Why Cash is Only One Measure of Employee Happiness

In 1981, Herb Cohen wrote and published “You Can Negotiate Anything”, an excellent guide to great negotiating. I’ve read and reread the book a number of times and find myself using the techniques often in many areas of my life. One of his lessons remains clearly on my mind and is a variant of the old “You name the price and I’ll name the terms” challenge that works so well in negotiation.

Cohen sets up an example where a senior position job candidate is stuck on a salary twice as high as the CEO is willing to pay, leading to a standoff between the two. Cohen goes on to point to twenty five non-cash items that the CEO could have used to narrow and eliminate the gap, many of them untaxed perks worth more than face value because of the employee’s tax savings. They include an expense account, company car, profit sharing, 401k contributions, medical coverage for dependents, free life insurance, educational payments, extra vacation, relocation expenses, paid trips to industry association meetings, or a small override on revenue from new products developed under the candidate’s watch.

One of the items on Cohen’s list of twenty-five was stock options. That of course jumps to the top of the list for young, fast growing technology companies. Many skilled, experienced executives have jumped from mature companies to more risky positions in smaller, fast growing enterprises primarily for the options. In a previous insight, we explored the common percentage of a company’s fully diluted stock that is often granted in the form of options for new employees. (See insight here.)

Many an executive has made much more than any cash compensation from exercise of “in the money” options after taking the leap to a smaller, fast growing company, attracted by just this form of incentive compensation. When used in combination with several of the twenty five additional non-cash forms suggested by Cohen, salary alone does not seem to be the barrier most people believe it to be.