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Negotiating Your First Contract

Author: Michael Parshall, Michael J. Parshall Healthcare — Schwenksville, PA

You have received an offer. It looks good but lacks a few features that you were expecting. You’re not sure what to do next. On the one hand, it’s a great group in an attractive location. But some of the terms are less attractive than those in other employers’ offers, and there is no mention of partnership. What do you do?


Are You Being Watched?

This potential employer wants you to join her practice, and she’s invested time, money, and energy in recruiting you. She is also worried about making a mistake—she’s heard too many stories of associates who have disrupted practices. Although she feels that you are a good “fit,” she realizes that she doesn’t know you very well and that her instincts could be wrong. She is looking for subtle signs in your behavior that will reassure her—or sound the alarm.

Communicate your enthusiasm for joining the practice. Reinforce the positive impression you’ve already made on the employer by continuing the actions that led to the offer (timely responses, clear communication, and understanding and responding to the practice’s needs and concerns).

Keep in mind that the employer’s decisions are not purely objective and rational. Emotion plays a big part in those decisions.

Maintaining momentum is the key to successful negotiations. Try to wrap things up within a few weeks of receiving the offer. Protracted negotiations most often fail because the potential employer believes the candidate is not sincerely interested, is greedy or stubborn, or lacks the people skills that are important to a successful, long-term relationship.


Know Your Objectives

Knowing what you want is the key to making a good decision. Sometime early in the recruitment process, probably after you have had a few interviews, it’s important to write down the characteristics you’re looking for in a practice. Refer to your list when comparing offers and planning your negotiating strategy. Your list should include quality-of-work, economic, and quality-of-life factors, and it should be divided into two categories: needs and wants. Needs are the essential factors you require in a practice. Wants are the nice-to-have extras.


What Are Your Needs?

  • Compatibility in approach to patient care and surgical indications
  • Opportunities to develop your subspecialty interests
  • Utilization of your skills
  • The degree of support the practice is prepared to provide.
  • Compensation that is sufficient to meet your financial obligations
  • Market rate pay reflecting your training
  • Practice location, and the
  • Potential for increasing your compensation package based  on your productivity and the overall performance of the practice.
  • The needs of your partner and family

Wants are all the other factors that would be attractive but that you don’t consider essential for offer acceptance. Once you’ve listed your wants, prioritize them from most to least important.


Understand the Offer

In The Seven Habits of Highly Effective People, Stephen Covey advises, “Understand before trying to be understood.”

This is great advice for negotiating anything, but it’s especially appropriate when negotiating something for the first time.

When you receive an offer, call or email the practice representative (the person who sent you the offer), thank the sender for the offer, and set up a time to go over it, section by section. Making this contact accomplishes two important things. First, you send a powerful message that you are carefully considering the offer. Practices realize that theirs is likely one of many offers you will receive. When you take the time to respond to and discuss the offer, the potential employer views that as a sign that you consider the practice one of your “finalists” and is encouraged to try to “close” the offer. During this initial discussion, do not attempt to negotiate any terms. Instead, listen and learn why the practice included the terms it did. Be sure that all terms are clearly defined, and strive to learn how the practice interprets them.

Clarifying each point of the offer and understanding the supporting rationale should give you valuable insight as to how to craft your counterproposal. Second, this telephone discussion or meeting gives you an opportunity to showcase your interpersonal skills, which a written or emailed response can’t convey.


Evaluate and Set Your Strategy

Compare the offer to the list of needs you developed earlier, and note any deficiencies. Do the same with your “high-priority” wants. Jot down remedies for each deficiency you identify. Last, review the offer for terms that you don’t need. These terms will become trading “chips” in the negotiation.

If the offer meets all of your needs, your counterproposal can focus on adding a few high-priority wants from your list. Watch your aim, however. You don’t want to appear greedy or selfish (remember the list of negative traits employers are watching for). Identify on your list of chips those you are willing to exchange for the wants you added in your counterproposal.

Follow one very simple rule: Compromise your wants to obtain your needs, but never compromise your needs.

Check Your Cards

Before you approach the potential employer, discuss your counterproposal with someone you trust who will objectively critique your strategy. To ensure that you receive an unbiased analysis, choose someone outside your family or circle of friends. If possible, role-play your presentation and ask for criticism. Use the criticism to refine your counterproposal. Repeat the process until you are confident in your rationale. You are now prepared to negotiate.


Present Your Counterproposal

Contact the practice representative and set a time to discuss your response to the offer. Go over the offer section by section, as you did in your previous discussion, but this time include your counterproposal terms. Be prepared to provide a rationale for each term you want to add or modify, and point out wherever possible how your needs coincide with the practice’s needs and objectives. This approach reduces conflict and makes your requests seem reasonable to the employer.

Once you have gone through the entire offer and completed your counterproposal, ask for the employer’s response.

What you want is feedback in real time, so that you can correct any misinterpretation of your counterproposal. Good negotiators try to learn what the other side values so they know how to frame their positions and arguments. Normally, the employer will immediately tell you what he or she is willing to accept, and what is not acceptable. If you don’t ask for immediate feedback, there is a very good chance that the employer will say, “We’ll get back to you”—which tells you nothing.

If there are many unresolved terms, however, the employer will likely request a few days to respond. Be patient. Thank the employer for his or her time, and set a time for a follow-up discussion. This tactic will keep the momentum going and should keep the employer from delaying the response and possibly beginning negotiations with other candidates (there are other candidates).


Understand the Endgame

The employer will respond to your counterproposal in the follow-up discussion. If the employer accepts all of your terms, you are finished—no more requests, no creeping expectations, no attempt to squeeze an additional drop from the deal. When you made your counterproposal, you in effect gave your word that you would accept the deal if your terms were met. Keep your word. Thank your new employer and ask for final copies of the offer for your signature.

If a few unresolved issues still remain, offer a chip (or chips) in exchange for a need (or needs)—and drop the other requests. When you offer the chip, make sure you preface the offer with an “if” statement that sets up the close: “Would you pay the tail if I agreed to take more call?” If the potential employer agrees, make the swap and close the deal. You are done negotiating. Finalize the offer and celebrate.

The key to the endgame is the timing of the chip swap.

Your chips are tactically very important. Save them for the time when they will help you close the negotiation. By offering to make a concession, you send the employer the message that you are willing to compromise and make tradeoffs—that you don’t always need to have your way. These are essential traits for a future partner. A compromise ends the negotiations with both sides feeling good about the final result.


Negotiating Do’s and Don’ts

Do

  • Maintain communications: Always set a time for the next discussion.
  • Prepare and practice your response: Negotiating is stressful and requires attention to detail that comes with practice.
  • Keep your word: Integrity is the foundation of all negotiations and agreements.

Don’t

  • Say what you won’t do: You send the message that you are rigid and uncompromising.
  • Respond only in writing: Instead, conduct your negotiations through personal discussions and explain your thinking; then follow up in writing.
  • Submit a long list of demands: The employer may conclude that the two of you are too far apart to come to an agreement and may refuse to participate in what he or she considers to be futile negotiations.
  • Abdicate the process to your advisor/attorney: Maintain parallel communications with the employer to avoid misunderstandings or miscommunication.
  • Revisit agreed-to terms: Once you agree to something, you’ve given your word. The issue is settled and off the table.

Both Sides Need to Win

Most people have the wrong idea about negotiating: they think one side has to win and the other side has to lose. In situations where the parties must interact productively after the deal is struck, nothing is further from the truth.

Most ophthalmologists join practice groups with the hope of beginning a long-term relationship. The progression from associate to co-owner involves a series of steps. In the process associates will face important decisions about the practice that may require compromise. Potential employers believe that candidates will approach future discussions and negotiations in the same manner as they did the employment offer. It’s very important, therefore, to start the relationship on the right path. Recognize that both sides in a negotiation must be willing to compromise so that both feel, in the final analysis, that they have “won.”


ABOUT THE AUTHOR

Michael Parshall is a health-care consultant with more 20 years’ experience advising practices on practice development, physician recruiting and compensation, practice valuation, buy-in and sales through his own firm and The HealthCare Group, Inc. He received the Academy’s Achievement Award in 2004 and is a member of the Academy’s Consultant’s Directory.