A tech veteran's guide to asking for more money at established tech companies.
By Jocelyn Goldfein (Angel Investor & Mentor)
I’m here to demystify how employees of established tech companies should ask for raises.
My blog has generally been targeted at entrepreneurs, but this post is really for employees of larger companies. At a startup, your compensation is dominated by equity and other very personalized decision-making; I simply can’t generalize about it. But if you are the employee of a company large enough to have comp bands and levels, this advice is for you.
Microsoft’s CEO recently made waves by suggesting at a women’s conference that not asking for raises might be a better career strategy in the long run. While widely criticized as evidence of sexism, his remarks reflected the tech industry’s sincere and heartfelt belief that it is a meritocracy.
That belief is based on a false premise. But if you work in a large tech company, your environment is going to operate as though it is true. And that makes it tricky to ask for a raise no matter what your gender is.
The definition of a meritocracy is that hard work, talent, and results are ultimately rewarded by the system. In such an environment, employees need not worry about being fairly rewarded — they can just focus on having an impact and trust that the rewards will come.
When that’s the cultural norm, an employee who is very focused on rewards is… suspect. Constant concern about pay, title or level might indicate someone who wants rewards they have not earned. We don’t expect employees to be saints and not care about rewards at all. But if you only care about the company’s success as a means to the end of your own personal success, then you are violating the social contract with your employer and your co-workers. It might mean that you’d make decisions that aren’t in the company’s best interests in service of your own, that you’d sabotage someone else if it helped you out, that you care about how good you look, not how much good you do. That makes you political, and toxic.
Too much overt concern with compensation also implies that you don’t trust the system to reward your merit — which is tantamount to saying that you don’t trust your boss. And if I’m your boss and you signal to me that you don’t trust me, then yes, I start to wonder if I can trust you.
So it’s sort of a catch-22: there’s a high social cost to asking, but (since the system isn’t actually a meritocracy, and there’s no objective way to assess impact) not asking probably leaves you underpaid. I’m not claiming that this is right, fair, or appropriate, but if you operate in an environment like this, there are a few tactics that thread the needle.
Ask How You Can Have More Impact
First of all, the most significant raises usually come from promotions, and there’s a simple way to ask for a promotion with no harmful side effects: ask how you can have more impact.
“What do I need to do to make a bigger difference to the company?” casts no doubts on the meritocracy of the company or your own motivations. This opens the conversation about what it takes to perform at the next level, what type of impact is considered most valuable to the company, what skills or track record or projects you should undertake to expand your capabilities, and how your manager can help you accomplish all of that.
I can’t promise you’ll get an instant promotion, but this is the most effective way to have the conversation. You can and should be clear that you want to advance, just stay on message: Your intent is to earn advancement with your good work and self-improvement, not declare that you think you already deserve it and the system has failed you.
If your manager visibly doesn’t believe in your capacity to get to the next level regardless of what you do, find a new manager; your career is at a dead end where you are.
Negotiating Compensation Outside the Context of Promotion
The one time it’s always acceptable to negotiate compensation is when you are being hired. Luckily, your first salary at a company is generally the most important one to negotiate — future raises are all based on a percentage growth from your current salary, so if you negotiate at no other time, doing it on entry will still improve every future raise.
You might imagine salary negotiation is a complex art, but in my experience there’s only one tactic that makes a difference: bringing competing job offers to the table (your current job counts.)
Every other tactic (arguing about how valuable you are, how much experience you have, your expenses of moving and accepting the job) boil down to debating with the recruiter that you are more valuable than they think you are. This is adversarial (pitting you and your prospective employer against one another) and generally ineffective, because you have no leverage. If a company really wants to land you, they might give you a nominal bump to avoid hurt feelings.
It also reflects a fundamental naiveté on your part: You think the salary reflects how much they value you, and you’re trying to argue that they should value you more. But it’s actually just a price set by the market for someone at your skill level. An established company’s offer to you is based on salary bands derived from market data, and their decision on how competitive they want to be in the market. On your own you can’t move the bands; but if you can demonstrate that the market values you differently than the offer, a competitive employer will make an “out-of-bands” offer, and an uncompetitive employer will decide that they can’t afford you.
Bringing other offers to the table also changes the psychology of the conversation. You are no longer adversaries, you and the company are on the same side. You want to work there, they want you to work there, it’s just the pesky competition that you both need to team up against. Sample messaging: “I love your company, I really want to work for you, but it’s really hard to sacrifice income to do it. If you can just match these other offers I’ll be with you in a heartbeat.”
You probably don’t love interviewing and job hunting. It might seem crazy to interview elsewhere if your dream employer offers you a job. But if you only talk to one company, you can’t negotiate your offer, and not negotiating your offer is guaranteed to leave money on the table… with one general exception: new graduates.
Fresh College Graduates
The caveat for fresh college grads is that established companies tend to have those offers completely standardized. Big companies like Microsoft or Facebook are making many offers at the same time to people with effectively the same qualifications. They are simply not willing to introduce the unfairness of paying new grads differently from one another. I still recommend lining up multiple offers, and there’s no downside to trying to negotiate. You might even get a little movement (usually around signing bonus). But I wouldn’t have high expectations of seeing the offer change.
For the sake of completeness: One other strategy is to assert that the company has incorrectly leveled you. If you get an absurdly low-ball offer from a company that is not a cash-strapped startup, under-leveling is most likely the reason why. Getting them to reevaluate your level will improve your comp package as per their bands. But the best way to do that is still to demonstrate that other companies are making you offers that represent more seniority. Very rarely, you may be able to make the case with additional interviews, but interviews are usually no good at detecting level.
This all might feel cognitively dissonant. Didn’t you kick ass in the interview? Can’t they pay you more because you are more qualified than the other candidate who did well but not AS WELL as you? The trouble is, the HR department knows for a fact that interview performance doesn’t predict on-the-job performance, so they aren’t willing to pay you more for it. So their very rational choice is to let the market dictate your price.
Asking for a Raise
What about asking for a raise after you’ve been on the job for a while? Interviews may be fallible, but now you’ve proven your worth on the job!
Turns out, this is much trickier.
Most tech companies have merit-based raises (in addition to market adjustments and promotion raises.) The timing is usually governed by the performance review cycle; at some companies, managers have a budget for raises and make individual dollar decisions; at other companies, managers decide your performance rating and HR uses a formula-based approach to derive your raise from inputs that include a performance ranking (from your manager) as well as market data.
So, there’s a good chance your manager thinks they’re already rewarding your performance through the standard performance review process. If you think you are significantly underpaid compared to peers, you should bring it up with your manager. Do your best to avoid any implication that they may personally have made bad decisions (putting your manager on the defensive is not a winning strategy here). Just tell them you’ve been worried about it — you trust them but wonder if they could look into it for you as they head into the next review cycle, which is also when compensation changes can readily be made.
It may help to understand the psychology of the manager. Managers can be much more flexible about negotiating comp for new employees, because giving one employee a big offer doesn’t reduce what they can pay subsequent new employees. In some larger macro sense it should, but usually that’s invisible to a hiring manager — their hiring budget is expressed in numbers of employees, not numbers of dollars. But a bigger raise for you means less for your co-workers, because the raise pool is fixed. Whether your manager makes an explicit decision about raise dollars, or a more abstract decision about a performance rating that feeds into a formula — it is zero sum.
If your case is severe (ie, you’ve fallen below the minimum for your level’s bands), your manager will probably correct it — asking might be all it takes. But if you are within bands and your manager tells you that your comp is fine, that old “squeaky wheel gets the grease” advice may do more harm than good.
If a promotion isn’t an option, your only other effective move is to bring a competing job offer to the table.
To be fully candid, I have never followed this advice; it is a case of “do as I say, not as I do.” I find the idea so excruciating that I’d rather just be paid less (a luxury I can afford because I’m paid extremely well as it is.) However, as a manager, it is the one tactic that I have consistently seen work for other employees at my companies.
The backfire potential is real. Job hunting can seem like disloyalty; it’s hard to avoid giving the impression of putting your own interests ahead of the company’s or not trusting your manager to treat you fairly. When an employee of mine has shown up with a competing offer and wants to negotiate comp, my first reaction was emotional. In the moment, I felt hurt and betrayed. I had to make a decision on the spot how much I valued the employee, and though it’s the minority, at times I have made the decision not to try.
So, if you go down this road, you need to be prepared for your company to decide not to move, essentially inviting you to quit. (Don’t forget that even in this scenario, your worst case outcome is that you still have another job with better compensation. That can go a long way to heal the ego blow.)
Of course, what you want is for your manager to get their emotional reaction under control and do whatever is in their power to improve your comp. Help them by softening the blow that you interviewed. Sample messaging: “The other company pursued me, I wasn’t looking.” “I didn’t take them seriously because I knew I loved my current job too much to leave, but I thought it would be good experience to interview.” “They were so persistent, I couldn’t help feeling flattered by their interest but I never expected it to go this far.”
You’ve also got to soften the blow that you are entertaining the other offer. Sample messaging: “I’d much rather stay at Current Company. I love my team/my work/the mission/our leadership.” “I was pretty surprised to find out this other company would pay me so much more.” “I don’t want to work there, I want to work here — but now I effectively must sacrifice income in order to stay here. Can you help me with this dilemma?” “If the compensation difference were not so wide, it would be an easy decision to stay.”
Lots of companies have “no counteroffer” policies, and they may even mean them and stick to them (in my four years there, Facebook always did.) But if they are going into a raise or promotion cycle anyway, managers can be influenced by the knowledge that your market value is higher than they are paying you, and they can find ways to address it within the confines of a “reward for merit” compensation framework.
If you’re not prepared to job hunt, then you have no leverage. It shouldn’t hurt to bring up your comp with your manager, if it’s a concern for you. But belaboring it or lobbying for it to change after your manager has addressed it to their own satisfaction is just not likely to do you any good.
Final piece of daunting news: Because it is so much easier to negotiate and line up multiple offers when you are changing jobs, and so much harder to lobby for additional raises within a job, staying with the same company for a long period of time can have a long-term damping effect on your salary.
Starting as a new grad at level 3 and getting promoted over the years to level 6 will likely land you a smaller salary than a new hire at level 6 with the same years of experience. That’s not because you are less valuable — it’s just the compound effect of relying on merit-based raises instead of market-based offers for your compensation changes.
This won’t apply if your compensation is dominated by equity and you are working for a company whose equity is growing precipitously. Likewise, if you’re in an environment that’s stretching you more and promoting you faster than you’d expect elsewhere, those promotions are step functions just like changing companies. These two effects are the reason why joining a high-growth company can be so great for your career and your finances.
But if your company’s growth is average for the industry, changing jobs will add upwards step functions to an otherwise smooth and gradual increase in pay, and if you forego the step functions, you’ll end up paid less over the long haul.
I’m not counseling you to quit a job you love. I think other rewards matter more than money, especially when you already make plenty (a luxury software engineers usually enjoy.) You could not pay me enough money to work in a toxic environment or with people who lack integrity.
I’m also not telling you that tech companies are screwing you. The companies I’ve worked for do their best to impose structural fairness, by establishing heuristics for value (level) and creating comp bands for each level based on market rates. Good companies factor position in band and market rate changes to their raise calculations, not just performance ranking. It’s just that talent isn’t a commodity and there’s no objective measure for what anybody but a new graduate should be paid. There’s a ton of variation within bands, and there’s a ton of subjectivity in defining merit. Not to mention the compound effects of past pricing decisions and the luck of how good your company is at monetizing the work of its engineers. So the only way to establish a price for any given employee is on the open market.
If you believe merit is objectively measurable, hearing that comp isn’t fully determined by merit might be disillusioning or even shocking. If, like me, you believe the assessment of merit is intrinsically subjective, perhaps it’s reassuring to know that the market is available as a backstop on an individual human’s judgment.
Ultimately, my purpose in writing is just for you to know the truth: Salaries don’t (and can’t) represent a fixed measure of your worth. Salaries are nothing more or less profound than the price a company pays for talent; they are set by the market in accordance to the intersection between supply and demand. This is a market that lacks transparency and undoubtedly as a result lacks efficiency, and higher salaries are just as likely to be correlated with those who hold more information about the market than those who offer more value to their employer. If maximizing your comp matters to you, I hope I’ve given you tools that can help.
This post originally appeared on Jocelyn Goldfein's Medium channel.
About the guest blogger Jocelyn Goldfein: Jocelyn invests money and time in making high tech startups successful. She gets to work with teams and products she believes in, every day. She's spent her career building software during high-growth years at VMware and Facebook (and a couple startups). Her and her teams have built middleware, distributed systems, big data powered ranking systems, operating systems, web and mobile apps and developer tools. Learn more about her investing activities on AngelList.