NEW YORK (MONEY Magazine) -
This will be the fourth year running that salary raises average less than 4 percent, according to Hewitt Associates.
All in all, it's still an economy in which some moxie is needed to push the pay envelope.
At the same time, though, a growing body of leading indicators suggests that the job market is turning in your favor. Fewer employers are freezing salaries these days (just 5 percent of companies this year vs. 16 percent in 2002, reports Mercer Consulting), and annual pay increases are finally beginning to grow again (averaging 3.6 percent for 2005, up from 3.4 percent this year and last, according to the latest projections from Hewitt).
In high-demand professions, such as accounting, and in the tightest regional job markets, raises have already returned to near-1999 levels. Big Four accounting firm PricewaterhouseCoopers, for example, says it has doubled the number of signing bonuses it is giving to new hires, while raises for its audit and accounting staff averaged 8 to 12 percent annually the past two years. Defense spending has turned Washington, D.C., northern Virginia and Southern California into employment hot spots, and a tourism and retiree boom is fueling pay growth in Las Vegas.
But let's not exaggerate the effect of the national economy on your prospects for a raise. Job demand in your specific industry matters more. But one other factor overrides both -- and that factor is you. If you hope to do better than the 3.6 percent bump-up that the average company will be handing out next year, you're going to have to ask.
And how you ask is going to be critically important. The skills that make you valuable to your organization will get you into your boss' office to make your pitch. But once the office door closes behind you, the skills you'll need are those of a detective, a diplomat and a dealmaker.
Maybe you're not entirely secure with your negotiating skills. Don't worry. As professional negotiators know, getting what you want is as much a science as an art. Careful listening and good preparation will take you much farther than the gift of gab. And so, it is with preparation that your campaign for a raise should begin.
Step 1: Rediscover your inner Sam Spade
Information is everything. Simple as that. You'll argue from a stronger position if you know how your salary compares with those of others doing the same job, both at your company and in your industry.
"To be credible, you need to have a defensible reason why you deserve the amount you're asking for," explains Deborah Kolb, a professor at Simmons School of Management, author of "Everyday Negotiation," and a partner in TheShadowNegotiation.com.
|†Note:  Estimate.|
Digging for pay dirt takes time. Web sites like Salary.com and SalaryExpert.com provide details about job-specific pay and even drill down to differences based on where you live.
But Web sites only offer estimates, often derived from stale government data or employer surveys that tend to lowball salaries for public consumption.
For the real scoop, get out from behind your desk. Ask co-workers to lunch, for instance, and turn a casual conversation into a chat about the salary range for various jobs, including, at some point, your position. What do they think the range really is? And why do they think that?
Be prepared to swap salary impressions. "If you're going to ask people about salary, you've got to be willing to put it on the line yourself," says corporate coach Lois Frankel, author of "Nice Girls Don't Get the Corner Office."
If you don't belong to a professional organization, join one so you can meet more people and gather more intelligence. Develop relationships with recruiters too -- they know exactly what people in your industry typically make.
"I never turn down a call from a recruiter," says Jennifer Yi, a 30-year-old in financial services who recently snared a double-digit raise. After two years of salary freezes, Yi knew she had to make a strong case, even though she'd taken on additional responsibilities. She clicked through the usual Web sites, but got much more current compensation details from her recruiter sources.
As she suspected, her pay was lagging. Yi showed her boss how her salary stacked up against others in the industry. She documented a 70 percent boost in business for projects that she headed and gathered positive e-mails from higher-ups. Yi says she asked for a 30 percent raise -- and ended up with 17 percent.
Another crucial goal of your investigation is to learn how valued you are by your company. Think about your last review and what you've done to address any problems or weaknesses.
|Manufacturing - Aerospace†||4.00%†|
|†Sources: Hewitt Associates, Mercer Consulting.|
Be honest with yourself: If you haven't been doing well, this is not the time to ask for a raise. If you don't know how you're doing, talk to your boss.
When Elizabeth Seabaugh, a consumer-products manager in New Jersey, found out she was making $8,000 less than colleagues in the same job, she didn't get upset. She armed herself with five years of stellar performance reviews and set up a meeting with her boss.
When he questioned why she deserved a raise, she handed him her reviews and brought up a recent product expansion she headed, which was producing 50 percent more profit than planned. He agreed to consider her request; five days later, she got an $8,000 pay increase. Says the 46-year-old Seabaugh, "I showed him that I was delivering more than was expected."
Step 2: Build up your fallbacks
The ultimate power in negotiation comes from having a good alternative. The classic strategy is to ask for more money than you'll settle for, so once you've decided on the dollar amount you really want in the end, our experts suggest adding on a 10 to 20 percent cushion. Ask for much more, and you risk seeming greedy or unrealistic.
Of course, the most powerful fallback is an offer in hand for a better-paying position. This does not mean you should bring up a job offer in your first conversation about a raise, since it'll likely put your boss on the defensive. But if you do mention another offer, you had better 1) really have one, and 2) be prepared to walk if you don't get what you want.
If you don't have another job lined up, the fallback could be to ask for something besides more money. Think: What else is important to you? More vacation time? Working at home a few days a month? A big expense account? A laptop? You want bargaining chips when it's time to talk.
Once you determine which options are important, prioritize them. Negotiators use this technique all the time: Exaggerate the importance of issues you don't care about so that you get what you want the most. So, in practice, you might ask for a 10 percent raise but be willing to accept 8 percent if you also get an extra week's vacation.
"Good negotiators," says Frankel, "get something in return for everything they give up."
Step 3: Walk in your boss' shoes
Negotiating is about solving problems. So your case will be much stronger if you stop to figure out what your boss' pressure points are and can demonstrate how you've worked to alleviate them.
When Todd Reynolds was angling for more pay, he learned new tech skills and took on projects that others wouldn't touch. Reynolds, who's now 30, was making $57,000 a year as a senior accountant in Birmingham and developed a way to track performance at a troubled division in his company.
He landed a raise, then a promotion that boosted his salary another 15 percent. "I understood what my boss was looking for," he says.
Effective negotiators always think about the other side's perspective. In this case, you need to understand your company's financial situation.
Does your boss have budget constraints? While you may not be privy to the exact numbers, you certainly will know whether the company is going through layoffs (in which case it's the wrong time to approach your boss), and you can find out whether he or she is giving other people raises (in which case it's exactly the right time).
One key advantage you have from the boss' perspective: Replacing a solid worker is always costly. So unless you're a slacker, even if the boss won't come up with all the money you ask for, you're likely to get something to keep you happy.
Step 4: Set the stage
The prep work is done, now comes the talk. Find out when budgets are set at your company and schedule your meeting six to 12 weeks beforehand. (Fact: Nearly 60 percent of organizations do their budget planning in the fall.)
If you miss your annual window, try bringing up the issue after a big accomplishment, when your boss is still thinking happy thoughts about you. Pick a time to meet when you won't be interrupted -- first thing in the morning or right after lunch. This is a serious conversation, so have the discussion in the office, not over food or drinks.
There's no reason to feel nervous if you've done your homework. To reduce your anxiety before the meeting, focus on the merits of what you're asking for, not on the person you're asking.
Not to sound too dippy, but visualize the talk going well -- negotiating pros often say that expecting success is a self-fulfilling prophecy.
Step 5: Talk soft and listen hard
Start the conversation by explaining why you deserve a raise. (This is where a written list of accomplishments comes in handy.) You've done your research on how your salary stacks up, so don't be afraid to name a figure first.
"By putting a number out there, you establish a ball park for the raise instead of letting someone else set the range," says William Ury, director of the Global Negotiation Project at Harvard Law School and co-author of Getting to Yes.
Then listen to the response. The best negotiators aren't the people who make the most vehement argument -- they're the ones who pick up on what's really being said. Listen "actively" (as negotiating experts put it), asking clarifying questions such as "What specific information do you need?" or "Why is a raise not possible now?"
Paraphrasing your supervisor's previous statement as you begin your response shows you understand, which helps build trust and a common ground. And don't be afraid of silence -- it often forces people to talk, increasing the odds that they'll back down, revise a position or at least reveal useful information.
As much as 90 percent of the communication between two people speaking face to face is nonverbal, so pay attention to body language -- your boss' and your own.
Sit forward in your seat with your arms and legs uncrossed to convey that you are cooperative and not being challenging. Keep steady eye contact and smile. Most people know that if someone you're talking to crosses his arms tightly across his chest, he's not open to what you are saying.
Watch for more subtle changes. A slight tilt of the head indicates uncertainty. If he's sighing, looking away or turning his body slightly to one side, he may be getting impatient or may not agree with what you're saying. If your boss is leaning toward you and making direct eye contact -- bingo! You are probably making real progress.
Be prepared to hear no, but don't give in and certainly don't get angry. Keep the conversation going.
"Good negotiating," Ury says, "is about asking the right questions."
If necessary, retreat to your fallback plans, such as a bonus in lieu of a raise or one day a week to work from home. If those proposals don't work, ask why a raise isn't possible now and find out what you can do to get one down the road.
Ask whether there may be more money available in the next quarter. Perhaps your raise could be staggered -- some now, some next year. Or offer to tie your request to a specific accomplishment, such as bringing in a new customer or producing cost savings or taking on additional responsibilities.
Pay attention to signals that your boss is ready to end the meeting -- say, she starts shuffling papers -- and wrap things up promptly. If you made a good case for yourself and are still hearing a firm no, ask if your boss would be willing to discuss the issue again in six months or work with you to develop a plan with explicit performance goals that would lead to a raise.
Of course, what you want your boss to say is that he or she will indeed consider your request and, depending on how things work at your company, discuss it with the powers who decide these things. Take quick notes during the meeting, and use those notes to follow up your talk with a memo or e-mail about what you and your boss agreed would lead to a raise.
"Once any deal is reached, get it in writing," counsels Frankel. "Most important, leave the negotiation without hard feelings and with your boss thinking he or she made you very happy."
After all, if you've given it your best shot -- unlike Brooks' character -- it's an experience you will never regret.
How to deal with a boss who's a... Tightwad
"Get real. The budget is tighter than my pants after Thanksgiving dinner."
Your response: "I understand that money is tight, but I hope we can work around it. I'd be happy to stagger the raise -- say 5 percent now and 5 percent when it's time for my annual review."
"Maybe, just maybe, I can get you a small raise, but no way will it be more than two percent."
Your response: "Let's not focus just on salary. I'm flexible on how I'm compensated. I'd be willing to consider 5 percent if you give me extra vacation days or allow me to work at home one day a week. Would you be open to that?"
How to deal with a boss who's a... Wimp
"Gee, I dunno. It's not my decision."
Your response: "I know you're not the person who makes the final decision on pay raises. But you're the one who knows my work best, and I'd really like to have you as my advocate. Would you help me script out what to say? And would you support me on this?"
"There's so much on my plate right now. This is really, really bad timing."
Your response: "Yes, I know. It's always hard to find time to talk about these things. But I really need an answer on this. When is a good time for you to talk about it?"
How to deal with a boss who's... Passive-Aggressive
"Of course you know that everyone around here is working very, very hard. Why should we make an exception for you?"
Your response: "Maybe we can do this in a way that doesn't look like a straight raise. How about a bonus based on the new business I'm bringing in?"
"But we just gave you a raise two years ago."
Your response: "I really appreciate that, but that was just the normal cost-of-living adjustment everybody gets. I was hoping you would recognize the extra work I've taken on."
How to deal with a boss who's an... Intimidator
"This thing you are asking for is impossible to grant. What planet are you on?"
Your response: "I understand the need to control expenses. But I'm sure you agree that if I leave, it would be more expensive to hire someone new to do my job. I really like it here, so let's figure out a way to make this work."
"You should be thankful you have a job."
Your response: "I like it here and think I am good at my job. But I've been contacted by another firm." (Don't bluff, Luke!) "I'd rather stay, but their offer made me think. I hope we can find a way to make my salary reflect the work I'm doing."