Negotiation Course: Negotiating With An Exploding Offer

An exploding offer is an offer that must be accepted within a time limit (potentially as short as a few hours), otherwise it will expire.

**Exploding offers are often fake** and you can take longer than the supposed deadline. However, you should protect yourself in the small chance that the explosion is real by having backup options.

If you face an exploding offer, the first step is to understand where the urgency is coming from:

> What’s the timing constraint? I’ve dedicated 3 weeks interviewing here and enjoyed meeting the team, but I'm curious why there's such an urgency at this point in the process?

A few options for how to request more time: 

- **(less effective)** Explain that you’re still collecting data and wrapping up the process so you’d like another week. Something like: "*I’m in the last round with the company so I’m confident I can get back to you by Monday.*"
- **(more effective)** Ask for more information. "*One thing I heard in the interview is that many of the mobile developers have transitioned to work on dev infra, which is interesting for me. Could I chat with someone who does made that transition?*" 
  - In a similar way, you can also request to chat with folks in the management chain, e.g. the director or VP.
  - When Rahul was at Meta, he’d do calls with people who got offers coming from Pinterest

Worst case scenario, you have to renege or quit shortly after joining. You should avoid this if possible (there is potential reputational damage), but we'll talk about this scenario in the next video.

Negotiation Course: Negotiating With A Single Offer

It is possible to negotiate with a single offer, but you are in a weaker position here since you don’t have as much leverage.

- Use "market data" to justify a higher pay, and talk about how your experience and background should justify being on the top end of that range.
- Talk about the ***potential*** of other opportunities that you could pursue but you choose not to for the sake of expediency and the fact that you like this job. "*I could get another offer, but I don't want to if I you can give me a competitive offer.*"

Two scenarios to consider:

1. If you’re currently employed, use that to your advantage. Pretend that you like your current job (maybe you actually do!) and that you have to be "pried away". Talk about what you're leaving on the table, e.g. unvested equity or bonus payouts.
2. The **Close the Deal** tactic is nice here. "For an extra $10k, you can snatch me away instantly."

Negotiation Course: Negotiating Your Current Salary

Negotiating your current comp is harder. You can no longer sell on potential, you have to show the outcome of what you have achieved. There are generally also fewer levers to adjust, usually just salary and equity refresh grants.

A few tips: 

- Time when you ask to coincide when your company normally does pay evaluations and merit increases
- Share market data or another offer

If you ask for money and reference another job, be careful about the impact it may have on your manager relationship, who may give you less scope or responsibility.

Negotiation Course: Recruiter Case Study: Insights From An Ex-Amazon Recruiter

This was a conversation with a recruiter who spent several years as a recruiter at Amazon and Uber.

She believed everyone should negotiate, but only when the company wants to give you an offer. 

- Most recruiters won’t prevent you from shooting yourself in the foot if you share too much information in the phone screen.
- Amazon would let go of unreachable candidates, e.g. Meta, if they sensed the candidate was already lost.

She also shared the dangers of getting starstruck with a company, e.g. Uber hiring in LATAM hired many people who didn't negotiate at all.

Negotiation Course: Recruiter Case Study: Insights From An Ex-Meta Recruiter

This was a conversation with a recruiter who spent several years as a recruiter at Facebook (Meta) and Pinterest. 

- The tactic of *"I will sign the offer if you meet me here"* is **effective if it's sincere**. You should be prepared to explore/defend various options around other ways the company could compel you to sign the offer.
- Exploding offers are almost always fake. Recruiters know that "**time kills all deals**" so they want to close candidates quickly. However, as a candidate, you can and should push back on an arbitrary deadline. Ask why the timing constraint exists and share why you need more time.
- Be graceful when you turn down a company's job offer. This recruiter would frequently be able to hire candidates several years later who had received an offer if they kept the relationship alive.

Negotiation Course: Prefer Async Communication

Recruiters have much more information and practice with negotiation relative to job candidates. The pressure of a phone call and our desire to please others means that phone calls become dangerous places where engineers shoot themselves in the foot. Too many tech employees keep speaking on the phone call and end up revealing too much.

- Recruiters have orders of magnitude more knowledge about the job, the range of possible offers from the company, and even the range of possible offers are peer companies. 
- On the other hand, most job candidates have a handful of data points around their compensation could be, based on their past jobs and what their friends have told them.

This information asymmetry clearly favors the recruiter, who can read your emotions and take advantage of the knowledge gap to lowball you.

For that reason, you should prefer to eliminate phone calls or keep them short, and then be deliberate about your emails where you can craft the exact message you want to send. Async communication is also better for clarity and you can research on your own.

Negotiation Course: View The Recruiter As Ally, Not Antagonist

Recruiters get a bad reputation, but they can actually help you a lot! The recruiter's job is to get qualified people to work for the company, so there is incentive alignment between both parties.

Instead of viewing the recruiter as an obstacle you must overcome, view them as an ally and a valuable source of information. 

- **Before the interview**,  ask them what will be on the interview and what advice they'd have to prepare.
- **After the interview**, ask them what parts of the comp are likely to change, and build the relationship with them so they can advocate for you.

How do you build a relationship with the recruiter? 

- Say thank you whenever the recruiter shares an update with you: *"Thank you for sharing, I appreciate your clear communication throughout this process!"*
- Show an interest in the job and what makes it unique. Don't ask generic questions. 

Keep in mind that most recruiters are not technical and may not understand the value you bring as an engineer. (Unlike the hiring manager, who will know intimately what role they're hiring for.)

Understand 2 different types of recruiters:

- **Contract (agency) recruiters** are compensated for landing a butt in the seat: they’ll be much more transactional and focused on getting you to accept an offer (any offer).
- **In-house recruiters** will usually NOT see a direct financial gain if you accept the offer. They are evaluated based on goals around recruiting conversion metrics.

Negotiation Course: Closing The Deal

If you’re willing to sign the offer, **you have manufactured leverage you can use to squeeze out additional compensation with high probability**. Tell the recruiter you’re willing to sign the offer immediately if they can give you X, where X is a bit higher than the current offer.

A good choice is to ask for an extra $10K-$20K in sign-on bonus. Companies are willing to do this since it’s a one-time cost but they can guarantee you sign. But $10K is be life-changing for many people.

Making the final request focused on salary or equity is a bit more difficult since it often requires more people’s approval. Your goal in this final round of negotiation is to propose something quick and a no-brainer for the company.

Phrasing:

> I'm eager to use my experience to have impact quickly at \[COMPANY\]. I'm willing to sign the offer today if you can add a signing bonus of $15,000. This would make the offer compelling for me so I can commit to \[COMPANY\] for the next phase of my career.

Ideally you want things in writing. Some recruiters will tell you they can’t put it in the formal offer until you’ve verbally agreed, which is fine, but in that case, you can still ask them for a quick email recap with the numbers included.

Negotiation Course: The Importance Of Equity In Negotiation

Most companies have larger allowable bands in the equity component of their compensation. For this reason, you should treat it with additional importance as a way to best meet your compensation target. 

There are 2 reasons why companies are more willing to increase equity (RSUs or stock options) compared to other parts of the offer: 

1. Equity doesn’t hurt the profit and loss (P&L) statement of the company. This is especially important for startups.
2. Equity has inherent incentive alignment between the company and the employee. The employee will be more motivated to grow the company because the equity is worth more when the company succeeds.

In addition, equity is generally less understood by employees. Rahul's friend at Uber shared stories of people who rejected an equity grant and simply asked for an additional salary (when they could have gotten significantly more in equity). The risk tolerance for receiving stock compensation is less understood outside the US, e.g. in European countries.

For many people in tech, their base salary is enough to cover their day-to-day living expenses. In a major metro area, an engineer's base salary in a Big Tech co can range from $100K - $300K. This can cover things like rent, food, travel, and even some savings.

If you are in this scenario, Rahul's advice is to be **very aggressive** about increasing the equity component of the comp package. You should tell the recruiter that you want to "*take part in the success that you'll help to create at the company*" and therefore want to be at the highest possible range for equity. 

We'll share more about sample phrases you can use later in the course.

Negotiation Course: What's Best To Negotiate

As you think about what components in the offer to negotiate, you should consider: 

1. **Where do you have the most alignment with the company?** For example, reducing the "clawback period" for your signing bonus from 1 year to 3 months is unaligned since the company wants to incentivize you to stick around beyond 3 months. On the other hand, doubling your equity package is more aligned, since your comp will go up if the company does well.
2. **Where can the recruiter best help you?** Generally, a recruiter is powerless to adjust things like 401(k) match or performance bonuses since they're standardized across the company. However, recruiters are able to adjust salary or equity, especially if you are willing to make trade-offs between them.

Another dimension to consider is that equity is riskier than salary, so, therefore, it should translate to a higher potential reward. Stock options and RSUs fluctuate in value based on the market.

If you're ok with the risk tolerance, you are likely able to get more equity vs salary, e.g. increase your equity $20K/year vs salary $5K/year. This is an **obviously** good trade for a Big Tech (FAANG) company, which will have a fairly stable stock price.

Negotiation Course: Determine Levers You Can Pull

The typical 4 highest-order bits for a compensation package in tech are salary, equity, signing bonus, and annual bonus. 

Ask an open-ended question to understand what the recruiter is dealing with: 

> What parts of the offer are you able to adjust the most?

In some companies, you’re just given a salary, a single dimension to negotiate on. In this case, your job is to **invent other parameters on which you can negotiate**. e.g. talk about benefits, title, and other things that you’re willing to give up in order to optimize the thing you really care about.

You can share other offers here, but be prepared to show proof (Rahul had to do this in 2013 when he had to show the Google recruiter the numbers from the Twitter offer)

Negotiation Course: Negotiation Starts Now

It's critical that you only start negotiations when a company has verbally given you an offer.

Leveling is very important since it’ll dictate your salary band and equity. If you’re at a larger company, ask what level you’re coming in at, and see what kind of wiggle room there is.

If possible, talk to the hiring manager or people involved in your interview"

- You can learn advice on what you could work on.
- You can hear what the business need was to hire a role and why they picked you. 

The above points give you “ammunition” for negotiation: you want to understand how badly the company wants you.

Negotiation Course: Don’t Overshare (Level, Passion, Timeline)

Understanding your emotional attachment to the offer is even more important than the data. Ideally, you want low emotional attachment and high data (as explained in [this Taro blog post](https://www.jointaro.com/blog/the-5-lies-that-too-many-people-believe-about-negotiating-a-job-offer/) by Rora).

For example, don't reveal that you're only talking to a single company, or that you're talking to 30 (either extreme can hurt you). Sample dialog: 

> If anything changes on my end, I’ll let you know, but for now I’m eager to learn more about your company

(There's a whole section dedicated to helpful phrases later on.)

You can share information with the recruiter, but be mindful of what and when you share. How much PTO or signing bonus you want are topics that should come up before (if it's a blocker) and after the interview, not during.

**If in doubt, don’t share it**. Just be positive and non-committal to pretty much everything the recruiter says. Answer questions with vague responses and be confident.

Negotiation Course: Get Other Offers

Researching data points is helpful when constructing a negotiation argument, but the **best** argument you have is an offer in hand from a comparable company. 

The big mistake most tech workers make is to be reactive with recruiters. If you decide to interview with a company, figure out comparable companies and apply to them as well. (Google and a seed-stage startup are not comparable.)

Talking to many recruiters and companies at once is painful, but it's better to concentrate the pain in a short window, rather than spreading it across several months. You can also negotiate interview dates, though this is admittedly harder in a bad economy.

As soon as you have a verbal offer, push all your other loops to skip you to onsite using that as leverage ("Don't let the awesome candidate of me get away!").

Negotiation Course: Determine Compensation Benchmarks

The key inputs to determine compensation are level, role/title, industry, geography

Use tools like [levels.fyi](http://levels.fyi) and glassdoor to understand what the typical market rate for the job is.

- **Level**: Offers are formulaic based on level, so you can obviously expect. Don’t reveal this to the recruiter.
- **Industry**: if your job as a SWE is a supportive role for the main product of the company, you’ll typically be paid less (e.g. engineer in healthcare compared to engineer in FAANG)
- **Geography**: California and New York are more expensive than other parts of the US and certainly more expensive than most of the world.

One pro tip here: use <https://h1bdata.info/> to see salary data that companies are legally required to report to the government

However, these sources can be out of date or show an incomplete picture, so the best source is talking to friends or people in the community, like in Taro.

In Rahul’s case, he had a pretty good idea that Snap gave out a lot of equity, Meta gave out huge signing bonuses, etc.

Negotiation Course: What If I HAVE To Give A Number?

A common complaint is that despite their best efforts, some tech workers are forced to give an expected compensation number to do a full interview at a company.

**Rebuttal #1**: You can just put a placeholder. e.g. put $1 for your salary expectation.

**Rebuttal #2**: Collect data from your network and provide a wide range. Ambiguity is your friend here, just talk about how compensation is one factor for you.

**Rebuttal #3**: Finally, even if you give a number you're unhappy with with, the interview is still good practice for you.

By the time you provide numbers, you ideally have done the legwork to know what to expect.

If you have to give a number, say the minimum number that is feasible for you. e.g. you need $250k TC to pay mortgage but the job's upper band is $180k)

Negotiation Course: Don't Give A Number First

The most important rule of negotiation is "Don't give a number first." Don’t talk about what compensation you’re expecting, and definitely don't share what you were making at your last job. 

It’s actually illegal in 22 states for recruiters to ask about your prior compensation (CA, NY, IL): <https://www.hrdive.com/news/salary-history-ban-states-list/516662/> 

Because of the info asymmetry we talked about before, there’s no benefit to you sharing a number, but a lot to lose. Henry Ford (the automaker in Detroit in the early 20th century) illustrated this well. He employed a tactic called "highball negotiation" where he would match the offer given by a landowner, even if it was inflated. Read more about this in "[The People's Tycoon: Henry Ford and the American Century](https://www.amazon.com/Peoples-Tycoon-Henry-American-Century/dp/0375707255)" by Steven Watts

Example dialog from the recruiter:

> We really need a number before proceeeding”

Sample candidate reply:

> At this time, I’m more focused on determining if the role is a good fit. I’m confident we can figure out an agreeable number once we mutually agree that we could work together.

Negotiation Course: How To Practice Negotiation Skills

Just like anything else, practice makes perfect. But conceptually understanding negotiation and practicing negotiation is very, very different.

Be aware of the difference in the incentives and working model between a job negotiation (once every 2 years) and your operational model on the job (every day).

- One (the job) is built on shared understanding, sharing vulnerability. There's a clear incentive to make life more comfortable for people around you.
- One (the negotiation) is **not** built on shared understanding. The person who wins is the person who can tolerate discomfort.

The upshot of all this is that negotiation is extremely important but you don’t get to practice much. Verbalize the advice and practice in conversation with a friend or family member.

Negotiation Course: When Should You Negotiate? And When Should You Not?

Negotiation makes the most sense for "high-leverage jobs" like software engineering or most other jobs in tech. An example of a low-leverage job would be to stock shelves in a grocery store or drive a taxi in NYC. The difference between the best and average worker in those fields is not that large. But in engineering, the difference in output for the best vs the average can easily be 10x or 100x.

Within the high-leverage category, there are jobs that have many comparable data points (e.g., junior or mid-level engineer) and those that are bespoke because they're rare/senior at the company, e.g., executive level or senior engineering leads.

Negotiation makes less sense for jobs that are purely stepping stones, or those that are time-bound. The classic example here is for internships. A good litmus test is if you know anyone who has ever negotiated that offer, e.g. no one at Stanford ever negotiated the summer research pay.

Finally, negotiation does not make sense if you already accepted the offer at a lower number.

Negotiation Course: Negotiation Is All About Leverage

The idea of **BATNA** (Best Alternative To A Negotiated Agreement) is about your ability to walk away from a deal. It is "*the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement cannot be made.*" This will dictate your success in any kind of negotiation.

**As soon as you want something too badly, and the other party knows that, you will be taken advantage of**. (This is also how Venture Capitalists operate, by the way.)

There are three ingredients needed to gain leverage (and therefore successfully negotiate): 

1. Time (patience)

2. Information

3. Options (leverage)

If you have all 3, you can walk into negotiations with confidence.

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