Profession Comm. 7

Review of General Management, Volume 27, Issue 1, Year 2018 119

EMPLOYEES’ VALUE REFLECTED IN THE INCOME

FROM SALARY NEGOTIATION STRATEGY

Oriana Helena NEGULESCU *

Abstract: The information technology allows today the job seekers to access

information not only about the job, but also about the working conditions offered. This option allows the employee to choose the job offers that better meet their

needs. The companies seeking for the best employees and trying to keep them

inside are offering important compensations apart of the salary. Nevertheless, most of them are aware that their employees are the most valuable intangible asset of

the company and are treating them accordingly. In this context, the paper is willing

to present what is the employees’ value for the companies, to analyze three

strategies for the income from salary negotiation based on the literature, to describe the negotiation framework and to propose a conceptual framework for the

negotiation strategy.

Kewords: employees’ value; income from salary; compensations; negotiation strategy

JEL Classification: E24, J21, A13, O15, J33, M12, M52

1. Introduction

The business world is facing a new labor market paradigm that puts

pressure on companies (Finkelstein, 2018), briefly characterized by:

 Unemployment is near an all-time low. A low unemployment rate means a lower supply of workers which means it‟s harder for

companies to hire workers.

* Spiru Haret University, Faculty of Legal, economic and administrative sciences,

Brasov, email: [email protected].

Volume 27, Issue 1, Year 2018 Review of General Management 120

 Workplace transparency is at an all-time high. This puts exceedingly more pressure on companies actually being a great place to work and

treating people well is now table stakes.

 Personal computing power is at an all-time high and accelerating. The ultimate goal of any company is to create profit by fighting for

markets or market niches with competitors. The company's success

lies in the quality-value-loyalty chain (Parasuraman & Grewal,

2000), which combines at least the technology used, the customer

satisfaction and the value of the staff.

 However, the new battlefield is as much for talented people as it is for key customers. Companies need to apply the same rigor to people

management as they do to customer management (Michaels et al.,

2001).

The value of the human resources is the most powerful factor in

differentiating the competitive advantage of companies. “People are definitely

a company‟s greatest asset. It doesn‟t make any difference whether the

product is cars or cosmetics. A company is only as good as the people it

keeps.” (Mary Kay Ash, 1984). The employees‟ value is an intangible asset

that contributes to the value of the company and to the profit. “The most

valuable asset of a 21st-century institution, whether business or non-business,

will be its knowledge workers and their productivity” (Drucker, 2013). The

employees are encouraged to continuously learn, to apply and develop their

knowledge, by means of developing their innovation and conception

competences (Dragomir, C., 2017, p. 33)

Many companies, especially multinationals, say the value of

employees is a priority in management and introduced the concept of

proposition of value. The term “employee value proposition” properly puts

the burden on the company to develop a proposition of value to the people it

needs (Wagner, 2017). In fact, this is a management strategy that manages

employees at different levels of the company. An employee‟s value

proposition is nothing but the sum total of the offerings a company offers to

its prospective and current employees so as to elicit their best efforts. It is

the totality of tools that employers implement to be able to attract, retain,

engage and develop employees (Sushman, 2017).

The changes in the labor market switching from the employers' power

to the power of employees, and unemployment reduction, on the other hand,

make companies change their selection and recruitment strategy with costs

Review of General Management, Volume 27, Issue 1, Year 2018 121

as low as possible (Stefanescu, 2017, 17). The candidates and employees, on

the other hand, will need to accumulate wage and other compensation

bargaining skills to be motivated to remain loyal to the company.

In any case, companies have to treat their employees as their clients to

win in front of the competition. “There is a strong link between customer

loyalty and employees. In short, customer loyalty increases sales and profit

potential, and leads to higher employee salaries and lower training costs.

Increased pay boosts employee morale and commitment; as employees stay

longer, their productivity goes up and training costs fall; employees' overall

job satisfaction, combined with their experience, helps them serve

customers better; and customers are then more inclined to stay loyal to the

company” (Reichheld, 1993).

Nevertheless, the company‟s strategy depends on its management

politics:

 When employees have supportive managers, are well compensated and well recognized, are not burned out by excessive demands,

have transparent and passionate leadership, and get opportunities

for professional growth, they become loyal workers (Wagner,

2017).

 For the human resources policy to meet the organization‟s goals, it

is necessary that it reflect the organization‟s thinking regarding how people should be treated (Panzaru, S., 2016, p.62).

 It takes more than just paying competitive wages for an employer to show that it values its employees. The most effective strategy for

companies to value workers is a blend of tangible and intangible

rewards and recognition (Mayhew, 2018).

 All in all, the employees, working at any level, are the eyes and ears of any organization. The real fuel and energy behind a

company‟s growth and success comes from its people or the

workforce. It‟s important to keep the employees delighted and

contended to make sure that the organization does not lose on its

customers, profits, and most importantly market value (Shethna,

2017).

 The labour is the most expensive and valuable resource at most companies. Managing that resource by time and place is an

unproven, inefficient and costly approach that fails to measure what

really matters: results (Mulcahy, 2017).

Volume 27, Issue 1, Year 2018 Review of General Management 122

2. The strategy to negotiate the income from salary

The salary income negotiation takes place between two parties: the

candidate for a job or the existing employee and the company's

representative, who may be the human resources manager, the recruitment

manager, the direct manager, or a senior manager.

The position of the two parties is different because the candidate seeks

to get a higher salary as well as other compensations, and the person who

represents the company seeks, on one hand, to maintain the balance of the

human resources‟ costs and, on the other hand, to enrich the company with

new performant employees and keeping the trained employees, in order to

bring in the future more added value to the company. In addition to the

salary, some companies offer a number of compensations, including: health

benefits, paid-for-off, options to work remotely, different perks (such as

gym membership or parking garage fees), bonus for moving to another

location, and growth potential over time "(Lypsey, 2016).

By comparison, the candidates and employees request such

compensations to alert the level of education, experience, aptitude, skills,

performance and loyalty, which should be highlighted.

Under these circumstances, the salary income bargaining is a difficult

and risky process, both for the company and for the candidate or employee.

The three main strategies applied in practice (the candidate, the

employee and the company‟s one) are further analyzed.

1. Candidate strategy

The proposed strategies for wage bargaining by job seekers (Madell,

2017; Snider, 2017, King, 2018; Hansen, 2018; Koenig, 2018) include in the

synthesis the preparation for negotiation and the negotiation:

• Preparation for negotiation:

- informing about the salary level in the company's industry,

comparing a possible income with personal expenses and preparing the

salary and compensation variants;

- Assessing your own skills, experience and knowledge in the balance

with the requirements of the job description and setting in mind the salary

and compensations to be accepted.

• Negotiation: listening, explanation, calm, watching the whole picture

and defensive thinking in mind.

Review of General Management, Volume 27, Issue 1, Year 2018 123

There are situations where the candidate does not ask about salary,

does not want to negotiate to get different benefits and the company offers

him a salary below the market rate (Lypsey, 2016). In this situation, the

recruitment manager may decide to hire the candidate for a specified period

(eg one month) to see how he / she responds to the job requirements.

There are also situations where the candidate asks for a salary higher

than the value of the job. "Sometimes, it's the candidate who has unrealistic

salary expectations" (Lypsey, 2016). In this situation, the recruiting manager

seeks to understand the circumstances in which the candidate has reached

that amount and bring it to reality by additional questions and break times.

2. Employee strategy

If the employee gets a good grade in his assessment, he is tempted to

negotiate a higher salary, compensation or promotion on a higher position.

a) Salary In the negotiation process, employees must be confident in their

abilities (not to be afraid) and convinced that they do not want enormous

salaries but only adapted to the corresponding salary on the labor market

(Zhang, 2018). On the other hand, they need to figure out the market value

of their skills and experience, but to be informed about the financial

situation of the company (Koenig, 2018).

b) Compensations If the company does not afford financially to increase wages,

compensation is often more advantageous in that it relieves the employee‟s

costs, such as: the cost of studies, the cost of an additional leave, the cost of

transport to and from location of the company, cost of accident insurance

and others. The employees have to map their request to the goals and needs

of the organization (Koenig, 2018).

c) Career promotion The career advancement is a privilege, not a right and means a new

role, new responsibilities, more authority and more rewards. When you earn

a promotion, it means that the people above you have faith in your abilities

and who you are as a professional (Scivicque, 2018).

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In both situations, the employee must be aware that in order to gain

new advantages or privileges, he / she will have to sacrifice time and effort

and show commitment to the company.

3.Company strategy

The manager's strategy that negotiates with a candidate or employee

depends on the company's overall strategy and policies. From this point of

view, there are different types of companies and strategies, but they can be

grouped in 3 categories:

 Companies that provide salaries above the average wages in the industry, especially for specialized personnel to maintain them

(Stefanescu, 2017, 18);

 Companies that offer a lower salary but, depending on performance, compensate employees with regular extra gains and

other compensations;

 Companies that have fixed a fixed salary for each post and who do not offer compensation. "If the employer refuses to negotiate the

salary it demonstrates an unwillingness to cooperate" (Lypsey,

2016).

In the first two strategies, depending on the negotiations and budget

flexibility, companies need to resize their salary budgets and / or spending

budgets with employees‟ compensations.

3. The general framework for negotiations

The process of wage and compensation negotiation can be divided

into two components or moments: in the selection for employment and

during the engagement (the person as employee). Also, people who are

employed are grouped according to their place of work: in offices and

production and sales locations.

The general framework of the negotiations includes: the selection of

candidates and the specific criteria of the two groups of employees, the

employees' requirements for their own benefits and the company's benefits

if they meet their requirements (fig.1).

The criteria considered for the candidates could be:

Review of General Management, Volume 27, Issue 1, Year 2018 125

 For offices jobs: carrier journey; candidate Experience; fit &

personalization and, interview; finally, the best fit candidates are

prioritized (Finkelstein, 2018).

 For production and sales work place: carrier journey; candidate

experience; interview; practical work and, time & location

acceptance (workshop and sales place).

The general framework of the negotiations also includes: the

employees‟ expectations or requirements and the company‟s benefits if it is

taking into account the employees‟ desire.

The employees’ expectations

 For offices jobs: early salary review (such as annually increase

according to the performance); rewards (such as money in addition

for a finalized project); tech & equipment (such as phone, laptop or

car, depending on the tasks and position); feed-back

(communication during the activity); social interaction (such as

week-ends with all staff); recognition for a higher position (the

opportunity for professional development or title); remote work or

flexible time (the opportunity to work from home or having flexible

time for working); vacation & leave time paid; parental leave paid.

 Increasingly more, some of the staff is requiring free time to think

and work in quite location, like at home and to be valued according

to the results and deliverables instead of spending the working time

in the office space. This means trust from the employer and

interpersonal communication by using IT devices (Mulcahy, 2017;

Sinatra, 2018).

 For production and sales work place: fair wages (the wage

according to the effort); rewards (such as money in addition for

productivity and quality or for sales in addition compared with the

target); bonuses (such as buying some items produced in the

company at the production cost); feed-back; coaching (when new

technology or procedure is implemented); working conditions

(such as lack of pollution, safety and healthy working

environment); recognition for the performance; vacation & leave

time paid; parental leave.

Volume 27, Issue 1, Year 2018 Review of General Management 126

Fig. 1. The income from salary negotiation framework

The employers’ benefits

Even if the employers are offering salaries/wages under the industry

rate, the employees could be much happier with getting different

compensations. In this case, the companies will benefit from the white

Top &

Executive Management

Offices work place

Production & sales work place

Candidates’

selection

Fair wages Rewards Bonuses Feed back Coaching Working conditions Recognition for performance Vacation & leave time paid Parental leave

Criteria: -Carrier journey -Candidate Experience -Fit & Personalization -Interview

Criteria: -Carrier journey -Candidate

Experience -Interview -Practical work -Time & location

acceptance

Early salary review Rewards Tech & equipment Feed back Social interaction Recognition for a higher position Remote work or flex time Vacation & leave time paid

Parental leave

Employees

expectations

Better ideas, results and deliverables Lower costs Higher performance

Higher productivity & quality Lower costs Higher profits Competitive advantage

Employers

benefits

Review of General Management, Volume 27, Issue 1, Year 2018 127

collars of better ideas and results or deliverables, lower costs and higher

performance and from workers of higher productivity & quality, lower costs

and higher profits and, competitive advantage.

Considering that the personnel is the most valuable company‟s asset,

having satisfied and committed people in the company is really a big deal.

4. Bargaining strategy

Most of the companies are using, at least annually, the personnel

evaluation process to know how their employees are responding to the job

description requirements and how they perform according to the imposed

tasks. Depending on the company‟s size, the evaluation is realized by the

top manager, HR (human resource) manager or the direct or superior

executive manager.

Having the results of the personnel evaluation, the managers are going

to negotiate or re-negotiate the employees‟ income from salary at their

request or at the Union request (if it exists). During this negotiation process

the two parties (employee and employer‟s representative) are using different

strategies (fig. 2).

Employee’s strategy

The employee‟s strategy consists in the following steps:

 Learn about industry wages & compensations market rate to see what level of salary the employee need to have in his/her mind for the

negotiation;

 Compare the cost of living with the industry rate to know what level of salary he/she needs;

 Fair valuate own skills & knowledge to know if the employer may be satisfied of his/her results obtained;

 Fairly negotiate in steps

 negotiate the salary/wage; the employee has to try to obtain a higher salary, but if the company doesn‟t afford it he/she has not

to insist on the subject;

 negotiate compensations; sometimes the compensations are more useful than the salary and the employee may insist on

getting more advantages;

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 Get the mutual agreement as a compromise between employee‟s application and the employer‟s representative acceptance at the bargaining

table.

Fig. 2 Conceptual framework of the income from salary negotiation strategy

Employer’s strategy

The employer‟s strategy includes 6 steps:

 Read the evaluation to know about the employee‟s performance and professional evolution;

 Learn about the limits of wages fund of the company;

Management

Employee Evaluation Negotiation

Bargaining table strategies

• Learn about industry wages & compensations market rate • Compare the cost of living with the industry rate • Fair valuate own skills & knowledge • Fairly negotiate in steps - Negotiate salary/wage - Negotiate compensations • Get the mutual agreement

• Read the evaluation • Learn about the limits of wages fund • Learn about the limits of compensations expenses • Learn about the company needs for such employee • Fairly start to negotiate • Get the mutual agreement

Results

Happy & motivated Competitive advantage

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 Learn about the limits of compensations expenses that the company affords;

 Learn about the company needs for such employee;

 Fairly start to negotiate having in view the employee‟s requirements in balance with the company‟s financial possibilities and human recourse

needs;

 Get the mutual agreement as a compromise between employee‟s application and the employer‟s representative acceptance at the bargaining

table.

These strategies, finalised with a compromise at the bargaining table

from the both parties have as results, on one side happy and motivated

employees and, on the other side competitive advantage for the employers.

In getting the mutual agreement, the both parties are considering a win-win

opportunity.

Conclusions

In order to reflect the employees‟ value in the salaries/wages

negotiation process the companies have to update their strategies to the new

paradigm of the labour market.

The companies have to measure what the employees produce, deliver,

and solve and have to consider them as clients. In this respect, the

companies have to consider their employees as being their most valuable

asset. The neglect of treating employees as clients by the company's

management brings serious threats to its future.

As a rule, companies want the best employees, but with lower costs,

and employees want higher wages and compensation as many as possible;

so the negotiation needs to be done in a way of mutual respect, as correct as

possible and, ending with a win-win compromise.

If we put the question “Is the value of employees reflected in the

income from salary negotiation?”, the answer is No; because as Shethna

(2017) stressed “the salaries cannot be considered as true measure of their

skills, and expertise, as the knowledge or creative ideas are abstract. They

are intangible and cannot be measured in terms of money”.

The framework for the salary income negotiations and the conceptual

framework of the salary income negotiation process, as well as the opinions

discussed in this paper, may be useful tools for managers.

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