Never Make Counter-Offers

http://bramcohen.com/2011/12/04/never-make-counter-offers

by floetic • 14 years ago

324 143 14 years ago

djtriptych• 14 years ago

Is this his only post? Or is there someway to browse this site that I'm missing?

Uhhrrr• 14 years ago

He was blogging (not very frequently) at http://bramcohen.livejournal.com/. Now he is blogging (not very frequently) at the site above.

slmbrhrt• 14 years ago

Looks like he may have done some cleaning. I noticed he doesn't seem to own bitconjurer dot org anymore, maybe this is why?

bramcohen• 14 years ago

I still own bitconjurer.org, there's a misconfiguration of some kind which needs to be tracked down.

jaredsohn• 14 years ago

Probably. He just moved his blog off livejournal (http://bramcohen.livejournal.com/) where you can find his older entries (ideally he would include a link to that on the new site.) He also frequently creates public posts on Facebook (http://www.facebook.com/bram.cohen).

MatthewPhillips• 14 years ago

> Management figures as long as they always match what someone is offered elsewhere, the employee will always prefer to stay

Do some companies really believe that? I can't speak for the world of employees, but if I have to put in the work of finding another job because my salary situation is stagnant, I am going to be very bitter with my current employer and require a crazy large counter offer to consider staying.

mirkules3• 14 years ago

"Management figures as long as they always match what someone is offered elsewhere, the employee will always prefer to stay"

This is not true (the original post, not yours). Typically, when an employee submits their resignation letter, they are out of the company, literally or figuratively.

If an employer makes you a counter-offer, never, ever take it. First, you already have a reason that you wanted to quit. It's usually not _just_ for the money, but probably for other reasons (e.g. intellectual boredom). If you are unhappy with your job, more money will just not help. As someone wise told me once, "Money is not a motivator, but lack of money is a de-motivator."

Secondly, and more importantly, the reason the employer is making a counter-offer is not to entice you to stay, but to buy enough time to find someone else -- a loyal and qualified someone else -- to replace you. Effectively, they are making you the counter-offer so that they don't have to spend the time and money looking for someone and training them, when they can have you train them for six months (even with a slight-but-temporary increase in your salary). You will be let go as soon as the employer feels that the new employee has been trained adequately.

The moral is, once you submit the resignation letter, stick to your guns, and don't be fooled by counter-offers.

[Edit: forgot to add, another reason they prefer you to stay is so that you can finish your current project. This minimizes risks to your project, while at the same time training your replacement. The employer would only keep you until the current project is complete, and you will probably not get any new ones.]

imcqueen• 14 years ago

complete agreement with this. you eventually get used to the pay increase and the reasons for wanting to leave remain. Your manager no longer feels compassion for rewarding your hard work with promotions, bonuses and awards. Long term they're definitely figuring out a way to make you less crucial.

This generally only goes for quitting though. Simply asking for more money is completely different. the article focuses on employees quitting for leverage. If you work hard day to day and plant the seed that you're unhappy with your compensation (and continue to grind) a good manager should step in and reward you or guide you toward a promotion. The benefit just takes a lot longer than the "pay up or I quit" approach.

tsotha2• 14 years ago

>Secondly, and more importantly, the reason the employer is making a counter-offer is not to entice you to stay, but to buy enough time to find someone else -- a loyal and qualified someone else -- to replace you.

People need to realize this. I worked for a company that did it time after time. Everybody who actually took a counter was out on the street within three months, meaning the company was able to make a much smoother transition at the cost of just a few extra months at the higher salary.

The guy who took the counter was then in a position of finding a job when he didn't have one, which is a recipe for getting lowballed by potential employers.

When they offered me a counter I was tempted to take it on the condition they give me a huge cash bonus and a twelve month contract with steep cancellation penalties. Instead I just said no. Who wants to work at a place like that?

nandemo• 14 years ago

> Secondly, and more importantly, the reason the employer is making a counter-offer is not to entice you to stay, but to buy enough time to find someone else -- a loyal and qualified someone else -- to replace you.

How does one decide that an outsider is "loyal"? More often than not the company will be "poaching" the outsider from another company. Doesn't that suggest that outsider is not loyal? And why the hell any company that does not offer life employment would expect loyalty from employees?

joezydeco• 14 years ago

Even if that counter was huge, you'd be insane to stay. Because now you're that guy. The quitter. You'll never be trusted again.

wmf• 14 years ago

It depends how sick the corporate culture is. If everyone else, including your manager, is that guy then you're actually a loser if you're not that guy.

timwiseman• 14 years ago

While it certainly won't always be true, it probably is true most of the time.

Even if the employee was unhappy enough to go looking, changing jobs often comes with high transaction costs that most people won't want to deal with without a good reason.

Also, in the tech sector and some other areas, its not uncommon to wind up with an offer when you haven't put in the work to find another job. If you are well connected in your field, you may get offers, or at least invitations to interview, without actively looking for them.

mikeryan• 14 years ago

if I have to put in the work of finding another job because my salary situation is stagnant, I am going to be very bitter with my current employer

If you're that bitter then leave. More money doesn't fix a bad working situation. If you are vastly underpaid then likely the company is stingy in other places too.

I think there's an assumption that if an employee comes to you with a better offer looking for you to counter then its likely they would like to stay. If you had no desire to remain then you can just take the new job and move on.

EvanKelly• 14 years ago

My first professional experience was working at a company where this seemed like the norm. They had no well-defined plan for advancement or raises, and I was constantly given the run-around when I would bring up the topic in conversations with my manager or HR.

Those which consistently threatened to quit renegotiated by throwing other employees under the bus, which led to a very tense work environment.

I wholeheartedly agree with the sentiment that retaining employees by expecting them to renogiate for themselves is wrong headed, but I'm not sure that "never make counter-offers" is a great philosophy. You paint yourself into a corner by having this doctrine which doesn't allow you to have your whole arsenal available when the moment arises in which you might want to make a counter-offer to retain an employee.

javajosh4• 14 years ago

I disagree strongly. Management has better things to do than push unasked-for money on employees, especially in a young company. An employee who wants more money can and should ask for it.

sukuriant• 14 years ago

What about a mature company? What about to continue to keep their salary at what it was before, to combat inflation? What about if they honestly are doing well and deserve more money?

To expound upon the inflation bit. Whenever you do not give an employee a raise that matches inflation, you're decreasing his salary by decreasing its buying power.

javajosh4• 14 years ago

My opinion is based on the notion that it is generally bad to cede control over your own interest. To wait for management to give you what you want rather than to simply ask for what you want is to cede responsibility for wage change to management, which will generally not be in the employee's best interest.

Another more practical problem with the OP's desire to abrogate responsibility for price-setting is that it is impossible to objectively gauge the value of an employee outside of the marketplace. That value is fundamentally determined by the marketplace, by who is willing to pay what for your efforts. As much as we'd like to, we cannot ignore the fact that price is determined by supply/demand even for our own work.

I believe that employees would be better served by accepting the reality of the basis of their wages rather than waiting for some sort of ill-defined "enlightened" management to give you "what you deserve".

ganjianwei• 14 years ago

It creates a lot of unnecessary tension between management and employees if employees can't just assume that they'll be rewarded for outstanding results and don't have to ask for it. If there's a tacit agreement that if you do great work you'll get a raise with a quarterly or semi-annual review process, employees don't have to get distracted by thinking about when they should ask for a raise or whether they need to get a competing offer to get leverage to ask for a higher raise.

Management might have better things to do, but if this creates an atmosphere where employees feel under-appreciated, they'll leave, and this churn can really hurt the company, which makes it a huge problem for management that could have been avoided by rewarding high performing employees earlier.

javajosh4• 14 years ago

I agree that there is a cultural bias in favor of this type of wage structure, and that any company that ignores it does so at their own risk, as it will create unnecessary tension, as you say.

But still I bristle at tacit assumption behind the OP's point that both the amount and timing of my wage increases should rest in the hand of a manager. The OP is saying that managers should be enlightened about it, and I'm saying you can't trust management to be enlightened about it and should take charge of your own compensation.

tsotha2• 14 years ago

Asking for more money is a much different thing than turning in your notice. Of course when you march into the boss's office and ask for more money you're sort of implying you might look elsewhere if they don't cough up the cash. But you're more likely to be labeled ambitious than disloyal, which is what happens to counter-takers.

javajosh4• 14 years ago

Can someone who's down-voted me on the parent message and other messages in this thread (-10 points total) please let me know why you've downvoted me? My position places a premium on personal agency even in the face of mismanagement and I'd argue it is principled, if unpopular. This entire thread is a matter of opinion, up to and including the OP, and I didn't realize that offering a dissenting opinion would occasion penalization. Or is downvoting a method of indicating disagreement?

alexwolfe• 14 years ago

I think the essence of what he is trying to say is very true, although his approach may be a little dramatic.

Ultimately retention is about creating an environment that is pleasant for your employees. This means creating opportunity financially, professionally, and personally. It's hard for any employee to leave a job that appreciates them and fosters their all around growth. Money is certainly part of it but in the big picture the message is "Build a great workplace". It's a proactive approach of doing good instead of a reactive set of rules on what not to do.

jeffbarr• 14 years ago

And then there's another post waiting to be written -- "Never Accept Counter Offers."

I didn't heed this advice, and took a counter offer (doubling my salary at the time). This seemed like a good deal.

What did I turn down? 10,000 shares of Microsoft stock. In 1983.

Oops...

cperciva• 14 years ago

Come on, you only missed out on 87 million dollars (assuming one share in 1983 = one share when Microsoft IPOed). It's not that bad... :-)

shasta• 14 years ago

You forgot to deduct his doubled salary.

larrys3• 14 years ago

I think that's a great point and one of the problems that I have with some of the "learn everyday" info linked on hn.

People think there are clear answers to things that in retrospect seem right or wrong decisions after things play out.

Those 10,000 shares of Msft? Well what if you were working for Eagle Computer (I owned one of those and remember that day very well)

http://en.wikipedia.org/wiki/Eagle_Computer

joshu• 14 years ago

There's more to it than financial considerations.

People who accept counters are usually gone in a year anyway - they'd already decided to go, management has written them off in their minds, something like that.

bkrausz• 14 years ago

For those curious, 1 share of MSFT in 1983 is ~= 288 shares today due to splitting, making this stock worth $87MM.

Sorry Jeff, don't mean to rub it in. Just had to do some Googling (ironic, I know) and figured I'd save others the time.

InclinedPlane3• 14 years ago

2,880,000 shares would be worth $87 million today. However, since 2003 (after the last stock split) MSFT stock has had dividends. In total those dividends have come to $6.75 per share, adding an additional $19.44 million for a grand total of $106.44 million.

MichaelApproved• 14 years ago

That also depends on what you do with the money from the raise. I don't know what that was but you could've invested it and made significant returns as well.

johnx123-up2• 14 years ago

You may have lost million dollars, but you may not have earned these experiences. After all we all are going to die. So, in the end only the experiences will be counted.

dragons• 14 years ago

Yes, but you can buy a lot of other really excellent experiences with millions of dollars.

rorrr2• 14 years ago

You still had made the right decision. Doubling your salary is not something many people would choose over some stock options.

Drbble11• 14 years ago

I would love to give you some stock options in exchange for all your salary. PM me.

Drbble11• 14 years ago

You don't know what would have happened to you at Microsoft. Anyone could be a billionaire if he had a (unique) time machine.

And what would have happened to Visix?

charlieok2• 14 years ago

but now you're the Amazon Web Services guy! That can't be too shabby...

brudgers• 14 years ago

There are organizations where it takes the threat of quitting to get one's salary, job duties, etc. reassessed. There is a lot of poor implementations HR processes out there - and poor implementation by managers, rather than company policy, often underlies the situation.

Many managers no more want to have negotiations about pay and advancement, than many employees do - there are two sides to the coin, many employees prefer the excitement of an affair with another company than trying to work out the existing relationship. The new company expresses their love; the old ignores the employee.

In other words, the situation described is frequently a failure of communication between supervisors and managers and their employees.

Drbble11• 14 years ago

The "affair" metaphor is perfect perfect. Interviewing is a socially acceptable form of romantic dalliance.

bravura• 14 years ago

Ben Horowitz (of a16z) discusses just this very problem:

http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-...

I enjoy Ben's blog post because talks about a more general company problem (politics), and gives guidance and process on how to avoid politics.

jazzdev• 14 years ago

There's a lot of great insight in there, but he's talking about senior executives, not technical contributors. From the article:

if you manage a junior employee and they ask you about their career development, you can say what comes naturally and generally get away with it. As we saw above, things change when you deal with highly ambitious, seasoned professionals.

I've worked with Ben and I know that if a highly-valued technical contributor turned in a resignation he would make a counter-offer to keep them.

larrys3• 14 years ago

"Management figures as long as they always match what someone is offered elsewhere, the employee will always prefer to stay, because that’s easier to do, and salaries are kept to the absolute minimum they can be with no real risk."

No. Could be they prefer to stay but have found out that their value is higher elsewhere. Nothing wrong with that. Also doesn't mean that the company is knowingly trying to save money and clearly knows the value of the employee or the position. If someone doesn't like their job and finds a job that is clearly better (maybe it's just closer to where they live with a little more money) they might not even care what the response is of the employer.

Besides, if the person didn't in some way desire to stay they wouldn't even present an offer to stay.

By the way, all this info pertains to the tech situation right now. In traditional business it's not always great to be paid the max of your value. Those are the people that are let go first when the boss has to cut costs. The people who provide the most value might very well be the ones to keep their job.

jay_kyburz2• 14 years ago

I kind of like the idea of only giving raises to employees when they have a offer letter for another job. That way there is no doubt in the employees mind about how much they are worth.

Why not turn the problem around, instead of only having your most "conniving, disinterested" employees looking for new jobs, why not encourage all your employees to have a look around. Why not even give them some work hours to "assess their own worth". Send out CV's and do phone interviews.

Then when your best employees come back with better offers you will be happy to pay them more. Even better, the guys who are not working out have somewhere better to go and everybody is happy.

Of course, it's a dangerous game and you might not be able to afford more.

I've never read a good plan for doing employee reviews and salary increases.

"Have clear and consistent salary guidelines, and regularly give raises to people who are outperforming their pay level."

The problem is right here, what is a pay level. Just because there is a number somewhere in a spreadsheet doesn't mean an employee will be happy with what you give.

jsankey• 14 years ago

I think if you consistently did this you would end up overpaying, for a few reasons. It's pretty common for offers to be made on the high side as an incentive to sign on, for example. People could get higher offers from places that have less appealing work (i.e. the job is not more valuable overall). Generally if you're always matching the highest offer, you're probably paying above the fairest sustainable wage.

mgkimsal• 14 years ago

Being that open about it would mean employees would let it slip, and you'd be a target by competitors to raise your costs far higher than they'd need to be.

InclinedPlane3• 14 years ago

This implies that spending a few hours interviewing is a better gauge of someone's abilities and "worth" than years of working side by side with them.

Do I really need to say that that idea is too ridiculous to be taken seriously?

jay_kyburz2• 14 years ago

Haha, of course. Just a silly thought experiment.

But the whole topic is a little silly too right?

A company exists to make money for its stake holders, not pay it's programmers. It's not in a companies interest to make sure each of its programmers is paid well, only to retain the talent for as long as needed. Not necessary the same thing.

Jare• 14 years ago

Making or accepting counter offers only ends well when the employee is inexperienced and/or confused as to why he is quitting. In any other case, you're only delaying the inevitable, and in most cases the short-term benefits of that delay will be overshadowed by the mid- and long-term consequences (less need to fix the real problems that led to the employee quitting, employee growing restless again quickly because it in fact was not just about the money, etc).

stream_fusion• 14 years ago

It assumes that all employees are informed about other employees playing a quit game. From a management perspective, it may be good strategy to make the counter offer, if you could ensure that it is kept quiet from office gossip. Also, an individual employee has no incentive to broadcast the fact that he is using the threat of quitting, and is likely to play into that stratey if he receives what he wants in pay/status/hours etc.

wyclif2• 14 years ago

Sooner or later the lower paid employees are either going to get the feeling that all the necessary secrecy around salaries means they’re getting screwed (because, um, they are) or find out that someone got a raise by quitting, and go about doing it themselves.

A good axiom I've always gone with is that the amount of pressure and process a given company has built into promoting secrecy about pay is inversely proportional to my desire to work for them. If you're asked by management to never discuss salary with your peers, you know they're screwing people.

fleitz• 14 years ago

Management that engages in that frees up more money for others who want to negotiate. Why should management give money to people who don't want it?

SatvikBeri4• 14 years ago

It's a productivity killer. If everyone knows that John is a better developer than Bill, but Bill gets paid twice as much because he understands corporate politics, then people focus on politics, feel like life is unfair, etc. The money saved by underpaying your best employees is rarely worth the inevitable productivity hit and loss of talent.

rayiner• 14 years ago

It creates bad incentive structures internally. Especially when you factor in the findings of behavioral psychology, which suggest that using pay as a performance incentive can actually decrease the quality of peoples' work.

Law firms have an interesting model where everyone is paid in lock-step by seniority, and in practice it works extremely well. Employees uniformly hated the moves some firms made during the recession to get rid of lock-step compensation. I think it actually boils down to a degenerate case of Fog Creek's very uniform compensation scale (there are far fewer variables for in a law firm than a programming shop).

R_Edward• 14 years ago

My first day at one employer, my HR rep scribbled some numbers on a paper and slid it over to me, saying, "Now this is your annual salary. We consider compensation to be confidential, and ask that you do not discuss it with anyone."

"Understood," I replied. "And you don't have to worry: I'm just as ashamed of it as you are."

dustingetz2• 14 years ago

this isn't going to be very popular, for obvious reasons.

> The most devoted, upstanding employees are the least paid, and the most conniving, disinterested ones are paid the most.

disagree. the best employees are the ones are constantly being recruited, they know their value, they have the quitting credibility to leave and go get a job anywhere else if their value isn't met.

anyway, if the employee wants to stay, it shouldn't get to the point of a counter offer. they ask for the raise, they have implied quitting credibility that is obvious and doesn't need to be used as a threat, they get the raise. if you have to actually threaten to quit, somebody is doing something wrong.

> If an employee tells you they have a job offer, tell them that if they take it then you’ll wish them well, and stick to it.

clearly Mr Cohen isn't working with superstar engineers, the type that are a massive blow to the company if they leave. you do what you need to do to keep them at any cost, not whine on a blog.

irahul2• 14 years ago

> clearly Mr Cohen isn't working with superstar engineers,

I can't find where he works(wikipedia, his blog doesn't mention anything). But considering he is the inventor of BitTorrent protocol and wrote the first client, I assume he won't be working at a place where his team doesn't comprise of equally smart people.

Also, his point was your strategy shouldn't be to make counter-offers, but to optimize the salaries and workplace in a way that people don't feel they have to quit to get counter offers.

kragen4• 14 years ago

> But considering he is the inventor of BitTorrent protocol and wrote the first client, I assume he won't be working at a place where his team doesn't comprise of equally smart people.

I can't figure out what you're trying to say, but if you think there are enough programmers as smart as Bram to staff an entire company, you're a fool. And if you think they all want to work for Bram, you're doubly so. Lots of them want to start their own projects, not work on somebody else's.

literalusername• 14 years ago

Bram co-founded BitTorrent, Inc., where he is surrounded by smart people.

ootachi• 14 years ago

There rarely exist engineers that are a massive blow to the company if they leave. Engineers are easily replaceable in all sorts of ways.

MixedContent• 14 years ago

The behavior described in the post sounds like the kind of intellectual and moral laziness that you'd have to expect when The Market is assumed to yield Truth, like some kind of modern Oracle of Delphi. And those who practice it risk serious rotator-cuff injury from constantly trying to pat themselves on the back for being so incredibly cynical... um, 'scuse me, efficient.

Management, done right, requires the ability to make judgments, including character judgments. Collapsing all possible human motivations into the single dimension of fear/greed may swell the bottom line of whoever can do it the most cynically, until at some point it doesn't, because over time (if not immediately), it will produce an atmosphere that is poisonous to innovation.

ary2• 14 years ago

This is counter-intuitive from a business standpoint. Managers behave this way because they've learned through experience that:

1) Most of the worst employees hang on for dear life to their jobs and don't dare risk losing them for any reason (asking for a raise, etc). Incompetence or sub-par job performance not withstanding.

2) Occasionally employees get a fire lit under them by a spouse, mid-life crisis, etc and attempt to obtain a raise. Doing so communicates that the employee wants to stay at the company, and that they can be low-balled.

3) The best employees have mobility in the job space and can get better offers. This is why quitting is the only reliable way to get a raise (counter-offer). The employee has clearly shown market value above their current position, and the psychological effect of social proof kicks in.

There are of course exceptions, but even a moderate amount of time in a large company shows this to be generally true. Managers are incentivized to keep personnel costs down, and only give in if their hand is forced. It's just human nature at work.

palish• 14 years ago

Am I insane for being completely satisfied with $80,000/yr to do really cool multithreaded programming work on some seriously beefy hardware? (Midwest area.)

I wouldn't ask for a raise for the simple reason that I'm totally satisfied with my number. So I'm just trying to figure out which of the following is true: I am overpaid, I am stupid for being content and happy, or people just tend to be greedy.

harichinnan• 14 years ago

That means you are not married and don't have kids to send to school and very young, to do any retirement planning.

kellishaver• 14 years ago

Maybe you just have a different set of priorities.

I feel much the same way. The bills are paid, there's some money going into savings, there's time to spend with the family, and I'm doing work that's fun.

OK, I'll ride that for a while. Could I make more? Maybe. Probably. Do I need to? Nope. Sometimes going with the flow is worth it for the amount of stress it saves you (and your family). As long as you are not stagnating and feeling unfulfilled and poorly compensated, I see nothing wrong with leaving well enough alone until one of those criteria changes or a great opportunity happens along.

If it ain't broke....

ary2• 14 years ago

No where in there did I say that the best employees have to quit and leave for better offers. I'm part of a startup that underpays me (based on job offers I've had since joining) yet I wouldn't dream of leaving. Incentives (and priorities) make a difference.

mishmash2• 14 years ago

>Am I insane for being completely satisfied with $80,000/yr to do really cool multithreaded programming work on some seriously beefy hardware? (Midwest area.)

In 10 years of midwest experience, $80k is probably a bit on the low side for systems-level work. Just a few years ago I would see DreamWeaver jockeys pick up full time for ~$50k/year. One hire did NOT know the difference between HTML and an HTTP server, someone else called me into a training session she was hosting and asked why her form wouldn't work. She had set the form's action param to email:

  <form action="mailto:example@domain.com">

Sadly I'm not kidding. :(

On the high-side, I've seen C/C++ contractors charge $100-$250/hour, depending wildly on the individual consultants.

So I don't think you're crazy for being happy. And great working conditions can have an often immeasurable impact on life. Happiness, is, after all, the end game - and a guaranteed $80k/year might be worth more than an unknown $120k/year for some people.

SatvikBeri4• 14 years ago

I'm satisfied with my strength, but I still work out to get healthier.

I'm satisfied with my social life, but I still enjoy meeting new people.

I'm satisfied with my life, but still enjoy new experiences.

dlytle• 14 years ago

I'm getting $47.5k in Nebraska to work for a Maryland company working on their Service-Now platform. 6 years with the company, been using SN since we were customer #5, and I just had to fight for a raise ($2.5k) after 2 years without. $80k seems pretty damn good, but based on what it sounds like you're doing you've got the skills to earn it.

Myself, I'm not so sure, and I really do love working from home, so I'm plodding along as is. A little ominous though to read this right after I insisted on a salary review and got one...

lordlicorice• 14 years ago

Wouldn't you rather be retired than working full time, regardless of the job?

publicus• 14 years ago

Yes you are, I'm at 130k and looking for more.

jrockway4• 14 years ago

This is a great article. It describes exactly how salary negotiation works in the US, and now when someone asks, I won't have to write it all out myself.

Ironically, I only realized the way things worked at my last job. I wanted to get paid more, but didn't really know how. Then a few companies contacted me out of the blue; I interviewed at each and was offered a job at each. They all involved moving, which I didn't really want to do, but I kept that to myself. I then asked my current employer to match the highest offer, which they agreed to do. Then I showed them the offer letter, and they didn't believe that my other offers were so high, and tried to negotiate me back down to my current salary. I put in my two weeks noticed and my managers looked extremely surprised. Apparently nobody had ever actually followed through on their threat to quit; everyone had used "I have another offer" as a way to get an easy raise (but never as much as the mythical offer).

Anyway, my current employer is More Enlightened and I don't think I will have to play this game for a long time. Which is nice, because you never actually win...

felipemnoa• 14 years ago

>>Which is nice, because you never actually win..

Could you explain what you mean by this?

jrockway4• 14 years ago

You wonder what would have happened if you took the other job, your peers resent you for "playing the game", people think you're not loyal, etc. You make the highest amount of money that your employer will currently pay you, but that's about it.

Drbble11• 14 years ago

Interesting, because many posts here accuse your current employer of being an aggressive screwed negotiater, with full time compensation specialists.

Posts by former or non-employees, so, perhaps biased.

jrockway4• 14 years ago

People are mad that Some Random Hedge Fund will pay them more than Google and that Google won't match it. This is upsetting because now they have to choose between a shitty job that pays a ton and a great job that merely only pays a lot, when they want a great job that pays a ton.

Honestly, nobody's ever offered me more money than Google, so I have no reason to complain.

iamleppert• 14 years ago

Horrible advice. Having unilateral policies like this are things that give people excuses to stop treating people like people.

Each case is different. It depends on the individual employee, their performance and role in the organization.

And I don't much like how you are blaming the employee for "not wanting to work for you". Of course that will be true for some people, who simply need a change for change's sake. However, do you not share some of the blame for a high quality employee seeking outside employment? What happened to that employee to want to make them work some place else?

mathattack• 14 years ago

It took me many years to learn the leave and counter game. The caveat is once you start playing this, you lose trustworthiness in the eyes of your employer. You get money, but lose promotions.

I think firms need to be consistent. Either play the game all the time, or never. If you waver, you might lose someone who just thinks it's a way to get a raise.

The investment banks are the worst at this.

ansy• 14 years ago

My ideal company would have a culture where people would want to work there for free. Above a certain amount, money stops contributing to real happiness. Some people have even suggested that number is as low as $60,000 in the United States. [1]

Unfortunately jobs are not the stuff we often fall in love with. Those opportunities are few and far between. But I think it is a far nobler goal to try and make more places like that than to have the most competitive salary policies.

[1] http://www.ted.com/talks/daniel_kahneman_the_riddle_of_exper... (see q&a in at the end of the transcript)

r00fus• 14 years ago

This logic holds IFF you don't have kids or a mortgage/rent in an expensive metro that push the "real happiness" number up.

I'd agree there is a the "real happiness" number, but it's different for everyone.

rorrr2• 14 years ago

60K is what, around $3500/month after taxes. If you live in NYC or SF, that's not a lot. Barely enough to get a small apartment, food, and go out once in a while, and save a little.

Drbble11• 14 years ago

More like $5000. 30% effective income tax kicks in around $150k annual salary. Still, your point holds. Not retiring or having a very healthy and actualized child or three on that salary.

Drbble11• 14 years ago

The 60k is about spending. It ignores savings for retirement and insurance again the uncertain future.

So, double the number to account for those factors and geographic variance of costs, and where are you? The numbers most middle class people talk about.

coliveira• 14 years ago

I would be ok with that if the owners of such a company also worked only for the happiness and not for the profits - in which case, they would forgot any personal compensation over about 60k.

But... you and me know that there are no such business around. Even people like the Google founders claim that their major goal is job happiness, but they don't think twice before buying a huge yacht with their billions. In other words, they have just talk and no attitude.

Why do you think that employees should be happy with getting only a base salary, without raises?

idlecapacity• 14 years ago

This post strikes a chord. Personal experience below, economics first.

It seems best for the species that wages be allocated to where they have the highest marginal impact on the final value of goods produced or services rendered. If a great employee happens to be too squeamish to ask for a raise, but he will still go on adding steady value to the widget, it strikes me as a societal waste to initiate a pay raise for him. However, there is this HUGE possibility of negative externalities from chronic under compensation (resentment of firm, shame of cowardice for not asking for more, laziness, obstinance, etc). This makes the problem of wages extremely difficult. Factor in the complexity that "market prices" based on outside offers are inflated to cover switching cost to the employee and it gets even harder to determine the RIGHT wage. Without quantifying these externalities, the best answer to what the right wage is, from the firm (and probably system) perspective, is the least amount of money you will take to perform the work. If this sounds un appealing to you as an employee, its probably good you're reading hacker news! THE PAIN of salary management comes from finding that "lowest amount" you're willing to take. Spending energy negotiating just to get to your scenario of indifference is slow torture. The winners in the whole process are probably below average people for whom salary reverts to the mean.

I left 100k USD in the midwest to become a west coast entrepreneur. In Chicago I got my salary raised three times in three years, first unsolicited for performance, second to counter a threat to leave, and third as a promotion. The threat to leave tied the promotion in dollar amount, but was highest in percntage terms at the time. The unsolicited raise for performance was so small that it set me down a destructive path of engineering larger pay raises which i thought i deserved and didn't receive.

What I Learned -Money feels VERY important when you hate your job -Big company jobs are comparitively more valuable to people with children and houses -While the employee-led raise environment is painfull to experience, it seems to produce an appropriate allocation of LABOR eventually

Hopefully one of us will someday solve the puzzle of quantifying the value of individual labor inputs to finished goods. This would have two amazing effects. 1) workers would be fairly compensated, 2) all workers would have empirical info on how to improve their value add.

Drbble11• 14 years ago

I hope you appreciate how your logical train of thought obliterated the facile economic myth you started with.

abalone• 14 years ago

I love it when intellectual property thieves lecture others about how to compensate intellectual property creators.

maaku• 14 years ago

Or better yet, pay your employees what they're actually worth to you, and remind yourself regularly to evaluate them for raises.

its_so_on5• 14 years ago

Sorry, guys, I am going to have to disagree with both this article and the suggestion that counter-offers should be turned down by employees.

The truth is that despite the fact that lots of hn (yc) type startups have employees working for enough to cover their rent or whatever, and a bit of equity that has absolutely no defined value, when the company does take off, it's only fair to ask: All right, thanks for sticking by me, now what are you guys really worth! What is this killer graphics designer worth ; what is this DBA back-end coder worth who has just scaled us from a bedroom to millions of customers ; what is this accountant worth.

If they don't have other offers, there is NO answer to that question. You can't appeal to the cost of their bedroom or car, you can't appeal to the chance to build something great, none of this is external or fair.

Fair is what the market says.

I remember somewhere years ago on Slashdot that it's impossible to be "ripped off" in a transaction, reasoning thus: "When you have a fistful of cash in one hand, and the offered good or service in front of you (forget what the example was), and you say 'ok' and get it, that's your choice, if you get what you thought you would get giving the money that was asked, you physically can't be ripped off. The money was in your hand and it was your choice".

Well, sorry slashdot poster from years ago: that's false. When you have a fistful of money and buy something, but you are radically misinformed about the market price (to your disadvantage) then you just got ripped off. If you sell your vintage gold (whatever) for a couple of bucks, being told it's just for the value in gold, but a vintage gold (whatever) is worth 100x what you just paid: then you just got ripped off.

The thing about talent like this is there is no market price because everyone is unique. The market price is whatever other offers you get.

In the vintage gold whatever example, if someone says "This only has a tiny bit of gold in it, I can give you $100 for it", but in the same town five out of the five other specialists you would sell it to if this person wasn't in front of you offer at least $3,000 - then you just got ripped off.

I'm not talking about if you were to sell it yourself (instead of to a specailists) to another buyer: maybe buyers themselves pay $8,000. I'm talking about other opportunities in the exact same circumstances and market.

The fact is, "intrinsic" arguments (like how many ounces of gold is in something), what food and rent costs, what you paid the last guy, whatever, are worthless:

the ONLY thing that establishes the market price in my market of my graphics designer is their other offers (not their own other work, which is a different market).. The ONLY thing that establishes the market price of my back-end engineer is their other offers (again, not their consulting work, which is a different market).

I want to be fair with my employees, and I want to be treated fairly. I don't want to rip anyone off, nor do I want to be ripped off.

The ONLY way to do this is to explore market prices, and the best mechanism to do this is through other offers (since no one is fungible with other people in this industry; you can't just 'look it up').

So I'm going to have to strongly disagree on all points here.

its_so_on5• 14 years ago

one more thing. If I'm generous I'll pay everyone 10% more than they're worth. How do I do that?? I have to know what they're worth first.

someone else in this thread said: "It's a productivity killer. If everyone knows that John is a better developer than Bill, but Bill gets paid twice as much because he understands corporate politics, then people focus on politics, feel like life is unfair, etc. The money saved by underpaying your best employees is rarely worth the inevitable productivity hit and loss of talent."

If everyone knows that Bill and John each get 10% more here than anywhere else, then I am a generous and fair employer.

If Bill and John respectively get -20% and -40% here as compared with what they would get elsewhere, then I am both non-generous and unfair. If they both get -10% as compared with anywhere else, then I am not generous, but at least fair.

And if they get +20% and +35% as compared with what they would get elsewhere, then I am generous but unfair.

barrkel3• 14 years ago

The market is inefficient because of the information problem - precisely as you say, everyone is unique. That harms your appeal to the market as a pricing mechanism.

Anyone making an offer for an unknown potential employee logically and necessarily discounts the offered salary by a certain amount to take account of the unknown. So the market price for a developer is lower than what that developer should be making once they are a known quantity for the most profitable position for them in the market.

And companies should give raises based on this - not on the market price, but on the known quantity, such that the only way that an offer exceeding the salary could be made is either (a) a position that creates more value (in which case the employee really should move, should money be their motivation) or (b) an irrational company.

its_so_on5• 14 years ago

I don't really understand what you're saying. I gave a pretty concrete example: I have Andrew or Alice who does graphics design, Barbara or Bob who does finance, and Carol (m/f) who does the back-end coding and all operations. They're pretty young, and I can't pay them what they're worth or anything near it. Now, I get some cash into the company: how do I now pay them what they're worth? What is your suggestion?

If my company competes successfully in its niche because of the level of fit and finish, and design, should I pay Andrew/Alice proportionally more than Barbara/Bob or Carol? Now what if my company competes successfully because of the scalable infrastructure - it's really an ops company, and it's just a faster service and that's why everyone uses it. Nobody cares about design. Then suddenly does Carol deserve more money than Andrew/Alice or Barbara/Bob? Now what if it's an excruciatingly tough market where everyone is incredibly price-sensitive. But by doing market research and have our financial acts together the best out of the companies competing in our space, we grow and prosper and persevere over them?

No. This is wrong. This leads to talented designers and finance gals and guys leaving because they're not being paid what they're worth OR appreciated. It leads to the ops company saying: "You don't get what you'd make elsewhere BECAUSE you're less important". This is the WORST POSSIBLE SOLUTION.

Of course, at an executive level you can choose to hire a BETTER designer/lead designer in one type of company, a BETTER or BETTER-CONNECTED or MORE EXPERIENCED finance gal or guy in another context, or a BETTER or MORE EXPERIENCED or whatever gal or guy for ops and back-end in a third context. You pay them more because they're WORTH more.

If you really want to go above and beyond, sure, pay them MORE than they'd get elsewhere. Show appreciation by paying or rewarding above market.

But your suggestion is right in line with command Communist economies, and goes about as far. By the way I think that's great in a small 1-5 person socialist setting (as in a family for example!). It's no way to run a company though.

*I also want to add that on the small level, "to each according to need" is also valid! If only one of the three first employees has a mortgage, then they might get a bit more to start off. This doesn't scale, and I'm telling you what needs to be done when you become an actual company with sound finances and a desire to grow, acquire and retain talent that won't be bitter.

wccrawford2• 14 years ago

At my previous job, I signed on with really low pay because I had little professional experience, but tons of personal experience. They quickly realized they were underpaying me and in a year, I was almost at what I was worth, and at 3 years, I was there. Since this was my only real experience on my resume, I felt this was a good response from them, and they valued me.

Then they refused to give me good raises the next 2 years. My skills were increasing faster than ever, and I was the only guy who knew the entire system inside and out. Everyone in the company came to me when there was a problem because I knew how it all fit together. (I did not hoard this knowledge... Others were disinterested in having it, or didn't stay long enough to matter. I was unable to pass it on, and documented as much as I could at all times.)

So at 5 years, at my review, I asked for a raise. The answer was that if I "really cared" I should go talk to my boss's boss. ... Seriously? After some arguing, my boss eventually told me that they would be looking to correct everyone's salaries within a year.

Faced with the knowledge that they intended to knowingly screw me for a year, and then possibly continue afterwards, I started replying to the job offers that had been coming in. I had previously been ignoring them.

Right away, I found a company that looked good, and signed on. For a 40% pay hike. I had known I was underpaid, but didn't realize it was that much.

6 months later, the pay raises came in at the old job. A friend who was making what I made (!) got a 20% increase. He managed to find get a job offer at the same rate I was now making, and took it back to them. They refused to match it.

And in case that wasn't insult enough, they put out a job ad for 7 new people at the rate I was now making. The rate my friend tried to get them to pay. Their existing, experienced, efficient works were worth less to them than random people off the street.

I told my new boss about all this and he gave the same advice that a lot of people here gave: Do not accept a counter offer. IF the company gives one, they intend to replace you soon with someone who won't hold them hostage. Because that's how they see it. You are demanding that they pay you more, or you'll quit and leave them short of staff until they can find a replacement. They can't take the chance that you'll do it a second time, so you're out of there as soon as they can make it happen.

And he's right. I'd do the same thing in his position. All he needs to do to avoid that problem is to pay me properly, and that's happening. It's so simple.

charlieok2• 14 years ago

So...

-If you ask for a raise without an offer in hand, you have a weak bargaining position

-If you ask for a raise with an offer in hand, you are “holding them hostage”

What is an employee to do then? Simply expect fair raises to come periodically, initiated by the employer, and quit if they don't?

yeswecan• 14 years ago

In word, yes. You either work for a company that believes in incentivising employees to stay, or you leave.

LockeWatts• 14 years ago

See, in the eyes of an employer that makes perfect sense.

SatvikBeri4• 14 years ago

Dear god no. As an employee, learn how to negotiate and get raises. Ramit Sethi's book I Will Teach You To Be Rich contains an excellent guide to asking for a raise, which I personally used to secure an 80% raise at a previous job.

joelrunyon• 14 years ago

Treat your employer like an employee.

If they're underperforming and not living up to what you want from them, fire them and find someone else who will.

I don't understand why employees are expected to just act helpless and be held hostage because someone gave them a job. If you're good in your field (especially in an area like tech), you should have no trouble finding other jobs at your fair market value and keeping your employer honest.

tomkarlo2• 14 years ago

Treat your employer like a relationship. As long as it works, be invested in your job and do your best. If something isn't working (like your comp), man up and have the hard discussion with your employer. If they don't fix it, find another job, but also leave properly - give proper notice, put your work in order, etc.

Don't be paranoid. Don't get into this thing that you're "putting it to the man." Yes, some bosses suck, and some are cheap. Most are just trying to do their job, and most would rather keep you around than lose you.

wccrawford2• 14 years ago

If you're timid like me (and a LOT of other programmers!) then yes, quitting and getting another job is how you fix the situation. It's currently the norm in the industry.

I disagree that you've got a 'week bargaining position', though. If they're underpaying you and you ask for a raise, they can stiff you on the raise and hope you don't quit... Or they can give you the raise.

If they don't give you the raise, they know that you know you're being underpaid. At that point, you're virtually guaranteed to start looking at other jobs. You'd be a fool not to at least look.

So even if they're greedy bastards, a little common sense will show them that they need to take care of the problem properly.

Sadly, not all of them have that sense.

But most who quit and get a different job don't ask for a raise. They've already been told flat-out that they aren't getting one, and asking would be silly at that point. That's the position I was in, and it was silly. It didn't do any good except to make me mad enough that I wasn't comfortable in that company any more. (It was a nice, cushy job where I chose what I worked on, so long as it was productive.) See, they had told me that they were capping all raises at 5% because of the economy. The thing is, they had previously shown me how they do better in a bad economy, because they save companies money and new customers come flocking in. I accepted that answer 1 year because the job was really comfy. The second year, I just couldn't accept it. I was too far below what I felt I was worth.

tl;dr - Yes. Quit and find another job if they won't give you the raise you deserve.

dustingetz2• 14 years ago

It sounds to me like a) you make as much as your boss does, and b) technology is not your company's core business.

rmc• 14 years ago

This is decent advice for companies. And I presume some will follow it "No $EMPLOYEE, it's for your own good that we don't make counter-offers, sorry!".

However they have to follow the other part of the advice: "Have clear and consistent salary guidelines, and regularly give raises to people who are outperforming their pay level. Don’t be a tight-fisted, short-sighted moron."

Drbble11• 14 years ago

Bram Cohen was laid off just prior to inventing BitTorrent, right? No doubt that experience (and being a founder) colors his perspective.

Drbble11• 14 years ago

This discussion has overlooked the last paragraph of Bram's post, which is that counteroffers are a non-solution when the manager has already failed. Don't give counteroffers, because you should avoiding do situations where your employees get competitive offers from outside. There are good ways (money, respect, excitement) and evil (sweatshop campuses) to achieve that

sigzero• 14 years ago

Usually there is more going on than $$$ when someone entertains the offer to leave a company. Getting more $$$ only plugs one of the holes in the dike and usually (in my experience) that person is going in 6 months anyway.

I never entertain counter offers simply because I consider it a firm agreement with that other company that I already accepted.

SonicSoul• 14 years ago

i've been on counter offer side of things a few times.. at first, it was nerve wrecking.. having to resign and admitting to have been "cheating" on your employer by secretly interviewing.. it feels horrible. but indeed, it was always well received (or maybe i was lucky in having rational bosses) in a do-what-is-best-for-your-career manner. and some of the counter offers were crazy good, but it would feel weird to stay based on that.. after all, while resigning i always listed other things that propelled me to do that (like being skipped for a promotion for 2 years because promotions were limited (to 1 per year) and other employees demanded them outright while i stayed quiet).

taking another offer is a big risk. you're leaving the cozy confines of your current job, where you know everyone and all the systems you've so carefully crafted over the years. Last time, the company i left for ended up laying off 60% of dev staff (myself included) 5 months after switching. But i am still glad i did it. i learned lots in those 6 months i wouldn't have if i stayed, and interestingly enough, when my old boss found out i was laid off he generously offered my old job back.

i have a friend, that outright tells his boss that once a year he'll be interviewing just to see what the market worth for his job is. This seems insane to me, but his boss is totally fine with that. My friend has a great job with amazing perks (sales) that would be very hard to beat elsewhere. This move does let his management know that he isn't going to stick around unless his growth at current place continues.

daviddaviddavid• 14 years ago

> The most devoted, upstanding employees are the least paid, and the most conniving, disinterested ones are paid the most.

"disinterested" means impartial or unbiased.

"uninterested" means not interested.

I wasn't going to comment on this (and thereby be a grammardouche) but I've seen the word quoted/used in the comments so many times that I thought people might actually not know this!

tomkarlo2• 14 years ago

The OP ignores the fact that at most decent tech companies, a TON of time is spent on annual or semi-annual reviews to determine raises and bonus comp for better performing employees. The exact reason this is done is to ensure they're being compensated fairly and don't go off shopping for offers.

It's not true that management has the goal of minimizing comp for employees. Management tries to minimize _total compensation expenses_, which includes the costs associated with replacing an employee (and those costs can equal a full YEAR of comp in most cases.) Not to mention the disruption to projects that occurs when a key team member departs.

Really smart tech companies take a step farther: if you're in good standing when you leave, they have a special process for hiring you back if you decide you want to come back later. It's smart: they expect that lots of the best employees will want to try their hand at a startup or smaller venture at some point, but they don't burn the bridge with someone they know is a good team member.

miha123• 14 years ago

The advise is similar to tricks to train dogs

Never Make Counter-Offers

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