As the Founder and CEO of Rora, I’ve helped thousands of tech professionals negotiate job offers over the past five years. A common theme across these conversations is that the negotiation process is shrouded in secrecy – leading job candidates to feel anxious, awkward, and afraid.
That’s why I’ve written the below guide – which will share negotiation strategies to help software engineers best position themselves to negotiate one offer or several.
Why salary and job offer negotiation matters
When people think about negotiation, it’s common for the focus to be financial. After all, not negotiating can cost you over a million dollars over the course of your career. It’s natural for getting the highest compensation possible to be your top concern.
Negotiating just a $5,000 increase at your first job can actually lead to a $1M difference in lifetime earnings when you take into consideration how investments compound, and how your future pay will also be higher because of higher bonuses and raises, etc.
The chart below shows the difference negotiating a $5,000 increase in your first year can have 45 years down the line, assuming you receive a fixed annual raise each year.
However, the process of negotiating impacts your career in more ways than just financially. Taking time to go through this process and ask the right questions gives you a chance to learn about the company and negotiate a scope, role, and mentorship that will set you up for successful growth. We’ve seen this countless times throughout our work with software engineering clients.
What we’ve seen
One of our clients – a Senior Software Engineer – accepted an offer but, within one year at the company, he was reorganized to different teams (and managers) four times. He quit soon after hitting the one-year mark.
In another unfortunate situation, an engineer interviewed for what he believed was a machine learning engineer role, complete with an interview process to match (with complex technical ML questions throughout). Upon starting his new role, he discovered that he’d spend his days doing little more than running SQL queries – it was a bait and switch.
What do these stories have in common? They’re prime examples of how negotiation – or the lack thereof – has a massive impact on your career. In these cases, deeper digging as part of the negotiation process would have uncovered aspects of the role that weren’t a fit and allowed the candidate to move on to something better (or ask for more money to make it worth their while).
In fact, we’ve seen exactly that situation: clients who initiate the negotiation process sometimes realize that the company or role they’re interviewing for is the wrong fit and continue their search, often finding a better, higher-paying role within a couple of months.
3 steps to an effective negotiation
Companies have a vested interest in hiring the right person, but they also have a financial interest in adhering to a budget. After helping over a thousand software engineers negotiate higher and better offers, I want to share three negotiation steps for productive experiences.
Step 1: Build leverage
Leverage your BATNA
Your first step is to build leverage. Put simply, this is providing proof of the value you bring to the table and why the company would benefit from giving you what you’re asking for. Common examples of leverage are having competing job offers, having a very niche expertise, or not actively looking for a new job (so in order to take a new role it’d need to be particularly great).
What jobseekers frequently fail to do is increase their leverage, or BATNA.
What does BATNA mean?
It stands for your Best Alternative To a Negotiated Agreement.
The best BATNA is the confidence in security outside of this one job offer. That could be in the form of self-employment or other employment security. This doesn’t mean you have to go out and start your own business from scratch just for negotiating power! It does mean, however, that your strongest negotiating power comes from having a financial and professional identity outside of a full-time job:
a side hustle
For example, one of our clients had been laid off and – a few months later – received an offer for a more senior role than she’d previously had. However, during the negotiation process, she picked up on some red flags along the way. Because she had ongoing freelance work on the side (even though it wasn’t paying what a full-time role would), she was comfortable enough to turn down the offer and keep looking. Seven weeks later, she received a higher offer from a better company she was much more excited to join.
It’s also imperative to build self-confidence: your thoughts create leverage and, over time, self-worth. Holding your standards high creates financial value. If you believe in your skills and talents and that you deserve what you’re requesting, you’ll be set up for more success.
Related: Try Hired’s salary calculator
Be open to possibilities
That said, you do need to keep your options open. It may seem exhausting to remain constantly on the lookout for your next job, but knowing you’re not tied to any one option will give you stronger leverage. Spend some time researching companies you’d like to work for and people you’d like to work with.
Keep track of the companies and people to stay in touch with – a simple spreadsheet should suffice – and check in with them annually. It may feel awkward or “disloyal” to your current company, but remember that your career comes first and you’re under no obligation not to explore.
Also, make sure not to decrease your leverage. Don’t schedule your first interviews at your top-choice companies; start with companies you’re less excited about to get some practice. At the same time, avoid glorifying companies: no company or role is perfect, and it’s always worth having options.
Consider the companies you’re interested in and then explore their competitors, too. Give a chance to companies that you’re less enthused about; it’s great to have a backup plan and it’s worth building your confidence by talking with companies that are interested in you.
Finally, don’t let lifestyle creep cut into your leverage. You hold leverage by not needing to accept a wrong-fit job, so be sure you’re spending and saving wisely. While it may be tempting to spend more as you make more, be realistic and practical. When your savings and financial runway allow you to be choosy about jobs and only accept the best, you’ll be glad you did.
Leverage the company’s BATNA
Next, you’ll need to think past your own BATNA and dig into that of the company. This will help you better suss out how much leverage you have to negotiate. In general, jobseekers don’t do enough due diligence to understand the BATNA of the companies they’re considering and it does them a disservice when it comes to negotiating.
How do you do this? Ask your recruiter or potential future teammates these questions throughout the process:
Why is this role open?
Did someone leave? If so, why?
How long have they been trying to fill it? Is it urgent?
Is the hiring manager currently back-filling this role?
Are there any other candidates at the offer stage? How do they compare to you?
What are the company’s highest priorities and needs, both immediately and in the long term, that you are most equipped to help with?
What do they need that you don’t bring to the table?
You have greater leverage when the company believes their BATNA to be weak and you know yours to be strong. Their BATNA may seem weak if the role has been open a long time, is urgently needed, and you bring the necessary experience and skills to achieve their goals – and their other candidates don’t measure up. The more you know about their situation, the more leverage you have.
Step 2: Create and invest in building social capital
Most engineers underestimate the impact of power and influence in negotiating a job offer. They want their skills to stand for themselves. Plus, companies design their hiring and compensation practices specifically to prevent influence – as it inherently leads to biased decisions – but power and influence play a role regardless. This shows up in a few ways.
The individual you typically negotiate with (likely a recruiter or HR professional) is intentionally separate from the person you’ll actually work for (your manager). While this may help reduce bias (companies don’t want a manager with a strong bias toward a candidate to push for that candidate to be paid outside of what the company deems fair), it also disempowers the candidate by forcing the negotiation to be distributive rather than integrative.
It’s true that managers don’t usually have much control over the compensation offered, but the common refrain of “your compensation is up to HR” is a misconception. That said, the argument for higher pay can’t come from the recruiter themself; to have an effect, it needs to come from the hiring manager or leadership team.
A manager who is especially excited about a candidate can influence a lot more than HR or Recruiting. This includes the leveling of the role, where in the pay band (or outside of the band) an offer falls, whether the role is designated as critical, if a signing bonus is offered, deadlines, and more.
The significance of deadlines
On the topic of deadlines, it’s important to be aware that the hiring manager defines offer deadlines. If a manager wants to extend your deadline for needing to make a decision, the recruiter will wait.
One of the most common ways recruiters create pressure and out-negotiate candidates is by setting false deadlines. In reality, timelines for interviews, offers, and start dates are much more negotiable than most candidates realize.
Not long ago, an engineer we worked with received word from a third-party recruiter that she needed to respond to a job offer right away – and that because she hadn’t responded yet, it showed a lack of interest in the company.
Rather than get caught up in the pressure, the candidate reached out to the hiring manager, who happened to be both on vacation and completely unaware of the alleged deadline. The hiring manager encouraged the candidate to take another week or two to think everything over, allowing her to close out another interview process and make the most informed decision about which opportunity was best.
If a company isn’t willing to be flexible and give you the time you need to think things over – what’s it going to be like to work there? This is an area where self-confidence and leverage come strongly into play: if you know your worth and what you’re willing to accept, you can push back and get what you need.
Step 3: Make a strategic ask
Think beyond the money
The biggest wins often come from non-monetary asks. Don’t focus on just your annual compensation, but on your compensation five years from now – or even further out.
Think like Louie Bacaj. A former engineering leader at Jet.com, Louie has published his earnings over time. At first glance, it looks like a consistently steady increase, but if you look closer you can see some strategic decisions that kept his pay stagnant – or even slightly reduced – in the short term, but ultimately led him to a huge opportunity with a high payoff.
For example, when he joined Jet.com in 2015 he actually took a step down in pay – and made a lateral move in terms of title. However, he had learned that the new role would give him management experience and he was really excited about joining a startup on the ground floor. Within two years, he’d surpassed his previous earnings and had more than doubled them within four years.
As counter-intuitive as it may be for me, as someone who owns a negotiation company to say: sometimes, the non-monetary aspects of a role – and where it will take your career – are worth a temporary step down in pay.
Another non-monetary area to consider in your negotiations is level. This may require additional interviews but often pays off!
Recently, an engineering leader was offered a Senior Engineering Manager position at a Series B startup but asked to be considered for a Director-level position. After four more interviews, she received a Director offer. Not only did she end up with a $50K/year pay increase, but she also got the satisfaction of knowing she was joining at the right level.
Avoid a bad fit
We’ve also had clients identify bad or wrong-fit jobs through the negotiation process, saving them from the stress of finding out once they’ve already started. One client negotiated with a CEO who was increasingly uncommunicative, so the client rejected the offer – and found out soon after that the person he’d report to would be leaving the company.
Collect career capital
Career capital – the skills, connections, and experiences that set you up for future success – should also be an area of focus. Just like Louie Bacaj, you may find that while a role isn’t a massive increase in compensation, it brings connections or credentials that will help you grow (and maximize your earning potential) in the future.
Freedom in flexibility
Of course, you shouldn’t forget flexibility. The ability to work remotely (or even part-time) can have an impressive impact on your mental health and family life – or give you time to focus on that side hustle and keep increasing your BATNA!
It all comes back down to leverage; this applies to how you should (or shouldn’t) evaluate a career option. Two important variables to assess here are:
The role scope/opportunity for you to make an impact
The company’s opportunity for growth and impact
The best career choices are those that offer the chance to make the highest impact or provide the opportunity to be paid to learn. Over time, this leads to financial gain.
Take smart risks
In our experience helping thousands of people negotiate, the data shows less than a 1% chance of losing your offer from negotiating. To further reduce that More