Salary negotiations are often the most challenging part of a search for a new employee or, on the other side, the search for a new job. Traditionally, the process is kept secretive with the potential employee and employer doing their best to keep actual expectations and limits secret to ensure the best "deal". In practice, this can often lead to frustrating outcomes where employers or employees simply walk away from the process. Often employers and employees may start the process with only a vague idea of what they want to get out of it.
Better, mutually rewarding negotiations are possible with a more structured approach. This method is called Principled Negotiation; developed by the Harvard Negotiation Project and explained at depth in a book called Getting to Yes: Negotiating Agreement Without Giving In. Many of these concepts aren't "new". We use them all the time. This book puts them into an easy structure.
I would encourage you to read the book or reference many of the other resources on Principled Negotiation. Highlighted here are those points that I feel are especially helpful for Salary Negotiations:
1) Before you start
Know Your BATNA: before you even start negotiation figure out your Best Alternative to a Negotiated Agreement or BATNA. This means evaluating your present situation as a job-seeker - do you have other offers of equal interest? do you need a job? do you see more long-term potential in this role? ... Likewise, as an employer it means evaluating your options as well - do you have other candidates of equal merit? do you have time to look for others? how limited is the pool of talent? Once you have figured out your alternatives, keep them in your back-pocket until needed.
2) As you start
Focus on Principles; Not Feelings: often in salary negotiations, we can get caught up in what we "feel" is the right salary. These feelings can often be influenced by completely arbitrary things like the way the candidate dresses or the quality of the office furniture. Always pull the discussion back to what is a fair salary for this role. Agree on impartial standards to benchmark against and be willing to share internal ranges to give perspective. Information should be recent, comparable, verified and substantiated. Comparing SAP Consultants and Electrical Engineers is none of these things.
3) Throughout the process - Be Creative
Salary negotiations are truly dynamic. The salary is not just about money but insurance, medical benefits, fringe benefits, bonuses, allowances, growth opportunities, reputation, experience, exposure... and the list goes on. This offers a wide range of options for a mutually agreeable solution. A salary increase of 5% may at first seem unappealing but when seen to include a 2-year training opportunity in some field of interest... I think you see the point.
4) After a while - Take a Break
Never start and finish the negotiations all in one sitting. In a perfect world, you will be able to work out all the details within the first negotiation session and have a rough outline or a full proposal. This is when it is best to take a step back. Come back to the table after a day or two and then finalize. We all get caught up in the emotion of reaching an agreement.
5) Concluding - Give a Gift
At the end of the process once everything is wrapped up, try to find a way to "sweeten the deal" not as an additional compromise but as a show of appreciation. This can be as simple as an employee negotiating with their present employer to leave 2-weeks early, or the future employer offering them the full (instead of pro-rated) bonus.
Dealing with three common issues that might come up during the negotiations
Play with your BATNA: when you hit a hard roadblock, go back and review your BATNA. This can be a time to explain your BATNA to the other party. If the candidate is refusing to budge on their salary, start by relating to their situation, then explain again your situation, finally give your BATNA. The same can work with a sticky Employer. Example: "I understand that you feel strongly that an increment of 15% is necessary to interest you in this role because that is what you see as common in the market. Presently in our company that will put you outside of the grading for this role and is also higher than the market range we discussed earlier. If we are not able to come to an agreement, we would need to move on to the other candidates we have shortlisted. Now, what do you think about 5% and....
2) Focus, focus, focus - On the Problem NOT the People
Often times we can focus too much on the people and not the problem during salary negotiations. All salary negotiations have the same problem: "how can we reach a fair salary/benefits/opportunity for both parties?". Often it can turn into: "how do I get the most money from them that I can?". Or even: "how do we convince him/her to take the lowest salary possible?". Focus on solving the problem fairly not the people.
3) Communication - Related, Understand, then Explain
When negotiating, make sure to relate to the other side, understand their situation and explain your situation as well. By relating first, it is more likely that they will listen to your explanation and eventually consider your conclusion AFTER your explanation. Relating or empathizing does not equal agreement. And you can make that explicit if needed.
And there you have it. A structured and detailed process for negotiating your salary or negotiating with a possible future hire.