Negotiating a Great Deal in the Face of a Low Ball Offer

Offer LetterHave you ever lived through this scenario? After endless interviews with senior management, meetings with the prospective board, a killer presentation of  your “first 90 days on the job” execution plan, and a long arduous sell to your significant other – you eagerly await that incredible offer from you new employer.   They love you (and have told you so); they understand what will motivate you (you’ve told them so), and they know exactly what they need to do to bring you on board (because the RECRUITER has told them so).  And then . . . that glorious offer comes in so low that the term “a box office bomb” would be an understatement!  Well this actually happens all the time, and knowing how to take the emotion out of the equation and understand what’s going on in the company’s mind, will be the difference between success and failure.  

Here’s a perspective on the potential gamesmanship that can happen with low ball offers, and how to turn a lemon into lemonade.  From a real life story, one of many . . .  

QUESTION:  Hi Tim.  I am considering an offer for a senior management position that I think is light [too low] and would greatly appreciate your help with some feedback.  I would effectively be the No. 2 person at the company, taking over operations from the CEO.  This is a California based software company; plenty of money from an earlier capital raise; less than 100 employees; still running a negative burn.

My goal is to take execution to next level, build out the marketing team and focus on jump starting sales.    I am currently in a chief operating role for another company that has not come through with equity as promised.  I was sought out directly by the new company via their HR team, and have been identified as the top candidate following meetings with the CEO and board member.  I let them know I was looking for a base in the low $200s.  Their first verbal offer (as presented from by the HR Manager) was $170k base, up to an additional $50K semi-annual performance bonus, and stock options in the 1.2% -1.5% range.

ANSWER:  It sounds like a fair package.  I usually see officers making a base in the high $100’s to low $200’s at companies that have closed a Series B and/or Series C.  The performance bonus would bump your cash comp potential up another $100k for the year.  What is required to hit the bonus however?  Why is the HR Manager giving you the offer?  Someone on the board should be doing it.  Why is it just a verbal and not a written offer?   They are probably expecting you to come back and negotiate some aspect of the package.  Let me know how it goes, Tim.

QUESTION:  Thanks for the benchmark, Tim.  When I first received the offer, I felt somewhat offended.  I was clear in my communication around comp from the beginning.  Having gone through such an extensive process, I was shocked that the offer was so far below my current range.  Is this an indication of the style and management culture I should expect . . . and I wonder if I should just call it quits now? 

ANSWER:  Believe it or not, what you are experiencing is very common for early stage companies.  It’s very possible that this is a test of your negotiating ability.  As a potential COO or CEO, how you handle conflict is imperative.  You may be the key player in negotiating vendor agreements, major client contracts, team member compensation packages, board communications, etc.  This company’s CEO may be waiting to gauge your response to the real first test of conflict management. 

Another distinct possibility is that the CEO lacks courting skills.  We call this “knowing how to dance.”  Some executives are fantastic at making you feel wanted; others think the candidates should run through broken glass to join their companies.  Thinking like the latter usually leads to lost company opportunities.  And it happens very frequently.  Most candidates – and people in general – are risk adverse.  While they are sincerely interested in considering their options, they tend to look for that one reason NOT to make a change. 

No company or culture is perfect – life is a compromise.  Once a candidate is committed and makes the transition, he or she ends up making adjustments to adapt to the new environment.  One takes a fundamentally different view, however, during the actual courting process.  All it takes is one perceived red flag to send a great candidate running back home in a hurry.  Does any of this sound familiar: 

  • The company promised to get back to you quickly but ends up taking forever
  • You will be reporting into the CEO but your feedback always seems to come from Human Resources
  • Although you were clear about your comp, the company gives you a low ball offer
  • The CEO says one thing but your offer letter and employment contract say another
  • The company says they really want you, but you end up haggling over a $5k relo bonus

Again, some CEOs have great intuition and are true communicators; others may be more technical or operations driven.  Knowing how to “sell the candidate” – and there is much to know – is 50 percent of the game.  Anyone can ask someone out on a date, but can they get a second one?  A good executive recruiter can help to mediate these issues, provide sensitive feedback back to the CEO, and keep the game on track.  We strive to be that trusted adviser since placing senior executives is what we do – all that we do!  Many CEOs struggle with “the dance” while thinking they are lighting up the ball room floor.  Those that lack such advisory relationships or rely primarily on an internal HR resource (many of whom have never held a senior operating role or worked with hundreds of chief executives), end up losing great candidates as a result . . . and resenting it later.

So don’t take it personally!  Smart company executives realize their own short comings and look for management talent to supplement their weaknesses.  How you handle this situation may determine whether you can indeed provide this support to the CEO when it counts the most.  Cheers,  Tim