Negotiating Severance: Your 6 Sources of Leverage
Posted: Thursday, February 24, 2011
by Alan Sklover
Sklover Working Wisdom
ACTUAL CASE HISTORY: Jacob, 62, was a seasoned business executive in managing professional sports teams. He'd worked for professional sports teams - from baseball to hockey to basketball - all his professional life. He knew all of the pioneers in ownership and development of professional sports franchises. And he was present when professional sports became "big business." Starting in 1962 as an office assistant to the owners of the astoundingly awful, original New York Mets (once called the "Meadowlarks" of the Continental League), he'd risen to become Executive Vice President of a publicly-held entertainment corporation that owned three teams. He reported directly to the company's recently-hired CEO, who he was getting to know and like.
Jacob had never been "downsized" before. In fact, he had only three employers in 44 years, and each of his previous job transitions had been at his own initiative. For the first time in his life, Jacob felt the impact of the word "downsized," both professionally and emotionally. He also felt disappointed that his boss, the new CEO, had not met with him to discuss his termination. His HR representative presented him with a separation package: four weeks of salary, and no benefits.
For the first time ever, Jacob was at a loss for what to do. He had no plans to retire, and no desire to do so. Just months earlier, he and his wife had assumed significant, new financial obligations when their son-in-law unexpectedly died. This complete loss of income worried him to the bone. He felt several things - betrayed, confused, insecure, and unsure of what to do next - all at the same time. Most of all, he knew he should ask for a better severance package, but didn't know how to.
Jacob tried: he met with his HR representative and shared with her why he thought his four weeks of salary was both unfair and insufficient to meet his needs. He shared with her why he and his family needed more. He shared with her that he deserved more. While she nodded in apparent sympathy, two days later she told him, "I'm sorry. We can't do more." Jacob thought of threatening an age-discrimination lawsuit, but didn't know if that would help or hurt. He knew, instinctively, that it would likely halt further productive communications. Simply put, he was frozen. "Why should they give me more severance?" he asked himself. He just couldn't think of a good reason, other than those he'd already raised. So he came to us.
LESSON TO LEARN: Even the most savvy and sophisticated business executives have a very difficult time dealing with the severance experience. Sometimes it seems it's these very same people who, in fact, have the hardest time. Perhaps that's because successful executives tend to be so focused on achievement within their own sphere of influence, and this context is foreign to their usual milieu. It's for this reason that we review, first, the basics of severance negotiations, and then address locating and using Your Leverage.
Employers don't give severance to employees because (a) the employees need it, or (b) to make them happy, or (c) to be charitable. Severance is a business transaction. An employee is given severance only for a business reason: to obtain, in exchange, reduction in risk to the employer. This takes the form of an agreement incorporating the employee's written promises not to sue, promise to return company property, promise to keep confidences, sometimes promise to refrain from working for a competitor, and several other possible promises. How much severance will be paid to the employee? As in any business transaction, the "price paid" will be as low as possible. So, how do you get better severance? What can you do? What is your negotiating leverage? Before we speak of leverage, you need to understand the reasons underlying that leverage. There's three steps in the necessary analysis:
First, bear in mind that to get someone to do something they're not inclined to do, you must motivate them. Every person who loses his or her job naturally focuses on (1) "I need more," (2) "I want more," and (3) "I deserve more." However, when seeking to motivate someone to do something, what you want, what you need, and what you deserve is simply not relevant. Those three things are not motivators to your employer. So, at least for the moment, forget them.
Second, what does motivate your employer? Simple, it's his or her own interests; said differently, what he or she wants, needs or deserves. Every living thing naturally and instinctively responds to what either promotes or threatens its interests. Even a potted plant will move toward the sun, for the sun is supportive of its survival. Your employer can be motivated by what he or she perceives to be in his or her interests. In business there are three categories of motivating interests: (1) revenues, (2) relations, and (3) reputation.
Third, when we say "your employer," we don't mean the company, or the HR representative. We mean one or more "decision-makers" who are authorized to "make the decision" you desire. Your "decision-maker's" perception of how you might affect his or her (1) revenues, (2) relations, and (3) reputation, is the key to getting better severance.
Whatever amount of severance you've been offered - even if it's the "standard severance" - can be improved by showing that (a) your circumstances are special, unique, "surely not standard," and (b) it is in your employer's interests to improve your severance offer.
Now that we have the "basics" of employment negotiations behind us, it's time to turn our attention to Your Leverage, how to locate it, and how put it to work for you and your family.
WHAT YOU CAN DO: So, bearing the above in mind, how can you affect your "decision-maker's" decision regarding what severance you will get? Focus on these "6 Sources of Leverage in Severance Negotiating":
1. "Pipeline Value": Often times employers fail to take into account that in the future they may need the help of the downsized employee. For example, if a downsized employee is a necessary witness in a lawsuit, that employee may have leverage to say, in diplomatic terms, "I can give you unhesitating future cooperation or I cooperate only in limited fashion; how you treat me may affect how I treat you." This can apply, as well, to (a) unfinished business deals, (b) important meetings at which the dismissed employee's presence would be helpful, (c) the transition of critical client relations to those assuming the departing employee's duties, (d) knowledge of critical operating details known only to the departing employee, and numerous other circumstances. Consider what kind of "pipeline value" you may have, and don't be hesitant about using it, diplomatically. Consider, especially, how this might impact your "decision-maker," and in letter form, don't hesitate to let him or her know it.
2. Contractual Expressions: It is highly likely that you may have been promised, assured, suggested or led to believe that you would be treated in a certain way, but later denied that treatment. You may need to reflect on this, and keep your mind open in doing so; don't restrict yourself to written contracts. These may include, among others, (a) unpaid bonuses, (b) reimbursement for monies you have laid out, (c) vesting of stock or stock options, (d) promotions, (e) commissions, (f) annual performance reviews, (g) educational assistance, and (h) time off. Your severance agreement will provide that these other "promises" will not be fulfilled, and that you are giving up any and all such claims. This is your time to raise these matters, or "forever hold your peace." Consider, especially, if your "decision-maker" may have been the person who made the promise(s); if so, it's in his or her interests to help solve it, now, by fulfilling those promises, or granting you additional severance, instead.
3. Defamatory Effects: Your professional reputation is your primary career asset, one that has taken you years and years, day by day, to build. Your professional reputation is called into question any time you are fired because, as a general rule, people who are considered valuable are not fired. Your reputation is especially harmed if (a) the firing is abrupt, (b) the reasons for the firing are "confidential," (c) you are not confident that your former boss will give you a positive reference, and, sadly, (d) if you are in or past middle age, you may possibly be viewed by some as "past your prime." At the same time, you must remember that criticizing your last boss during a job interview is very harmful to your chances of being hired. It's important that you bring this to the attention of your "decision-maker," along with your concern that it is in everyone's interests, including his or hers, that your anguish about your treatment not be a public matter. The only way to ameliorate the problem is to expand the terms of your severance. Otherwise, your only honest answer to "what happened?" could harm other reputations, something you have no desire to do.
4. Discrimination or Interference with Vested-Benefits: Far more frequently than is proper, many people seem to say to themselves, "Do my age/gender/race/disability/etc. give me a right to claim illegal discrimination gave rise to my firing?" While it is without doubt that many people do have rightful, legal claims of illegal discrimination, (a) perhaps 90% of discrimination claims are unsuccessful in the course of lawsuits, and (b) even those with proper claims don't usually get much in the way of satisfaction (despite occasional headlines that suggest otherwise.) That being said, if you do believe that you have been subject to illegal discrimination, or interference with your rights to vested benefits, such as pension, 401k, and the like, now is the time to raise those claims. But remember: common sense dictates that "decision-makers" are moved more by claims that involve them personally than by claims that do not.
5. Retaliatory Responses: Perhaps the most under-appreciated source of potential leverage in severance negotiating is employer retaliation to an employee's (a) refusal to go along with illegal activities, or (b) "whistle-blowing" about it. Over the last few years, both our Congress and our Courts have responded to growing concerns that corporate executives are acting without propriety or accountability, and they are giving new important legal rights to those who "blow the whistle" on them. If you believe that this may be the motivation, in whole or in part, for your termination, you should raise this in a letter to your "decision-maker." However, this is the one area of severance negotiating where we always advise that an attorney needs to oversee your actions and writings, because the most common response from employers' attorneys, though usually baseless, is "This is extortion." It is not extortion, but prudent safeguards need to be in place to ensure that such baseless charges are quickly laid to rest.
6. Unusual, Extreme Need: Bearing in mind that I earlier counseled that you should for the moment forget about your own needs, this is the time to raise them, especially if they are unusual and extreme. By "unusual or extreme" we mean a family member undergoing cancer treatment, an unexpected family death resulting in increased financial obligations, a child whose well-being is at issue, or some other truly moving matter in your personal circle. Decision-makers are human, too, and will sometimes respond favorably to such rationales for increased severance. Sometimes it's their heart, sometimes it's their fear of later appearing heartless, but either way, these can be leverage in severance.
All of the facts, events and circumstances of your employment and its termination need to be reviewed for elements of these six sources of leverage in severance. These are the things that will motivate your decision-maker to treat you better. And that's what severance negotiating is all about, isn't it?
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