What does that mean?  First, it means that before you go looking for a new in-house role, understand your own budget.  What is your hoped for compensation?  Moving from that ideal, what is your mid-range compensation?  Finally, what is the number below which you absolutely cannot go?  You must know these three numbers, or you will not negotiate effectively for yourself. 

Second, you must be willing to give up your current compensation figure to the employer, if they ask.  A lot of candidates do not like to do this because they feel that it tips their hand in the negotiation process.  That may be the case, but the advantage to you of playing your cards close to the vest is marginal, and you will be in the minority.  The overwhelming majority of candidates are very clear with employers about their current base compensation and related package add-ons (bonus, LTIP, stock options, etc.).   Thus, while you don't have to tell a potential employer about your current compensation, bear in mind that your competition for the role is likely to be completely transparent.  That clarity works in their favor because employers know exactly where they are coming from starting from day one.  Thus, if the employer's package is higher, they have somewhere to go.  If the employer's package is lower, they will inquire as to the candidate's flexibility on compensation to move to the employer's lower level.  If the candidate can do it, now is their chance to put that reality on the table. 

Some may be asking, "Why would I agree to go down in compensation?"  The answer is multi-faceted.  Many people agree to go down in compensation to join a group where their upward career trajectory is more clear, to obtain a more significant title, to relocate closer to home or family, to secure a position which is more interesting or challenging, and/or to land a role in a corporation with stronger financials and fiscal accountability.  There are any number of reasons why people take pay cuts so as to fit into a proscribed "budgeted" role -- and the reasons are all valid.  In contrast, if a candidate cannot take a pay cut, now is their chance to leave the discussion. 

Successful candidates know this, and they approach compensation discussions with a clear voice, and avoid murkiness.  They put everything out there, and they see if they can make it work.  They have a clear picture of their current package breakdown, they have a clear picture of their three personal points on the compensation spectrum, and they have an awareness of the market and its affect on how talent is valued.  Today's corporate employers appreciate it when a candidate avoids any opaque commentary on compensation, and they respond accordingly.

Similarly, if an employer asks for a compensation "number," but they won't give you their budgeted compensation target, the successful candidate knows what to do in this instance as well.  They don't punt the question or play games--even if it feels like the employer, itself, is hiding the ball.  Instead, they say what they would like to make (this comment is for you), and that they have flexibility on that front (this comment is for the employer since you have no idea what they are thinking)...understanding that the economy is tight and budgets are tighter.  Again, there are three key points here--you, them, the market.  Successful candidates then invite the employer into the discussion so that they can have a frank reciprocal dialogue about where the employer wants to be and where the candidate wants to be.  A great number of candidates avoid doing this because they think having conversations about compensation at this level and/or stage is "taboo," but it is not.  Other candidates avoid doing this because they do not like the fact that the employer is being a little unclear, themselves, about dollar figures.  Regardless of the reason for possibly avoiding the conversation, it is a question which requires an answer, and those that are afraid to approach it and clear the air on this topic right from the start are at a disadvantage as compared to those who grab the bull by the horns and look it in the eyes. 

The bottom line is this:  Corporations are a business.  Businesses have budgets.  Budgets are squeezed, and many are unmovable--especially in Q1 and Q4.  These are three truths that aren't going to change any time soon.  Thus, the sooner you adopt these truths as your own, the sooner you approach compensation discussions with a more relaxed eye and move past them.  Successful candidates know this, and they act accordingly.

Inherent in all of the above rhetoric is the fact that candidates also need to be mindful of the fact that what they were worth five, six, or seven years ago may not be the same as what they are worth today.  The market dictates value.  Thus, you may not actually know what you are "worth" on the market today until you get out there and see what folks are paying for someone at your level and with your credentials/experience.  Be mindful of this overriding fact.  Successful candidates are quite mindful of this reality, and, once again, respond appropriately. They factor this reality into their compensation discussions quite readily -- further adding to their flexibility and open-mindedness.  If everything else lines up, in-house employers respond to this self-awareness with an invitation to interview. 

Part B - Partner & Associate Compensation

Compensation discussions at the partner level within law firms have taken a similar spin as at the in-house level.  Very often, we start talking finances before a partner even gets in the door.  This is new.  Previously, we would start with the resume, perhaps coffee between the partner moving and the partnership team hiring at a given firm, a follow up meeting, a hiring committee meeting, and the offer stage -- where compensation is discussed and financials are reviewed.  It is now the exact opposite.  Before a partner even gets past a new firm's threshold, that firm will want to see financials -- very often referred to as "historicals."  These historicals represent the partner's performance in terms of business development over the last three to five years.  So, we are looking at client names, client numbers, the type of business brought in, the partner or team working on it, and the full logistical breakdown of that partner's given practice.  For many partners, this feels intrusive and, in some regards, it is.  However, firms are not entertaining partner interviews unless they feel they have a partner in front of them with a solid book of business and, likewise, a partner whom they feel warrants a significant compensation package.  Once historicals are reviewed and the firm is satisfied, and the general manner in which such firm pays its partners is acceptable to the candidate, then we move to the interview stage.

Successful partner candidates know this, and they come with their financials as soon as they walk in my door.   They also come with an open-mind as to what type of compensation package will suit them.  Some partners love eat-what-you-killl; some hate it.  Some find such an arrangement energizing; others find it belittling.  Likewise, some partners prefer to work under a scheme with multiple percentage breakdowns on top of a base compensation; others want a more simplistic scheme.  Whatever the goal, the most successful partner candidates come prepared with their financials, and they are clear about what motivates them in terms of a compensation scheme.  More so, they are eager to get through the financial discussions right from the get go so that they can move on to the interview setting.  This approach saves candidates' time, and it also saves firms' time because we clear two major hurdles immediately.  Again, successful partner candidates know that compensation discussions and related dialogue as to portables must be addressed at the gate.  They want it that way, and so do the firms, and both sides win when this clarity is at hand.

What about associates?  Do they have a say in this discussion since they are, very often, much more junior to the above individuals?  If you are an associate with a lockstep firm, you are obviously locked in to a given compensation bracket.  Hence, the utility of the discussion above is limited for now until you move up in the ranks and age out of lockstep or move on to an in-house or non-lockstep firm role.  However, if you are an associate in a non-lockstep firm, the overriding rule remains true:  the market will dictate your value today at a base level.  If you think you are worth more, be clear about why.  Your defense cannot be based purely on experience or years.  Instead, you need to be thinking about what you are bringing to the firm today.  How do you add immediate value or future value.  Think in terms of numbers and pretend you are running a business.  If you owned a business in today's economy, and you had a set budget in front of you, would YOU hire YOU?  If so, what would YOU be worth?  Step outside of yourself when having this discussion so you can see things clearly and approach the compensation discussion from that vantage point.  Don't be afraid of these conversations at non-lockstep firms.  Having a keen opinion as to your worth, as dictated by a clear eye on what the market dictates for someone like you, will result in the right type of compensation discussion today -- and one that you needn't fear. 

As for associates going from a law firm to in-house, the discussion had in Part A of this blog dialogue is applicable.  Follow the same rules but keep in mind that if you are coming from a Big Firm, your pay is likely higher now than it will be in-house (not always, but most of the time).  So, prepare yourself for a pay cut and make sure it makes sense for you.  If you can't convince yourself, you won't convince a new employer. 

In summary, successful candidates know that compensation discussions at the get-go are critical in today's market and how you handle them can streamline your path to success or create a further hurdle.  It's a numbers game -- now so more than ever.  Be aware of this fact, embrace it, and take control of your future opportunities.