When Do You Know the Offer is Good Enough?

You've delivered on your interview and the company has just made you an offer. How do you know it's good enough? Or better yet, how can you figure it out?

Howard Seidel, Partner, Essex Partners, an executive career management firm based in Boston, tells eFinancialCareers that executive job candidates often have a hard time evaluating an offer when they get it, especially if they're in transition at the time.

"They may have a visceral reaction as to whether the offer feels right," says Seidel, "but how do you know for sure? No one wants to take a position only to learn they have sold themselves short in the process."

This is particularly true in the case of stock, options and other deferred compensation where there are so many variables. "It can be hard to even figure out what the equity is worth," adds Seidel.

Seidel, who has over 15 years of experience as a career and executive coach, takes a three-pronged approach to evaluating offers:

• External equity—the offer in relation to comparable companies in terms of where the market stands for that position.

• Internal equity—the offer's competitiveness comparable to similar roles inside the company.

• Personal equity— how it compares to your salary history or what you've made in the past.

Let's look at each one separately.

External Equity

"When it comes down to the general structure of compensation, there's little difference between c-level executives and the next level down," says Seidel, who typically works with c-suite executives. "If you're interviewing with a public company, you can see what the CFO or the CEO is making by looking at the 10K. It's the next level that can be challenging. There, you need to study the market. If you have contacts in HR, you could talk to them, or sound out recruiters who have placed people in positions similar to the one you're applying for."

Internal Equity

"Sometimes a company is not as interested in being exactly where the market is in terms of compensation," said Seidel. "In this case, the offer is only good within the context of that company's equity scheme. There are times when you may take an offer that is more than what you've been making, and others when it may be less. However, in this climate, companies are afraid to hire someone who earned more than the job pays because you are likely to jump when a better offer comes along."

Seidel says companies want their employees to fill fulfilled and rewarded for their work so it's important that your salary expectations work within their range for a position.

Personal Equity

"You know what you've been making at each stage of your career, so you have a relatively good idea of what you're worth in the market place," added Seidel, who recommends that you be straightforward about what you earned, although it may be OK to leave things out if you're trying to downplay your last salary. For example, just give them your base and omit any cash or stock bonuses.

Banking analyst Meredith Whitney recently said she believed financial professionals and investment bankers in particular should expect to take a further cut in salary going forward.

Taking a Lower Salary

"It's contextual with the clients that I'm seeing," says Seidel. "You can't summarily dismiss an opportunity because it's not at your previous level, unless you're positive that there's a market there for you at that level. Anytime you take a position that pays less than you're earning, it changes your salary history, and I don't coach people to do that. But sometimes senior executives coming out of big companies where they made a lot of money are looking at startups or organizations that are smaller where there's a different mix in the salary makeup. The base may be lower, but there might be a higher amount of equity or bonus potential. So you have to take each case on a one-off basis and ask yourself, if you like the job, can you grow with it and how far off is this salary from what you were earning in the past? Then decide if you can make it up and if the opportunity cost of not taking the job is going to end up costing you more in the long term than taking it."

Deferred Comp and Other Perks

For senior executives, the pay package often includes a portion of deferred compensation in the form of stock grands and stock options along with an assortment of other perks, all of which can be used in negotiating your compensation.

"For example, if you didn't need health care, you can ask for the cash equivalent in an upfront bonus," explained Seidel.