups goes public.
Next, check out the management team. Have they been successful in this
industry before? Do they 'get' the technology? What happened to their
previous companies? Would you enjoy working with these people? Do you
trust them? Would you give them your money? If not, why would you
invest your time?
PRESENTING YOURSELF TO SUITS
Have a list of business questions from your research above. Ask to
speak to your prospective boss's boss and ask this person. They love
to talk about this stuff. Keep in mind that they live for 'deals' and
'the industry'. Talking industry is comfort food for suits. Read
(*gasp*) Upside, Red Herring, or Business 2.0, because you can bet
these guys do.
Keep in mind that you're not trying to impress them technically. You
are trying to make them think you are manageable. It's a pass/fail
test, and if you do a little of the above, you'll pass with flying
colors. Once they think you're ok, you can ask them all your zinger
business questions and they'll gladly answer. Make sure that you
really listen. Nothing makes people think you are more intelligent
than when you let them talk! Remember to nod at the appropriate times!
THE BEST OFFER
During the interview process, your goal is to get an offer, because
you can't make a judgment about the company without the offer in
hand. Make sure you get the offer in writing. I've learned the hard
way that verbal offers mean nothing. Yes, you could sue, but what
would that get you? Get it in writing.
Be professional at all times and don't get flustered. Don't answer
questions pertaining to salary requirements or what you made at your
last position or other offers you may have in specific terms. If you
name a number first, you deprive the company of a chance to offer
more. Don't be afraid to ask questions like "How much flexibility do
you have?" or "What is the range for this position and where does this
offer fall?" Ask these questions for stock as well as salary.
Here is the number one piece of advice I have for negotiating: SHUT
UP! Sales people do this all the time. Ask a leading question and then
let it hang. Let the other person get nervous and fill the space with
a number or a suggestion. You never know what you'll get using this
technique, but I guarantee you won't get less. Ask leading questions
and then SHUT UP!
RATING THE OFFER
The main idea is to come to a valuation for the entire package. Here
are some quick guidelines: For options, ask what investors paid in the
last round of financing. That's a good proxy for the share
valuation. The closer the company is to a liquidity event such as
going public or getting acquired, the higher value you should place on
these shares. Keep in mind that very, very few companies actually do
well enough for average employees to do well. This just means you need
to negotiate well to increase your chances.
The younger and riskier a company is, the more shares you should
get. Ask how many shares there are outstanding and divide it by the
number you've been offered to see just how little they think of you.
(Just kidding!) If there is any question about what outstanding means,
I always ask, "If the company were sold today and everyone who could
exercised every possible option, how many shares would that be?"
Seriously, run the numbers and see if you are being invited to share
in the business or if they're just giving you a few token
shares. Expect to be offered in the range of one to four year's salary
worth of stock.
If a company does not have excellent medical, dental, vision, and 401k
plans, keep looking. Even if the company is a raw start up, these are
not negotiable. Entrepreneurs are often willing to forego insurance
and other things to get the company off the ground. You shouldn't.
Last but not least, take a moment to think about how this position
will look on your resume a year or two from now. Will it add or
detract value? Only diamonds are forever.
GETTING WHAT YOU WANT
Almost any aspect of the job is negotiable these days. Even companies
which are very tight with compensation will often deal when it comes
to time off before starting, vacation, working conditions, hours,
working from home, etc. Decide what is important to you and ask for
it. Do this AFTER the company has given you an offer. At that point,
they have decided they want you. They will think you are negotiating.
If you do it too early in the process, they will think it shows bad
attitude, and you won't get an offer. Make sure your requests are
commensurate with your experience. I've had a rookie ask to work at
home three days a week so he could play in a band. This person didn't
get an offer!
ITERATE
Our industry is changing rapidly. If the company doesn't have a six
month review policy, you should pay attention to the market and
approach them if you feel you are not keeping pace. Also, any time you
significantly improve your skill level or increase your
responsibilities, you should sit down with your supervisor and review
your compensation package. Keep in mind that you are in business. Your
business is trading mental acuity and the ability to create new
technology for salary and a piece of the action. Do your homework and
make sure you get your fair share.
SUMMARY
- Educate yourself about the specific industry and the company.
- Talk to the business people.
- Ask hard nosed business questions.
- Make the other side blink first -- let them name specific
numbers.
- When presented with an offer: Ask a leading question, then
SHUT UP, listen, and wait, wait, wait!
- Iterate #4 and #5 until you get what you want.
Good Luck!
Dennis Faust is the Director of Web Development at more.com (http://www.more.com/) and was
previously Director of Development at Digicash, Inc. (http://www.digicash.com/). He has
been a Development Manager for more than fifteen years and has managed
groups of thirty or more developers on several occasions. He is a
technical advisor to JustGive (http://www.justgive.org/) and
EverySchool (http://www.everyschool.org/). He
humbly gives thanks to all the developers he has had the great good
luck to work with over the years. He can be reached at: dennis@faustian.net.
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