Answers to Frequently Asked Questions

Question One: Where can I find general information for my job search ?
Answer: The best place to start is the "MIT Careers Handbook," available free of charge at the Office of Career Services and Preprofessional Advising and on the World Wide Web at ( http://web.mit.edu/career/www/handbook.html )

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Question Two: I currently have an offer from a large firm and part of the package is a "sign-on bonus" of $1,500. It is now the end of October, and I have until early December to decide whether to join the firm. They have indicated thatthey might be willing to re-extend the offer next Spring when I would have completed my interviewing, but the signing bonus would not be available. What should I do ?
Answer: The sign-on bonus is being used with some frequency and there is a strong economic reason for the employer to take this approach. Certainly, if they can fill their slots in December, they save considerable time in interviewing other candidates and they are happy to share these savings with individuals who would like to make an early commitment. Naturally, you would like to explore other alternatives, and that will require several more months of interviewing and deliberations. There is a chance that you can more than cover the $1,500 with better offers, assuming the other attributes of the company still to be identified are equal to the company "in hand", i.e., and assuming that the company that has made the offer is not so special that there is no point in looking further.
Now let us assume that you delay, and it is next March or April; you have several other offers, and they are in the range of the offer from this first company and it is getting time to make a decision. Do you raise the matter of the foregone bonus with the first firm? You can certainly make a pass at the subject, but like all discussions about salary, you should not raise it unless you are ready to sign on with this firm if they come through with a favorable response.
One way to raise the issue might be to say something like: "I'm very interested in coming to work for you. I did not sign on last December since I wanted to look at some alternatives and as a result of this process, I am even more convinced that your firm would be the right place for me to start my career." (Now, assuming that the other offers are not better and they cannot be used for benchmarking, and assuming that the first company is still interested in hiring you) "I wonder whether your budget still contains any of the monies that were committed for bonus payments last fall. I understand why it was to the company's advantage to offer the bonus, but I thought I would ask whether it might still be available.

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Question Three: This past year I have been working with several MIT professors on some new technology and it looks quite promising. They are in the process of starting up a firm and want me to come and work on the business side of the enterprise. I expect that the salary offer will be approximately 60% of what my other alternatives would be with large corporations. No mention has been made about bonuses or stock, and I am wondering how to raise the subject and whether I should be negotiating with the principal owners (who are the investors) or with the CEO ?
Answer: It is quite normal for startups to try to find ways to lower fixed costs as much as possible. Consequently, taking a salary at only 60% of what might be considered a market rate for your talents is not out of line. Clearly, you need to have in the package some form of "participation" in the performance of the firm. I assume that you are prepared to sign on with the firm, since you have been working with them and you know the individuals; and for a startup, having individuals like you who are committed and willing to see it through the early and difficult stages, this is very important.
This brings us to the point of negotiating some satisfactory contingency compensation for yourself. This should definitely be done with the CEO and not with the owners. Leave it to the CEO to deal with them as you work out your terms of employment (and any possible dilution of their ownership).
Ideally, you should be granted both bonus and stock arrangements. The question is, how to evaluate the value of these, and how close this brings you to a market rate.
With respect to bonuses, you would want to know approximately what share of profits might be forthcoming and you could check this against the financial statement and projections of profits. The evaluation of stock is a little more difficult. But again, the financial statement should give you some idea of what expected book values would be at various points in time, and you might even talk with some of your colleagues in finance at the Sloan School who would be savvy about the appropriate multiple to put on earnings -- so that you could begin to gauge the shadow price for the stock, assuming that it will be closely held for some period of time.
It sounds like an exciting opportunity, and it may take some education of the principals who are well-versed in technology but not in compensation arrangements to reach a satisfactory plan. The last thing you should do is to leave it to their goodwill or to be worked out in the future. It is important to have the principles of bonuses and stock options well understood at the start.

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Question Four: I grew up in "Asia Major," and I am now completing the MBA program and I have been talking with a number of U.S. companies that are now moving ahead very aggressively in my home country. Naturally, they would like to place me into some joint ventures in my home country. I speak the language and understand the culture and would be able to bring the latest skills and ideas of business administration into this rapidly developing economy. The big problem is that they want to pay me as a "local" which means my salary will be only a fraction of what I would get if I were to wrok elsewhere in the world.
Answer: You clearly are facing a very complex situation. Certainly, if a multinational firm were to locate a European or North American MBA graduate in your country, the individual would be paid an international market rate and that would be understood all around. In essence, the irony is that because you are a native of the country, you are seen as someone who should be paid on a local scale. In fact, if you were paid at an international market rate, there might be considerable resentment shown toward you by other local manager who did not have the chance to leave the country and receive an MBA from a major institution in the West.
I take it that you would like to return to your country of origin, if a satisfactory financial package could be negotiated. One of the important principles of negotiation is that salary follows responsibilities. One way for you to be seen as qualifying for an international market rate would be to secure an important line position such as department head or possibly even plant manager. The most difficult circumstance for you would be to join the organization in your home country as a staff person working alongside other managers who have not left the country but have as much seniority and age as yourself.
Another dimension to this negotiation should be a discussion about your career progression. It might be necessary for you to work at something less than market rates for several years as you demonstrate your leadership skills. You should be on a fast track and you ought to be able to agree on the length of time for the initial assignment (perhaps 3-5 years) after which you would be given major international responsibilities -- with your experience and accomplishments in your home country as evidence of your substantial promise.

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Question Five: I will be going next week for my initial interview with a large accounting firm. Word has come back from others who have interviewed with this firm that the interviewer insists, in the opening round, to know salary requirements. What should I do when that question is raised ?
Answer: Some firms press for information about the salary requirements of potential candidates, since they do not want to waste time if there is a large negative gap between their upper limit and the salary expectations of potential hires.
Nevertheless, if it is possible to delay discussion of salary, this should be done. You want to develop the strongest appraisal on their part of your talents and experience, and this will take time and the best strategy is to say something to the effect: "It is early in the interview process for me, and I am not ready right now to give an answer."
Quite possibly the interviewer will take a hard line and say something such as: "Well, if we don't get any indication from you at this meeting, then there is no point in proceeding." Such a strong committed position may very well convince you that this is not the company that you would want to work for and you might gracefully end the interview. However, if you are still interested and want to keep this option open, it is necessary for you to say something about salary. The question then is how to frame the answer. The candidate could also ask: "What is the salary range for the position ?"
Since you have done your homework (Prepare, Prepare, Prepare) and have formulated your target (presumably based on what you expect starting salaries to be this year, your past salary updated for two years in the MBA program, your debts, and other factors), you are in a position to indicate what would be an attractive salary figure. Clearly, your initial asking point should be close to your target. It cannot be so high as to seem ridiculous and to immediately close off further discussions. You might try to keep it somewhat flexible by saying something to the effect: "It would be in the high five figures." The interviewer might not find this very helpful and might press for much more specificity -- in which case, you would be forced into naming something like "in the high $70s" -- assuming this is in the range of your target.

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Question Six: I currently have offers from two companies. Can I use these as leverages to produce a good salary arrangement for myself ?
Answer: Normally in employment negotiations, it is not wise to foster a bidding war for your services. Most employers will not engage in such a sequence. There may be some situations where firms will bid for your services much like sport teams might bid for the services of a rookie star, but that would be the exception rather than the rule.
Certainly, it is appropriate to mention the fact that you have a competing offer. Now let's think through how this would unfold. If the higher offer is from the company that is your first choice, then the deliberations are over and there is nothing more to be done. However, if the company that you would prefer to work for is lower, given the comparison of the two salaries, then you do have an opportunity to use the leverage of the better offer. Remember that you should be prepared to accept employment with the preferred firm assuming that a favorable offer is received.
Now how do you go about doing this? First you do not want to give away your bargaining power by indicating that you are prepared to come to work for them, and you just wanted them to know that you were turning aside a higher offer. Perhaps something like the following would be appropriate: "I am very interested in working for this firm. However, I have a competing offer and I wonder whether you have any flexibility and whether there are some other things that we might talk about that would increase the financial value of the package before I come to a decision?" If you are asked for the exact amount of the competing offer, you should be forthcoming, although probably not mentioning the name of the firm.
Basically, you are saying in effect: "If you were in my shoes, you would want to see how close my first choice can come before making a decision." By keeping matters a little uncertain, you maintain as much leverage as possible on the first firm. You have not in any way closed the door regarding the possibility of coming to work for them even if they are not able to close the gap completely.

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Question Seven: How should I think about the offer of stock options in the employment package ?
Answer: Increasingly today, companies are including stock options in the employment package. If it is a large company and the position is at the entry level, it is unlikely that the stock options had any appreciable value on the way into the company. They are a way of identifying your interests with the long-run interests of the company and over time hopefully might be worth something significant.
However, if you are entering a small company or being given a top position in a medium-size company, the options might very well represent an important part of the overall value of the starting financial package. The prospective employer with whom you are dealing should be happy to explain the way the options and what would be the inherent value in them given current levels of the company's financial performance and the stock market's evaluation of this performance.
Evaluating how the options will work in the future is a very uncertain exercise. The company will have financial projections (often optimistic), and you need to assess their value on some type of expected basis. Often it is helpful to have various scenarios ranging from ones that are reasonably cautious to those that are quite optimistic in terms of firm performance and the consequences for the value of the options.
One has to decide how much of the overall financial package should be committed to this important form of contingent compensation. Most individuals would not want to have a large proportion of their normal earnings related to stock options.
Generally, there is not much to negotiate over stock options since they are established by the compensation policies of the company and usually dictated by guidelines developed by the board of directors. It may be possible to negotiate a loan program to help with the exercise of the options when it is advantageous to do so. Again, the interest rates and other terms for the loans are probably spelled out in company policies and not subject to negotiation.
Nevertheless, considerable information needs to be obtained and one needs to ask as many questions as possible of key people in the prospective company about the structure and promise for the stock options program.

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