Proposal and Justification for Compensation Package

Negotiation Final Project

Varilie Garner

DHA804 Negotiations and Conflict Management

Virginia University of Lynchburg

Dr. Hammond

August 8, 2023

Compensation Package Proposal and Justification

Job Offer Table

Compensation Item

Proposed Amount

Compensation

Bonus

Relocation Allowance

Stock Options

10,000 shares at $2.70 per share

Continuing Education Stipend

According to Glass Door (2023), “The estimated total pay for a Director of Business Operations is $193,928 per year in the United States area, with an average salary of $132,368 per year.” Bonuses are often tied to performance, and this figure provides a strong incentive for high performance while remaining within industry norms. The reallocation figure is based on typical relocation allowances, which often cover moving costs, temporary housing, and other expenses associated with relocation (Ocampo, 2021). The stock options consideration is based on the value of the company’s stock and comparable allocation benefits given for this position. The continuing education stipend also reflects the price of education courses in the US and represents sufficient funds to pursue one course per year to continue education for this position.

Letter of Acceptance

Dear Jim Hummer,

I hope this letter finds you well. I am writing to formally accept the offer for the position of Director, Business Operations at Whole Health Management. I am thrilled to join and contribute to your esteemed organization's continued success. From our initial interactions, I have been impressed by the innovative spirit, dedication, and camaraderie that permeates Whole Health Management. The opportunity to work alongside such a dynamic team and contribute to meaningful projects aligns perfectly with my professional aspirations.

I am eager to bring my skills, knowledge, and passion to this role and am confident I can significantly contribute to the team and the company. I am particularly excited about managing client relationships and contracts, growing existing client contracts, and developing new client businesses. I am also looking forward to starting this new chapter in my career at Whole Health Management. I am ready to face the challenges that come my way and am committed to learning and growing within this role.

Thank you for extending this offer to me. I cannot adequately describe my excitement about joining the team. However, I am sure my enthusiasm to begin contributing to the company's success will be more than apparent soon enough.

Best regards,

[Your Name]

Executive Memo

Dear Dr. Hammond,

I am writing this memo to provide a rationale and evidence for my actions in completing the job offer table for the Director, Business Operations position at Whole Health Management.

The compensation package I proposed was carefully crafted, keeping in mind the guidelines provided by Jim Hummer in his email to Monroe Davies (McGinn & Tempest, 2008, p. 3). The salary was set at $105,000, which is competitive at Harvard Business School (HBS) and within Whole Health's salary ranges. The average salary for 75 percent of HBS graduates working in the health sector is within the range of $100,000 to $125,000 (McGinn & Tempest, 2008, p. 10). Thus, the salary of $105,000 is within the acceptable range for HBS graduates. At the same time, Mr. Hummer had mentioned in his letter that the salary to be paid was inversely related to the available room for error. As such, higher pay meant there was less room to commit error and a higher risk (McGinn & Tempest, 2008, p. 2). As a recent graduate, I opted for $105,000, which is within the lower range for HBS graduates to provide room to learn and gain experience without imposing too much pressure on myself. I am sure of my ability to help the company realize immense growth. Therefore, I believe that I will be in a position to negotiate a higher salary in the near future once I have been acquainted with the company’s operations and proven my abilities.

The bonus was $30,000, which is the median signing bonus for HBS graduates. At the same time, I recognize that bonuses payable to executives may differ by industry. The average percentage bonus for executives in the healthcare industry is between 19.2 and 30 percent (Lagasse, 2018). The bonus of $30,000 is approximately 28 percent of the annual base salary and is within the recommended percentage range for companies in the industry. I selected the relatively high percentage of 28 percent in line with Mr. Hummer’s strong emphasis on risk-taking. In all his letters, Mr. Hummer encourages risk-taking and advises against setting goals that are too low and limit the ability to realize maximum potential from the available resources. Capping the annual bonus at a relatively high percentage of the base pay serves as an indicator of my commitment to responsible risk-taking.

The relocation allowance was set at $10,000, an estimated amount that should cover moving from HBS to Cleveland as well as acquiring a new residence. Rental costs for an apartment in Cleveland range from $800 to $3,000. Given that I am taking up an executive position, I considered it prudent to consider an apartment that would reflect the said status, which would cost approximately $3,000 in rental costs.

The stock options were set at 10,000 shares at $2.70 per share, the standard equity plan for incoming executives at Whole Health Management, and which would be more acceptable to the CEO (McGinn & Tempest, 2008, p. 2). Further, given that I am in the very early stages in my career and only beginning to build my personal and professional life; I am more focused on spending than long-term investment. Hence, there may not be a need to push for more stocks outside the standard equity plan at this time.

Finally, the continuing education stipend was set at $5,000, a proposed amount, as no specific information regarding this item was provided in the case study. However, keeping the knowledge and skillset viable and innovative for the organization is imperative. Data from Built In shows that most American companies pay between $5,000 and $14,000 annually to employees in annual learning stipends (Whitfield, 2023). As an MBA graduate and having just joined the company, I chose $5,000 in annual learning stipend for a start as I plan to focus more time within the company’s premises to fully understand and get acquainted with its operations.

In crafting this compensation package, I also considered the negotiation strategies and techniques discussed in the "Negotiation Skills: Negotiation Strategies and Techniques to Help You Become a Better Negotiator" reading (Program on Negotiation at Harvard Law School, 2023). Specifically, I aimed to set high goals while being ready to make mistakes and take a proactive approach.

Setting high goals is a fundamental principle of negotiation (Pruitt, 2013). It is based on the concept that ambitious targets lead to ambitious outcomes. By setting a high bar for the compensation package, I aimed to create a starting point for a fruitful negotiation process. This approach is rooted in the understanding that the initial offer often serves as an anchor in negotiations, influencing subsequent discussions and shaping the final agreement (Program on Negotiation at Harvard Law School, 2023).

Being ready to make mistakes is another crucial aspect of effective negotiation (Pruitt, 2013). It is through mistakes that we learn and adapt our strategies. In the context of this negotiation, being open to making mistakes meant being willing to adjust the proposed compensation package based on feedback and counter-offers. This approach helps one to cultivate a learning mindset, which is essential for growth and improvement in negotiation skills (Program on Negotiation at Harvard Law School, 2023).