Over the course of her professional life, a woman will leave a million dollars on the table because of not knowing how to negotiate compensation. Clearly, we need to get better at this.
That eye-opening statistic was first published in a now-famous study conducted by Linda Babcock, a Professor of Economics at Carnegie Mellon University and a globally recognized expert on negotiation and dispute resolution.
Babcock's research asserts that women's discomfort with negotiation is one critical factor that influences the gender divide in salaries and other forms of compensation. She points out that even women who negotiate brilliantly on behalf of others often falter when it comes to asking for themselves.
Female entrepreneurs are also affected. Babcock believes women's aversion to negotiation influences the discrepancy in venture capital funding for women-owned businesses.
The data seems to support that hypothesis. While women own 40% of all businesses in the U.S., they receive less than 5% of the available equity capital.
The reality is that there are many factors behind the financial disparities women face. Negotiation skills are just a part of the story, but they are one of the few factors we can control. Mastering these skills can positively impact almost every aspect of our professional – and personal – lives.
So, how to address it? There are two key steps women can take to improve their negotiation skills dramatically. We'll walk you through how to master them both.
Step 1: Get Educated
Babcock reports that women often don't know the market value of the work they do, and consistently underestimate the true salary range of a job as compared to men.
This also holds true for consultants who need to set the value of a product or service they offer, and entrepreneurs who need to estimate the value of their business as a whole.
So the first step is to ensure we are well informed, whether we are negotiating a compensation package, consulting fees or financial investment in our business. A great starting point is to leverage the wealth of resources online.
There are a number of excellent online tools for researching compensation or consulting fees. Sites such as Payscale.com, Salary.com and Glassdoor.com allow the users to refine information by field of work, experience level, region of the country and even by company. Payscale.com also offers a personalized "salary report" to help users assess a prospective job offer.
Getting educated in the fundamentals of raising capital for a start-up or small business is a more complex topic, one that is dependent upon the type of business you're running, and its current growth stage. But just as with compensation research, you'll find a lot of help online.
One of the best resources for entrepreneurs, I've found, is the SBA's Small Business Development Centers. I've worked with the San Francisco Small Business Development Center; there are more than 900 offices across the country.
The SBDC offers no-cost consulting with business advisors who are experts in business plan development and access to capital, among many other areas. A few years back, I utilized the no-cost consulting services offered through the SFSBDC when my husband and I were considering whether to purchase a business. The SBDC financial expert assisted us in a detailed analysis of the company's books, helped us ballpark projected earnings and ultimately provided crucial insight into the true market value of the company. Expert advice like this is an indispensable aid to the entrepreneur navigating the complex world of small business financing.
While online research is an essential step, remember, it's just a starting point. Networking can also be a big help. You'll often find the most useful information through professional and personal contacts. Your connections on LinkedIn, alumni groups or professional associations like Women 2.0 are all great places to seek out further information.
When I finally realized I needed to “up my game” in compensation negotiation, one of the first things I did was ask a trusted former colleague for his take on an offer I was considering. I was more than a little chagrined to learn that he (yes, it was a man) knew more about the market rates for my field than I did. But the information he shared was just what I needed to improve the outcome significantly.
This is the first in a series of two posts. In the next post we'll examine the second critical step in Mastering the Art of Negotiation - how to step out of your comfort zone and artfully ask for what you want.
Join the Conversation
What about you?
Do you feel you know enough about the competitive rates for compensation in your field?
If you're an entrepreneur, how well-informed are you in the art and science of valuing your business, product or service?
Have you found it difficult to negotiate a compensation package, set a price for your services or raise capital for your business? What stands in your way?