Richard Sanderson | Dissecting Compensation Understanding, Negotiating and Managing Pay" Part 2

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1:06Welcome back to part two of our episode with Spencer Stewart, practice leader Richard Sanderson. We join Mike and Richard as they discuss leverage in negotiations when accepting a new position. In most cases, the offer is expressed verbally first. And then can you accept this offer? Yes or no. In my experience, that is your moment as a candidate. That is your moment of highest leverage. They've made it clear they want you. They've probably maybe even switched off most of the other candidates. So the eggs are all in the basket here. They want you. They want to make it work. You haven't committed.

1:41This is your greatest moment of leverage. That said, it is about doing the right thing. In my experience there, this is your opportunity now to respond to this and very clearly based on this is what I think I need to make it work. And you really get one shot at this, right? You can say, look, I understand the rules, but I would leave a lot of equity on the table. Is there anything you can do with that? And how many things can you ask for? Okay, so we'll come to that in a second. All right. So now look, a good recruiter should have worked with you to uncover the issues. Right. Forfeitures that we spoke about, ideally, Mike, that shouldn't be covered weeks ago.

2:20There should not be at this point, new news or surprises to either party in this negotiation. Now, what you also have to understand, and I try and get this from my clients, is look, some clients come with a, what I'll call a full and fair offer up front. This is it. It's basically best and final, or I'd say very close to best and final, and maybe a little bit of wiggle room, but this is it. We're not trying to do any funny business. We're trying to give you a full and a fair offer. Or some companies that love to negotiate, that love to go through a round, maybe two of negotiation. And again, working with your recruiter, whether it's an external agent or an employee in the talent department of the company, just getting a sense of how a company runs negotiation, what rounds of negotiation you should expect, understanding the company's approach.

3:13That is really critical. Hey, and when the recruiter says this is their best and final offer, how do you know if that's true or that's a negotiating tact from the company? Because no one says, this is my first offer. Give me a counter. So this is where, and look, there's a little bit of brokering that goes on. This is why I actually think it's helpful to sometimes use an executive, not sometimes, but to use an executive search firm. because I think it can, when there's a third party involved, it's the same when anyone buys or sells a house. It can get quite heated. You all have different views on what your house is worth and what someone should be paying for it.

3:49And I think the same is true about ourselves and our services. And I think using a broker to try and take some of the heat out of negotiation that can truly broker a win-win relationship for both parties, that is where I'd say, look, trust your recruiter. Many of them have been doing this for many years, if not decades. They generally know what they're doing. And they're just as vested as you in getting this done and moving on. They're there. They don't want to go back to go unless they have a right number. No recruiter wants to go back to a restart. So look, I think there is some sense of being open, being honest, all parties.

4:25I haven't found that anyone comes to these negotiations trying to screw someone over, Mike. I just have not experienced that. It is about how we find the best available outcome for all parties involved. I do think there is a lot of good faith that exists in these situations. How about other things like the one-offs in the earlier show you mentioned about moving the horses? Yes. There's severance deals, which is, I know I'm going to a higher risk job. Are you going to give me a severance package? How do people think about those? So this is where I say, look, even if you can't get the base salary number or the bonus number, for example, to be exactly where you want it to be, there are so many other potentially negotiable elements beyond pay.

5:09Right. So severance, sign-on bonuses. We'll talk about that in a second, maybe. Relocation, start date, work location, travel allowances, or even there are some unusual perks. I think that joke, which you always bring up with me is when there was a negotiation about the horse stabling costs. There is some literally crazy stuff that can occur from time to time. My point is there are many other elements beyond just base and bonus to think about here. The one we probably should talk about, because this does come up a lot, is severance and separation. Let's talk about it. Yeah. Sinead. Spencer Suri, for many years, has been publishing a 10-year study about the average tenure of a chief marketing officer.

5:52And guess what? It's 4.3 years. That is not particularly long. As you and I have discussed, Mike, it's not that different from the average C-suite member, which is actually about 4.9 years. But look, it's below average. And given the short tenure of chief marketing officers, there is a discussion around should they, quote unquote, protect themselves. Yes, and that's average. So on the bottom end of that curve, it's one in two years. Now, look, this can be really quite interesting. Here's what I'll tell you up front. Look, there are some companies that just have a straightforward policy around several corporations.

6:26All their C-suite members or however far down the organization they choose to extend this offer are essentially, there's a company policy, we're all going to follow it. And if something happens, then that will come into force. To be clear, if you involuntarily leave, so for example, if you resign, if you're on a call to take another job, there's no severance or separation there. similarly if you are fired for cause, so you commit a crime or something, there's clauses where this doesn't apply. So first of all, check number one, is there a company-wide policy under which this role falls? If not, again, when we spoke about being at that moment of negotiation of greater leverage, that is the moment to ask.

7:10And what I say to candidates is, look, the worst thing they can do is say no. The worst thing they can do. And then in many instances, look, where there is a severance or separation policy, again, it's company by company. I'd say the most common might be around six months, occasionally, up to 12 months. It might be three months. Everything's there. But in most cases, there will be a standard policy. You are not the first person to ask about this. I can assure you, do ask, because again, this is your moment to do it. And is this the thing you should ask through the recruiter? Because all this stuff is way better through the recruiter than directly through the company, right?

7:49Look, I am of the belief that you are correct, Mike. I think that using a third-party broker negotiated, as I said, just takes the sting, the heat, or the emotion out of this. I'm most concerned if people are seeing, candidates are seen as greedy. I know in many cases that is not the case. They're generally trying to protect themselves. and this may be a very potent issue for a company that is going through some sort of transformation, is having some major performance issues. I think it is the right thing to ask about, but at the same time, you don't want to offend people. I think it's way better to go through the search firm.

8:21And also, if they've had a CMO or two blow out in the last three years and you're coming in, there's a little bit of a track record where you don't want to ask that question, but the search firm can probably do a better job of it. Let's take a quick break from our discussion for a word from our sponsor, Quad.

8:44Marketing is all about high performance. Everything has to fit together and work together exactly right. Or efficiency, speed, and ROI all suffer. That's why Quad is obsessed with making sure your marketing machine runs as smoothly as possible. We help you achieve a seamless marketing experience with less friction and smarter integration. Better marketing is built on Quad. Now back to our discussion with Richard and Mike. I think that's right. I want to make sure we're done with negotiation. And if we are, I want to flip over to just thinking about COP in general. But anything else on negotiation you want to talk about?

9:28No, I think we've covered the main topic. All right. So let's talk about you're looking at all these proxy statements and you think, wow, I'm not in the name executive officers and all my peers feel like they are. I feel undervalued. I feel underpaid. Or I read about so and so getting this ginormous stock grant and I don't have any of that. How do you recommend marketers think about how they get paid here? Yeah. So look, I think there's probably two things to think about here. One is for yourself. What do you do if you personally are feeling underpaid? There's another subtopic here, which we might want to come on to, which is how do you manage subordinates?

10:10That's going to be the next question. Yeah, I'm going to pop on that because first you got to get your head on right about, am I paid fairly? Look, this is always such a difficult topic. I challenge you to find anyone who thinks that they're overpaid. I always wanted one of my people to come in and go, Mike, you're overpaying me. I want to give some money back. Everyone to some extent, probably Shields, they're leaving a little bit on the table. But look, this is a really difficult topic. I think I'm a fairly data-driven individual. But as I said at the beginning, Mike, there's actually very little public data.

10:43It's really hard. And so inevitably, these conversations get tricky because it comes down to anecdotal data. Worse, you may be comparing yourself to your peers, your colleagues, your co-workers in the company. So then it seems either resentful or jealousy. It's really difficult. Look, I'd simply say this. If you truly believe you're undervalued, try and gather some data and have a direct conversation with your manager. Try and use where you can, where it exists, market data, peer benchmarks, even recruiter insights to support your case. And then, so if you conclude you are actually relatively fairly paid, but you realize, gosh, the company values, say I'm a financial institution, and they value loan officers more than they value the marketers, which makes actually a lot of sense, or maybe in retail, they value the merchants more.

11:34How do I manage my subordinates through this in a way that calms them down and keeps them from getting a bug about how they get paid? Yeah. Look, again, I recognize this is a tricky one. I'm sure everyone on there has team members that at some point have probably approached them about this topic. I mean, I have always felt when it comes to compensation that sunlight, to the extent that exists in this, is the best disinfectant. And what I mean by that is be transparent about pay structures and market realities. I would often say, hey, by the way, to a team member, have you actually read the proxy statement?

12:13There's actually a lot of detail in there. There's a lot of detail in the book. Often 20 plus pages of excruciating detail. Yes, it's not going to make a movie out of it. No, I mean, it's not exactly riveting stuff, but at least it is transparent. Now, look, I recognize this is only for public companies. If you're a private company, then obviously this is not an option. But I would, at a public company, I would strongly encourage sharing with a team member, go and read the proxy statement and tell me what your concerns are based on that. We are all operating under the same, we're all operating on the same structure to some extent, but there's some insights you'd like to learn further about from the proxy statement.

12:55Then let's have that conversation. And one of the things about the proxy statement is all the shareholder services groups have torn that thing apart for say on pay. So this is not something that is some esoteric thing. You should go read the proxy statement to understand a lot. How about when the equity is underwater and your team comes in and says, hey, Richard, all my equity is underwater. The best thing I can do right now is change companies and reboot my equity. And just because they'll start me at zero and I'm already underwater by five bucks. First of all, I think you have to be empathetic in those situations.

13:36I think you have to acknowledge the frustration that may exist. But I think as a manager, as a leader, as a chief marketing officer, this is your opportunity to communicate the long-term vision and the potential upside. Let's be honest, I don't know many chief marketing officers that single-handedly can move the share price of the company. We're all part of a larger entity or organism. But in many instances, and you've heard me preach about this before, the reason I am so excited about the long-term future of marketing is because it is the growth driver of the company. So everyone there is with you there in the engine room and you have perhaps more control over your destiny than perhaps you might realize.

14:19So I do think this is a moment to, as I said, acknowledge the challenge, but also very clearly, I think, set the vision and restore the faith. And the other thing is, hopefully your company is refreshing, not repricing, but refreshing the option pool or the RSUs every year so that you're getting them at a low price this year. So understanding that proxy statement is a big deal. Correct. And look, some of it is dumb luck. Here's another data point I'll give you. Most companies, when they're issuing annual equity, are typically doing it around March or April. Yeah. Guess what happened this March or April of 2025?

15:00Do you remember? We had Liberation Day. Yeah. Markets took an absolute dumb while. And now, by the way, they're stronger than ever. And I understand the S &P is hitting new records every day. If you, through done luck, happen to get your equity issuance at a certain, I forget exactly when it was, but a certain date in late March or early April, Right. You're just in money the day after you get it. You're already looking at a 20 % return this year. On the other hand, if you happen to reissue equity the day before. Yeah. Well, it wasn't looking great. So look, some of it is just in the lap of the gods here, Mike, we can't control everything.

15:36And the other thing I would say, having spent a lot of time with comp, is if you look at one year, there's always something where you're really lucky or you really got screwed. and you should try and look at comp over time and think, am I getting fair comp over time versus can you fix the Liberation Day problem that just smacked me? I also have never had anybody come in and go, we got the stock the day after Liberation Day and we're up. We feel we're being compensated unfairly positively. We'd like to take a lesser bonus. No, exactly. You're never going to hear about someone complaining about the upside.

16:11You're only going to hear about the downside. Hey, any other comp practices, best practices we have missed in our chat? There is one, one very important one. And this is something I will do on pretty much every offer for any major role that has a lot of complexity to it. And that is you need to do, or it's simple, it's a multi-year cash flow analysis. Typically five-year cash flow analysis. You've got your, what I'll call your steady state. So here's where you are today. Here's your base. Here's your bonus or target. Here's your expectations of equity. And you're going to do it by investing. So it's actually a real cash in hand, W2 look at what you're getting.

16:51And then you're going to compare it to the offer. Yeah. And you're going to do this over five years and you're going to figure out where there's a delta. Now, in my experience, there is typically a, sometimes a negative delta or a negative gap, sometimes in year one and year two. Here's why. When you are issued equity, for example, as part of your compensation package, we spoke about vesting cycles, Mike, at the top of this podcast, sometimes it's a three-year click. So in other words, the numbers look good on paper, but you're not, from a cashflow perspective, you're not seeing any of it until three.

17:26Whereas if you stayed where you were, you've got that cashflow continually coming through as you're now in the middle of these or realizing these vesting cycles. And this cashflow analysis over five years can really reveal where there are going there'd be some meaningful gaps as to what you would actually experience, literally cash in your bank account or in your wallet. That can be very revealing and very important to do. What I nearly always find is there may be a gap in year one and two, but nearly always, once you hit year three and beyond, then it really takes off as the equity accelerates.

17:57So now, again, this is part of a point of negotiation. You go back to your counterparts and ask for some sort of sign-off or bridge payment, call it what you will, year one and year two? Will they handle that or not? Is that negotiable? Yes or no? And what does that gap look like? Especially if you have to buy a new house or something in a higher cost neighborhood, you really want to do your homework here. It's a neighboring other point, which I wasn't sure we were going to get to. One of the challenges now, it is financially punitive to relocate. Many people have locked themselves into a sub 3 % mortgage.

18:32And until a few weeks ago, I understand 30-year mortgage is running close to 7%. There are some substantial financial costs now associated with relocation, which we didn't really see a few years ago. So, Lutz, think about anything else before we get to our traditional last question. Look, yes, look, all sorts of things come from negotiation, typos. Do you have the C title? Yeah. SVP, VP, head of marketing. There's a whole bunch of things there. Again, that would normally be established up front. You've probably seen even a job spec that spells out what the role should be. But sometimes there's some negotiation on titles.

19:15Again, the reporting line, typically that's fixed. That stayed in the job spec. That's typically not over the negotiation. Here's something that does come up. Non-compete and non-solicitation agreements. Oh, yeah. That's a good one. that may exist in offer letters, or in many instances, it may not exist in an offer letter. You may be presented with a bunch of documents on day one, but no one told you it was coming your way. You should potentially just better understand how issues like that are handled and what are you walking into. So there's an almost infinite number of topics, Mike, but I think I'll leave it there.

19:48I have one more I want to ask. A lot of people will say you should never get to the point where you turn down a written offer. that is a, unless the company blows it up or changes it, how do you feel about that statement? There's an assumption, which is by the time you've got a written offer, you have already negotiated the elements. And typically I'm working with my clients, as I said, to get to a verbal yes before the written offer letter goes out. If you have got to the point where the written offer letter has gone out and you say, no, something has gone terribly wrong, either in the process or conditions that weren't being made aware of, or, and this is shame on the recruits for not figuring this out.

20:34You may frankly be looking at two situations side by side and look, the other firm has got to the finish line first. Here's the reality. And most of the offers that we're handing out from our clients, you've basically got a week max to sign on the dotted line or the offer expires. A lot of times, the company has to go to the board of directors or other people to get specific risks approved. And so when you get to the written offer, if you don't close it, it makes you feel pretty bad as the hiring. Correct. So that's why we're doing all this pre-close work before we get a written offer. no CHRO or even CEO wants to go back to their comp committee multiple times negotiating an offer.

21:21So look, I think that's a highly unlikely situation. I'll tell you one thing that really is problematic, which is you accept the offer verbally, you accept the offer on the written offer and you sign, and then you renege on the offer. Wow. It's rare, but it does happen occasionally, but it's rare. I would say in searches I'm working on happens once every two years or so. So it is pretty, pretty rare. But one out of 50, one out of 50. Yeah. One out of 50. I said, not a loss, but it does happen. There are all sorts of reasons it can happen. The biggest risk is when there is a large difference between the moment when someone resigned and their start date, which is why many companies are pushing you to resign ASAP and would like you to start a couple of weeks later, I have very few clients that are comfortable saying, yeah, you can resign now and we'll see you on January 1.

22:17You're asking for trouble. You're begging for a problem. You are asking for trouble, but it does occasionally happen, particularly in financial services where there's often required notice periods or gardening leaves built into - Oh, the garden leave, yeah, where you just have to hang out and do anything. Built into employment contracts. So look, there is some risk, but And that is a real challenge, I think, both for your reputation. That probably follows you around forever. That's a reputational challenge that can be a real problem. All right. This brings us to our – this has been a great chat.

22:52Thank you. This brings us to our last question. You're very familiar with it. It's a two-parter. Practical advice we haven't yet discussed for our listeners and our funniest story you want to share. I've exhausted all my funny stories, Mike. So now I'm back to some practical advice. All right. Very good. Which is where I think I've been for the last couple of podcasts. So here's what's coming up right now in interviews. I obviously ask candidates on how the interview go, what they talk to you about, what they want to know. Here's what I'm telling people. You've got to be ready for the AI question.

23:22It is literally coming up now. Every interview for every chief marketing officer role. How are you using it? What are your use cases? What impact is it having? How are you working with the CFO? So you got to have now some nicely packaged AI anecdotes about the impact and transformation AI is having on your business and on your team. It's not the first question out of an interviewer's list, but I can assure it's definitely the second, third or fourth. And so this is moving away from what we feel your resume or tell me about the time you did this. The AI topic is front and center now in interviews.

23:59I think they're being used as a proxy for broader-based, I would say, agility, transformation, learning, manage costs, and optimize. But the AI question is being asked now in pretty much every single interview I'm hearing about. Well, I think that is a great way to end the show. So thank you, Richard. And thanks to everyone for listening to CMO Confidential. Look for our other shows on Spotify, Apple, and YouTube, which include Colonel Mustard, In the Study with the Job Spec, Why Can or Why Khan Can't, and Richard's earlier shows, two of which are A Rapid Evolution in the Marketplace, the Spencer Stewart CMO 2024 Study, and It Was the Best of Times, It Was the Worst of Times, A Marketing Perspective.

24:52Hey, all you marketers, stay safe out there. This is Mike Linton signing off for CMO Confidential. In marketing, everything must work seamlessly. If not, efficiency, speed, and ROI all suffer. That's why Quad is obsessed with making sure your marketing machine runs smoothly with less friction and smarter integration. Better marketing is built on Quad. See how better gets done at www.quad.com slash build better.