Yesterday I wrote a fairly lengthy post which touched on a few ways to determine your market value -- the first part in this series on negotiating a raise. Today's post will be a bit shorter, though the topic is no less important: What would it cost your boss to replace you?
We all like to think of ourselves as unique individuals who are utterly irreplaceable. In business, however, everyone is replaceable. Everyone. The only question is how much would it cost in terms of hiring a replacement, training that replacement, the opportunity cost of pulling in another resource to fill in until the replacement is ready, the potential cost of any customer or revenue impact, etc.
Most employers will try to minimize those costs as much as possible by having employees with redundant skills and not allowing revenue or customers to become too tied to a specific person. The main issues to focus on are the salary of a potential replacement and the cost of training that replacement.
Hiring a replacement is going to cost the company the market value of a person with the right skill set. This is sort the reverse of my last post on determining Your Market Value. In this case, you want to determine the market value of someone else who can do your job.
Determining this figure can be a bit tricky, but you can use many of the same techniques from Part 1 of this series. You just have to factor out any special skills that may increase your value, but which aren't required for your job. For example, if you are bilingual, many employers will pay a premium for this which increases your market value. But if your current job doesn't require that skill, then you can't factor it into your replacement cost.
As much as you may want your market value to be really high, its actually in your best interest to have the market value of your replacement be about the same as your market value.
Think about it this way. If you are paid much more than your potential replacement, this means that you are underemployed. You aren't using all of your skills in your current position and should probably be doing a different job. You are getting paid too much and your employer could probably replace you with someone who makes less. Your prospects of getting a raise are probably not very good.
If you are earning drastically less than your potential replacement, this means that your employer is taking advantage of you whether they know it or not. You could be earning more at another job. Maybe it's time to think about a promotion.
People tend to find themselves in this scenario early in their careers, especially in technical fields. Straight out of college, you are unproven and an unknown quantity. This equals risk to an employer. After a very few years of hard work and proving yourself to your employer, your market value tends to go up fairly quickly.
Sometimes employers count on this, and hire young people with the intent of training and nurturing them in their careers knowing that their pay will increase dramatically over the next few years, but also counting on getting increasingly more and more work and expertise out of that person.
If you find yourself in this scenario, you probably should be asking for a raise. Your replacement cost is high.
That covers the salary of hiring your replacement, but what about training? In high tech companies -- especially ones that use highly specialized technology -- it often takes three to six months for a new hire to become effective. In cases like this, an employer has to count on shelling out up to half a year's salary with little or no return on that money when hiring a new employee. That's a pretty big incentive for your employer to try to keep you from leaving the company.
That doesn't mean that you should ask for a raise of up to half a year's salary. But it does mean that you should be paid at the top end -- or maybe just a little over -- the market value of your potential replacement. If on the other hand, your job requires little or no training, then you can probably only command a salary in the lower or middle range of your potential replacement's value.
In the next post, I'll explore one last topic that can add dollars to your next raise -- your value to the company. After that, I'll give you a few topics to avoid and wrap it all up.
Until then, spend some time thinking about your replacement cost. Just like your market value, your replacement cost is an important factor any discussion about salary.
What does your replacement cost tell you about your salary? About your career?
photo credit, kevinzhengli
Posts
0 comments:
Post a Comment