Wednesday, April 23, 2008

How to negotiate a better contracting rate

In any transaction, the person with more information and more experience usually comes out ahead. That's why the typical consumer negotiating with a full-time salesman is at a huge disadvantage. A car dealer, for example, might negotiate several sales every week, while you only do it every two to three years.

So people making big decisions -- new car, new house, new job -- do as much research as they can, trying to level the playing field just a little bit. And lots of the information they come up with is flat out wrong.

One of the most damaging pieces of advice to follow when looking for a job is to rely on a headhunter's self-interest to get you the best rate. The idea – which seems quite reasonable on the surface – is that the headhunter's commission is a percentage of your salary. Obviously they want this number to be as high as possible. It's easy to believe that their self-interest lines up with yours.

The first flaw with this idea is that the headhunter doesn't get anything if someone else gets the job. If there are multiple qualified applicants, you are on the wrong side of a bidding war. The contractor doesn't want to price you out of the running, so the incentive is to lowball your rate.

The second flaw is that every day the headhunter spends searching for your perfect job is day they don't spend finding a job for the dozen other people they're working with. They make more money by placing more people than they do by placing fewer people at higher rates. 30% of $70k x 3 is more than 30% of $80k x 2. Their incentive favors the quick hit, not protecting your interests.

So what do you do about it?

  • Stop thinking of the headhunter as your own personal agent.
    They're doing a job for you, but they are more interested in getting you something than in getting you the best thing.

  • Know what you'll accept before taking the interview.
    Have a bottom line that you won't go below. Based on what you hear in the interview, you may decide to demand even more to accept the conditions. But your lower limit should never be negotiable.

  • Ask what the range is for the position up front.
    There's no point in wasting time on a position that you'll never take.

  • Never give up something for nothing.
    If they want you to travel and you don't want to do it, ask for extra vacation in return. If they want you to be on call, ask for comp time. Never give up one of your demands without getting a concession in return.

  • Get it in writing.
    You can't deposit a promise in the bank, or buy groceries with verbal assurances.

So are all headhunters ready to sell you out at a moment's notice? Of course not, even if it's just to preserve their reputation. But if you want to avoid being disappointed, you should never forget that your best interest only sometimes matches up with the headhunter's interests.

Tuesday, April 1, 2008

How To Triple Your Output By Cutting Your Output In Half

The fastest typist I've ever seen was a guy I used to work with. When he started going it sounded like a machine gun. Our standard line when people asked the rest of us about him was, "Yeah, he types over 150 words per minute ... and about 40 of them are spelled right."

Even after you ran his stuff through a spell checker, you'd have to proof-read very carefully to catch the places where "there" and "their" were mixed up. Where single letters showed up at random because the spell checker skips one-letter "words". Where he left out words or just plain didn't make any sense.

It usually took longer to fix his stuff that it would have taken to do it yourself from scratch. So why did we put up with it? Well, he was the boss. Keen.

But like anything else in life, you can at least learn something from the situation. What I learned from him was that it doesn't matter how much you produce if no one wants it. Or put another way: Anything you do for someone else that isn't up to their standards doesn't count.

For an example of an entire industry that's working as hard as possible to ignore this simple truth, compare television today to what it looked like in the 1950s.

The golden age

Back then there were three networks. How many prime-time shows did they collectively produce per week? Counting 8-11 p.m. Monday through Friday, that's three 1-hour slots x five days x three networks = 45 hours of programming. Lets say a third of those hours were broken up into half-hour shows, so a total of 60 shows per week.

Let's assume that to have a consistently great show you needed six extremely talented writers and actors. (Yes, there's a lot more to it. This is just an example.) The fewer good people you have, the less often your show will be good. To fill 60 shows, you might have the following mix:

Show qualityTalented staff
per show
# of showsTotal
talented staff
Consistently great616
Very good428
Sometimes good23570
Generally poor122

Obviously every network would like their shows to be better. But for whatever reasons there are only 150 people with the level of talent needed to produce a weekly show.

Double the output

Fast forward a couple of decades. Now there are six networks. The talent requirements to produce a good show are the same, but there aren't suddenly twice as many talented people available to do the work. The chart above might now look a little something like this:

Show qualityTalented staff
per show
# of showsTotal
talented staff
Consistently great616
Very good414
Sometimes good22142
Generally poor17575
Unwatchable - bad0150

Notice how many shows had to drop into the lower categories to make this work. The contrast is really obvious when you look at the two outcomes side-by-side.

With twice as many total shows, there are fewer shows that are even sometimes good. By doubling the total output, there are fewer than half as many shows that are ever acceptable to the audience And there are only a third as many shows that are usually good.

These numbers are obviously a gross oversimplification, but they illustrate a point: By increasing the output without increasing a limited, but required resource the overall quality declines faster than the total output increases.

500 channels and nothing's on

Now fast-forward to today. There are literally hundreds of networks trying to fill 24 hours every day. Granted, with the amount of money flowing in the industry there may be more people willing to work there. But if my assumption is at all close to reality, then we would expect to see shows that clearly don't have anyone talented working on them. We might even see shows where they simply send a camera crew out to film people without a script. We might call this a "reality" show.

So you're not in the TV business. How does this apply to you? Everywhere in the example above, replace "talented staff" with "attention". How much undivided attention do you have each day? How many ways are you dividing it? By trying to do more things, are you doing fewer things well?