Navigating Salary Negotiations for Procurement Professionals

Hooray, you’ve been promoted! Your hard work and achievements have paid off. 

Or have they? Sometimes the accompanying salary increase is disappointing and now you're left contemplating your options. Or maybe it’s time for that annual review.

In this article, we'll explore how procurement professionals can effectively navigate salary negotiations and career growth, even if an initial offer is less than ideal.

Understanding Salary Ranges and Market Comparisons

First, it's crucial to understand your company's salary range structure. 

This often determines the range within which your salary can be negotiated. When you're promoted internally, the increase for promotions tends to be between 8-13%.

This can feel limiting, especially if current market rates suggest you deserve more. 

It's good practice to use free platforms like Glassdoor or Salary.com to benchmark salaries in your area. States with pay transparency laws can sometimes provide valuable insights into competitive salary ranges.

Effective Negotiation Strategies

As a procurement professional, negotiation is one of your core skills. However, negotiating your own salary can be uniquely uncomfortable. 

Here are some strategies to enhance your approach, inspired by Chris Voss' Never Split the Difference and insights from hiring managers:

Leverage Your Achievements

Tooting your own horn is itself uncomfortable. Take the perspective of helping your manager to understand. Remember they have their own challenges, and it is not realistic to expect them to notice everything you do. If you want to include some unfavorable information, this can be disarming and contribute to the sense you are providing helpful information. 

When highlighting your contributions and value try to focus on priorities and qualities your manager values. Common ways to quantify your achievements are cost savings, improved supplier performance, and successful cost avoidance. 

A data-driven approach is objective, non-emotional, and will strengthen your case. If your company doesn’t capture a metric you’ve excelled at then keep a log yourself.

Understand the Full Compensation Package

Salary is just one part of your total compensation. 

Consider the value of benefits such as bonuses, stock options, retirement plans, health insurance, and professional development opportunities. 

Usually, your manager will have more flexibility with benefits, and this can often compensate for a lower salary increase. A big example today is work-from-home, what is it worth to you to avoid a commute? PTO is another area where managers often have flexibility.

Use Tactical Empathy

One of the key lessons from Chris Voss is the concept of tactical empathy. 

Understand the perspective of your employer and acknowledge their needs. This doesn’t mean agreeing with them, but rather showing that you comprehend their constraints and priorities. 

For example, you might say, “I understand the budget is tight this year and I’m asking for comp outside the range”.

Labeling Emotions

Voss emphasizes labeling the emotions of the other party. This can help in diffusing tension and fostering a more cooperative atmosphere. 

For instance, you could say, “It seems like you’re concerned about maintaining equity across the team,” which shows you recognize your managers’ challenges.

Mirroring

Mirroring is a technique where you repeat the last few words the other person said, encouraging them to elaborate. 

If your manager says, “We’ve already stretched the budget as much as we can,” you could respond, “Stretched the budget?” 

This prompts them to explain further, potentially revealing more flexibility. 

Understanding Managers' Motivations

Knowing what motivates your manager to grant pay raises can significantly inform your negotiation strategy. Here are key factors:

Retention of Top Talent

• Fear of Losing Valuable Employees: Your managers are highly motivated to retain skilled and high-performing procurement pros like you. The cost and hassle associated with finding, hiring, and training a replacement are significant. As an experienced employee you have incumbent value because you already understand your company’s processes, ERP, culture, supply chain, and goals. You may have commodity expertise that is also particularly valued.
• Reducing Turnover: High supply chain employee turnover means team members will have to take up the slack and train the replacement, all while doing their own job. This always disrupts team dynamics, lowers morale, becomes concerning to suppliers, and impacts productivity. Your manager is highly motivated to retain top talent to maintain stability and continuity within your procurement team.

Performance and Productivity

• Rewarding High Performance: Managers are motivated to reward employees who consistently perform well, including meeting or exceeding cost reduction and/or supplier performance targets. Recognizing and rewarding high performance helps sustain motivation and encourages continued excellence across the team. 
• Incentivizing Productivity: General incentive-based increases can be difficult in procurement. For example, OTD performance can be misleading depending on how delivery dates are managed, and cost savings can be misleading because of fluctuations in the market. A better approach is to establish specific quarterly objectives that consider potentially misleading factors. One objective might be to improve a specific vendor’s OTD performance based on original promise dates. Another might be negotiating a volume purchase agreement with a particular vendor.

Market Competitiveness

• Competitive Salaries: To attract and retain top talent, managers must ensure that their team’s salaries are competitive with market rates. They do not want top employees to  seek opportunities elsewhere.
• Benchmarking: Human Resource departments often subscribe to salary surveys to establish pay ranges, and these ranges are then enforced on managers. There are two problems with these benchmarks:
  • By definition, salary surveys are stale. Who knows when the survey was taken and how fresh the underlying data is.
  • Buyers, through their network of salespeople, tend to have very fresh data on prevailing wages in their area.
• Objective Feedback: Be aware your manager can be very constrained by the salary range established by HR. You will need to either make a case that you should be paid above the range, or that the range should be changed. The company hires you in part to discover market prices, you can offer to use this skill to help the company better understand the current market wage range by gathering competitive bids for your services (wink wink).

Budget Constraints and Financial Health

• Budget Limitations: Managers must work within the budget constraints set by the company. This will vary depending on the business cycle; are you in a growth spurt or is business slowing down?
• Growth Budget: Your company will want to increase production to meet customer demand and capture market share. The procurement  budget will be flexible, something close to whatever it takes to maintain and increase production.
• Contraction Budget Phase 1: In the first phase of a contraction procurement will be focused on realigning the supply plan with the dwindling demand plan. The priority will be to mitigate liability and minimize inventory. The budget will be stable and open hiring requisitions may be filled if they support this mission. 
• Contraction Budget Phase 2: Once the supply plan is stabilized the focus will become cost reduction. There will be a sense the company may have overpaid while prioritizing availability over cost. And your manager will want to justify retaining the headcount that probably grew during the prior growth period. 
• Contraction Budget Phase 3: When the cost reduction effort is complete the focus will become staff levels. This is the layoff phase.
• Your Focus: Ensuring the company remains profitable and managing costs effectively is always crucial. Managers will need to justify salary increases within the broader context of the company’s budget. As a procurement professional you are often uniquely positioned to directly contribute to financial results via documented cost savings and/or cost avoidance. As general guidance, aim to reduce/avoid costs by 10x your annual compensation.

Employee Morale and Engagement

• Maintaining Morale: Fair compensation is crucial for maintaining high morale and job satisfaction among employees. Managers recognize that if you are engaged and productive your positive attitude will be infectious.
• Team Harmony: Ensuring that salary increases are perceived as fair and equitable among team members helps maintain harmony and prevent resentment or dissatisfaction.

Employee Potential and Career Development

• Future Leaders: Companies know that employees who show potential for future leadership roles or have a clear career progression path are highly valuable. Investing in their development benefits the company long-term. You can lean into this by attaining procurement certifications like CPIM, which not only enhance your skill set, but also demonstrate initiative.
• Investment in Development: Employees who invest in their professional development and acquire new skills definitely stand out to managers and can be a key signal they must retain you.

Preparing for the Conversation

Before your conversation regarding salary:

1. Research and Benchmark: Have data on competitive salaries ready.
2. Document Your Contributions: Be ready to present a list of your key achievements.
3. Know Your Worth: Understand your market value and be prepared to articulate why you deserve a higher salary.

Long-Term Career Planning

If the current offer doesn't meet your expectations and there's little room for negotiation, you may need to consider your long-term career strategy:

1. Accept the Offer and Plan Your Next Move: Sometimes, accepting the current offer while planning to seek better opportunities externally within a year can be a pragmatic approach. This allows you to build your resume with your new title while keeping an eye on the job market.
2. Continuous Professional Development: Take advantage of any training or development opportunities your company offers. Enhancing your skills increases your marketability and prepares you for future opportunities.
3. Network and Stay Informed: Use your network of salespeople to introduce you to industry peers, and if possible participate in professional networks, forums, and conferences. Staying connected is crucial to learning about new opportunities and industry trends. Keep your LinkedIn profile up to date.

Final Thoughts

Navigating salary negotiations can be uncomfortable, it’s perfectly natural. 

Objectively presenting your achievements and being prepared to consider the full comp package can put you in a better, more comfortable position for a successful negotiation. 

In brief: Leverage achievements, understand constraints, align with aims, and get your gains!

 

Additional Resources:

• Glassdoor Salary Reports
• "Never Split the Difference: Negotiating As If Your Life Depended On It" by Chris Voss
• Salary.com