Preparing for a Negotiation
Employers face negotiations with employees in all aspects of the relationship, but two types of negotiations are particularly important: the first occurs once, upon hire, and the second occurs at each subsequent salary review. Assess the candidates or employees with regard to the following considerations.

• Competence. How capable are the employees in performing the job? Assess their ability to perform the specific functions of the job effectively by reviewing past performance, if applicable. Also consider whether they have the experience, skills, and competencies you require.
• Compatibility. How well would they do the job here? Assess their ability to interact effectively with customers, suppliers, and other employees. Also, assess their abilities to develop a positive impact on the desired results.
• Compensation. Will they perform the jobs for the pay levels we deem to be appropriate? Assess your organization’s ability to attract and retain the caliber of talent necessary for business success within the job’s market range. Will they be difficult to replace?

Candidates and employees who review favorably against these considerations may warrant higher placement within the pay range for the job.

Establish a Process of Formal Negotiation
Employers benefit from having a formal performance and compensation review cycle. Many companies have a semiannual performance review cycle. One of the two reviews often coincides with the normal annual salary review while the other is used sparingly for special or off-cycle salary adjustments. This formal process is helpful because it allows the employer to do the following.

• Establish a regular schedule the employer and employee can use to prepare for discussion and negotiation.
• Communicate the employer’s commitment to engage in a negotiation.
• Minimize the number of off-cycle negotiations and adjustments.
• Set expectations about the employer’s important business objectives and the rewards that correspond to meeting or exceeding those objectives.

Performance Management as an Effective Negotiation Process
Employers can negotiate effectively with employees when the process is based on performance management. Employers can collaborate with their employees by communicating important business goals and the rewards associated with achieving results. The benefits of this collaboration are as follows.

• Employees know their employer’s performance expectations.
• Employees develop ownership for meeting or exceeding performance expectations.

Both employer and employees can agree in advance what the rewards will be depending on actual performance outcomes.

• Communicate a clear understanding of how employee performance will be measured in the coming year.
• Establish three to five reasonable, measurable goals with each employee at the beginning of the performance year.
• Agree on what the salary increase and incentive award will be depending on actual performance outcomes.