GUEST BLOG POST: She Who Hesitates, Loses

September 08, 2011

Beware the financial expert who has the answer before you have even posed the question.  It’s a telltale sign that he or she isn’t really interested in the facts or circumstances of your personal situation, and has something to “sell,” whether you need it or not.  As the saying goes, when all you have is a hammer, then everything (or everyone) looks like a nail.

As a CFP® professional, my usual answer to most questions is “It depends…”  It depends on your tax bracket, your marital situation, your age, your objectives, etc.  And then we get down to work.  But I have to admit, there is one situation where I am tempted to make a recommendation no matter the question, or the personal details.

All I need to know is that the client before me is a working woman, and without further discussion, I want to tell her, “Ask!  You need to ask for more.”

I am advising her to ask for more compensation, whether it is a raise or a beginning salary for a new job.  According to Linda Babcock and Sara Leschever, authors of “Women Don’t Ask:  Negotiation and the Gender Divide,” men are 8 times more likely to negotiate a starting salary than  women, and liken the process to a  “wrestling match.”  Women, by contrast, compare the negotiating process to a visit to the dentist.

The analogy is apt.  Failing to negotiate, just like failing to go to the dentist, can cost an enormous amount of money over a lifetime.  This is money that women, in particular, cannot afford to forego, given their longer lives and higher medical costs.

Take the following example:  Sara, a 30 year old manager, is making $75,000 a year, and believes that she deserves a modest 7% raise, to $80,000 based on the fact that she has not only consistently gone above and beyond to accomplish her responsibilities, but has also helped the company in other areas at her own initiative.  Her job has clearly expanded since she was initially hired, and the company has grown in part as a result of her efforts.  She’s hoping her good work will speak for itself, and that her boss will offer the raise at her next review.  He doesn’t, however, and Sara figures she’ll wait to bring up the matter next year.

Sara’s hesitation has real dollar and cents consequences.  By the time she reaches 65, she will have given up approximately $250,000 (today’s dollars, after-tax) in salary and retirement plan contributions, based on conservation assumptions of cost-of-living wage increases and a 4 percent return on her money.  The costs may not end there, however.  If Sara has other benefits tied to her salary – such as life insurance, disability insurance, a cafeteria plan, company stock purchases – all will be reduced because of her decision to pass up the opportunity to ask for more.

If you are in the same position as Sara– doing work above your pay level, yet not being fully compensated for your efforts, here’s what you need to do:

• Do your homework and find out the comparables.  In other words, what are employers in your industry paying employees at your level, with similar qualifications and experience?  There are resources available to get this information: one is the Department of Labor’s Occupational Handbook, issued every two years, which has job market data by state on the required education, training, expected earnings, responsibilities and work environment for given occupations.  You can also go online to monster.com or payscale.com to get information on average salaries by job title.  While this information may not be specific to your exact position, it at least gives a starting point for gauging your expectations.
• Determine your worth to your company. This is about your contribution to the bottom line.  You have to think here like your boss, and in particular, get familiar with the “beans” that he or she counts every day.  How is growth or profitability measured in your company?  Find out what accounting numbers or ratios are important, and in particular, the staff metrics used to evaluate employee performance.  Take some time to determine how your work impacts those numbers:  does your contribution lower expenses, increase sales or revenues, generate more “eyeballs?”
• Promise it, then prove it.  Sometimes there are extraneous factors that may tie the hands and budget of your boss, no matter how compelling your argument for “more.”  In these cases, ask for a  reconsideration of your request within the next few months, and tell your boss what you plan to accomplish before that next review date occurs.  Making it clear to supervisors that you mean business, and expect to advance in the company, sends a powerful message that generally will not be ignored.

The one thing Sara should not do is ask for more based on what she needs.  Too many employees make the mistake of asking for a raise because their mortgage payment has gone up.  If that worked, then the employee with the most crushing debt payments should be the highest paid worker.  At the same time, once Sara has the factual basis for asking for what she is worth, she might think of her lifetime needs to give her that extra bit of resolve to negotiate.  After all, that $250,000 dollars could make a world of difference to her financial security in retirement.