Lloyd Blankfein may have been joking when he said he was “doing God’s work,” but he is no doubt serious when it comes to compensation. It requires more than being a “master of quip” to take home $26 million in a year from Goldman Sachs. The same skills that shape a star banker make a master negotiator. In a world driven by relationships, risk taking and transactions, a massive pay package isn’t an automatic reward.
Before the financial crisis, bankers were paid largely based on seniority and performance. Pay packages now routinely include deferred cash payments and restricted stock awards that can be redeemed only after multi-year waiting periods. Getting what you deserve is complex, but you stand a far better chance if you take the lead from those at the top. Showcase your skills and just enough swagger to demonstrate that you’re on track to attain star status.
Executive compensation expert Marc Hodak, managing director of Hodak Value Advisors and an adjunct associate professor at New York University’s Stern School of Business, shares some insider advice he gives his clients.
PLAY THE ROLE
It helps to be a top banker by having a strong track record of making money for your organization, or at least being part of an organization that has performed very well. Although in the finance world past performance is not necessarily a good predictor of future performance, past performance is an excellent predictor of future pay.
LEAD WITH REPUTATION
Unfortunately, in the finance world individual performance is sometimes difficult to assess, and group performance is sometimes not stellar, so the next best thing you can have going for you is a reputation among other stars for being exceptionally intelligent, hard-working, and trustworthy. Nurture that reputation.
DON’T BE SHY
Great bankers are assumed to be great negotiators. Don’t be afraid to be on the aggressive side.
TAKE YOUR TIME
There are no ironclad rules about negotiating for pay, but I generally tell my clients to put off providing a prospective employer with a specific answer to “what are you looking to make?” as long as possible, preferably after the prospective employer had made an offer. The best answer is, “just a fraction of what I would be making for the company.” This conveys that you want to be paid for performance, which banks like, and that you can’t realistically assess what that can amount to that until you are far along in the discussion of what exactly your role would be in the organization.
KNOW THE NUMBERS
Star bankers have an air of indispensability about them. They are being pursued, and are usually approached with multimillion dollar pay opportunities. That’s their starting point in negotiations. If you’re not in that position, then you should get comps for the position you are negotiating for. You can get them from your search or outplacement firm or, if you’re on your own, invest in a study by a comp consultant. The total compensation ranges will give you the boundaries for what you can ask for.
RISK AND REWARD
If you are willing to take a greater compensation risk by getting paid more “on the come” for stellar group performance, rather than in salary or guaranteed bonus, then you can ask for higher target total pay. Your investors would not take on additional risk without the expectation of a greater reward, and neither should you.
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