Why Negotiating A Severance Is Possible: Absolute Reputational Destruction

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Negotiating a severanceGood things don’t happen to those who disbelieve. Be open to possibilities.

One of the push backs people have about my book, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye,” is doubt an employer will ever give them a severance. They think they’re either too good of an employee or too bad of an employee to ever receive one.

What these skeptics don’t understand is that a company’s greatest fear is losing their reputation. Let me use a fascinating example to explain.

Company Reputation Is Everything

No doubt HR personnel and managers everywhere have read this post on Medium entitled, How I Got Scammed By A Silicon Valley Startup. You should read it too if you are in a position of power or care to one day negotiate a severance.

In a nutshell, a woman by the name of Penny was promised a $10,000 relocation bonus to help her move from Texas to the Bay Area to join a startup. She would receive a $135,000 salary, equity, and a 3-month severance package if she were to leave without cause. Penny signed on and made the leap. After months of missing payroll, however, and receiving what she claims was a fake payment invoice, Penny filed a wage claim and says she was fired in retaliation.

When you “hire fast, fire fast” as the WrkRiot CTO told Penny during her initial interview, you might fail to realize the repercussions of your fast actions. Instead of working something out peacefully with her employer, Penny turned to the internet to blow them up!

Penny’s article has since been picked up by The New York Times and many of the biggest media publications on the web. Everybody in the startup industry knows her story and many more will too in the weeks to come. As a result of Penny’s article, her previous employer no longer exists. Their Twitter and Facebook profiles are gone. Previous employees and investors have disavowed the company and the CEO is now a ghost.

Instead of just reporting the news, let me share with you some lessons for both employers and employees to follow.

Lessons For Employers

Lesson #1: Don’t screw with your employees. They may go on the internet and light a torch to your barn. Your HR personnel and lawyers won’t be able to save your company once a disgruntled employee goes on a rampage. “Heav’n has no rage, like love to hatred turn’d, nor Hell a fury like a woman scorn’d,” William Congreve ( The Mourning Bride, 1697).

Lesson #2: Understand the risks if your disgruntled employee tells all. In Penny’s case, she had almost nothing left to lose at WrkRiot because she wasn’t getting paid her salary nor did she receive a severance, which she claims to be $50,000. That sounds abnormally high for only several months of work on a $135,000 base salary, but it’s a relatively small amount to pay if it could have prevented what followed.

Lesson #3: If you are not absolutely certain about a potential new hire, make him or her interview more people. What’s another two hours of interviews to make sure you’re not missing anything? Once you’ve hired the wrong person, it’s extremely unpleasant to lay the person off. You’ll probably want to wait at least three months to build a record of underperformance for documentation purposes. Then you’ll need to have the talk and start looking for a replacement. What a productivity killer. Spend more time in your vetting process instead.

Lesson #4: Be open to negotiations. Something can always be worked out. It’s less likely Penny would have filed a wage claim if her employer was honest and told her the company was in a severe cash crunch instead of sending a fake pay invoice. Did you know around 50 of Pandora’s first employees didn’t get paid for two years? The CEO didn’t know it was illegal to not pay his employees at the time, but he made up for their sacrifice and then some once the company went public.

Lessons For Unhappy Employees

Lesson #1: You have more power than you think. Not only can you have your tell-all editorial published in The New York Times like Greg Smith did when he wrote, Why I’m Leaving Goldman Sachs, you can turn to platforms like Medium to potentially get your story told more easily using social media like Penny. Or you can easily start your own blog like this one to tell your own story about what went down. You’ll be surprised at how much more respect people will give you once they know you have an established online platform.

Lesson #2: Know what’s at stake. The people who tell-all, even if they have a great reason to tell-all, will likely have a much more difficult time getting employed in the future. Rational employers won’t want to risk hiring someone with a history of blowing up their previous employer if there’s another candidate with equal skills and no such tendencies. No employer wants to always feel on edge wondering whether their company culture may offend you. If you plan to detonate your company, make sure you already have a signed contract to work for another employer. Or, make sure that if you win a lawsuit, you’ll win so much that you’ll never have to work again. There are much more undetectable ways to get back at your employer.

Lesson #3: It’s always better to negotiate. More than 90 percent of pending lawsuits end in a pre-trial settlement. In other words, both sides realize there’s too much to lose by going all the way to court. When you come to an agreement, a fair exchange takes place where both sides walk away happy. You won’t be seen as an “at risk” employee by future employers. Meanwhile, you’ll have a nice severance to hold you over until your next move.

Build Stronger Relationships

Reputation and a strong brand go hand in hand. If a brand really takes a lifetime to build and a minute to destroy, don’t you think a company will be more open to negotiations knowing that you have the ability to soil it with one post? Of course they will. Once you publicly trash your employer it will make recruiting and retaining qualified individuals much more difficult at the margin. If the company is publicly traded, perhaps its stock might take a hit as investors sell first and ask questions later.

You don’t have to threaten a company with a tell-all post if you don’t get the severance you want. Companies already know they are susceptible to assault. Instead, you need to build stronger relationships with your managers so that you can have an open dialogue to negotiate. Only the lazy or fearful quit a job with no backup plan because they can’t stand confrontation. You must protect your own brand as well if you are not financially independent.

When I raised my hand to get laid off in January 2012, I told my manager I was willing to sacrifice myself so he didn’t have to make a difficult decision to lay someone else off who wasn’t as amenable. Employees who’ve never managed people underestimate how difficult it is to tell someone their services are no longer needed. If you can help make your manager’s job easier, they’ll be more willing to help you get what you want.

In return for receiving a severance and all my deferred compensation, I offered to stay for as long as it took to train my subordinate to do my job. I reassured my manager I’d introduce him to all my clients, sing his praise, and stay until he felt comfortable my departure wouldn’t severely hurt the business. Further, I assured my boss I wasn’t going to a competitor.

In the end, I got the severance I felt was fair. I stayed on for a couple of months once I made my intentions known to help with the transition. The severance package alone has paid for 100% of my lifestyle for the past four and a half years. Now that my passive income target has been achieved, I don’t have to worry about my finances once the last severance tranche is paid in 1Q2017.

I’ll never speak ill of my employer because they took a chance on me when I was just 24 years old. Of course there were times when I thought I should have been paid more or promoted earlier. But that’s what every employee thinks when they are trying to ascend the corporate ladder in a highly competitive environment. Everything worked out in the end because I built as strong of a network as possible until I no longer cared.

Never quit. Get laid. Negotiating a severance is absolutely possible.

Related Posts:

Never Quit Or Get Fired, Always Get Laid Off Instead

Examples Of Good Resumes That Get Jobs

Negotiating Better Deals With BATNA

Readers, why do you think some people don’t realize negotiating a severance is possible? Would you ever hire someone who wrote a tell-all post? Have you been able to negotiate a severance in the past? 

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