Don't divvy the pie up. Make more pie.

TL;DR

1. Agree on a fair process to conduct the negotiation and fair standards to judge the outcome.
2. Understand your negotiation style.
3. Stand firm on your principles, focus on your needs, and be flexible with your positions.
4. Competition breeds competition; collaboration breeds collaboration.
5. You can’t listen with your mouth shut: Paraphrase, probe, test assumptions.
6. Ditch the golden rule.
7. Give feedback on behaviors and impact, not inferences and judgments.
8. Know your BATNA
9. Don’t let yourself get bullied.

Why in the world should I care about negotiation?

Negotiation is a part of everyone’s life. All day long, we conduct negotiations. It not only determines how much you get paid or how much you’ll spend on your next car, negotiation also resolves who picks the kids up from school and who gets that prime work assignment. You negotiate with your friends to figure out where you’re eating lunch and you negotiate with yourself when debating if you should exercise or eat another cookie. Negotiation is one of the most important skills you can develop. As a young leader, learning how to negotiate can change your career trajectory. If you intend to ever grow a startup, negotiation will be your constant companion. Why haven’t you done more to learn how to negotiate? Here’s your chance to start.

Egyptian President Anwar el-Sādāt (left), U.S. President Jimmy Carter, and Israeli Prime Minister Menachem Begin shaking hands at the White House after signing the Camp David Accords peace treaty between Israel and Egypt, September 17, 1978.

Your skill in negotiation is intimately linked to your ability to listen. In Getting to Yes, the most influential negotiation book of the past half century, Fisher and Ury stress the importance of principled negotiation (as opposed to positional bargaining). A principled negotiation is one based on objectively fair standards. They encourage us to judge our negotiations based on three criteria.

First, the negotiation should produce a wise agreement, that is, the agreement should be fair and satisfy both parties to the extent possible. The negotiation should also motivate both sides to faithfully execute the agreement.

Second, the negotiation should be efficient. Avoid unnecessarily wasting time, effort, and resources. Protracted bargaining serves neither side and may end up damaging relationships.

Third, the negotiation process and ultimate agreement should strengthen relationships. Avoid relationship damage at all costs. This makes it easier to negotiate in the future and protects your reputation as a negotiator.

So, how does one conduct a principled negotiation?

Start by assessing your style. If you’re primarily concerned with your own outcomes and you disregard the needs of your counterpart, you’re a competitive negotiator, and will often find yourself bargaining over positions.

If you are primarily concerned with the needs of your counterpart to your own detriment, you’re an accommodating negotiator, and you likely end up appeasing others.

Avoidant negotiators look to avoid conflict at all costs and don’t end up satisfying their needs or anyone else’s. Being avoidant is perhaps the worst way to negotiate as nothing changes.

It is very possible that you’ve taken your grandmother’s advice and look for compromise as soon as there is a hint of conflict. Compromising negotiators, however, end up with sub-optimal outcomes for both parties. Neither side gets what they need, though neither walks away empty-handed either. I know you think compromise is a good thing, but it rarely leads to an optimal outcome. Getting to Yes gives us a great example of how compromise fails both parties in a negotiation:

Two people are vying for the last orange. In order to avoid conflict, they compromise and split the orange in half, and each walks away disappointed. The first person goes home, peels her half, tosses the peel, eats the fruit, and feels half satiated. The second person goes home peels the orange, tosses the fruit, and uses the peel to bake with, halving her recipe for lack of more peel.

This story shows the danger of compromise. The desire to avoid the hard work of negotiation left each person worse off than they would have been had they taken the time to negotiate. They also missed an opportunity to collaborate and strengthen their relationship. The principled negotiator is highly concerned with their own needs and the needs of the person they are negotiating with and will often find win-win, collaborative solutions.

How do you find these collaborative solutions?

I’m so glad you asked. Most of the time we go into negotiations with our positions mapped out. “I want a $150,000 salary.” “You should do the dishes.” “We should have Mexican for lunch.” Positions, though, often represent some underlying need or interest that we haven’t stated. Usually we aren’t hiding the need, we just haven’t done the work to figure out what interest our position is fulfilling. If you focus on your needs in a negotiation, and are flexible with your positions, you’re more likely to find win-win solutions.

Perhaps I want Mexican food because I want something cheap, but you want something vegetarian. If we talk about our needs, we won’t discuss the expensive vegetarian restaurant versus the cheap Mexican place; instead we’ll choose from the inexpensive vegetarian restaurants in the neighborhood and meet both of our needs.

One time in a difficult salary negotiation with a prospective employer, I came up with an inventive solution. I knew one of the executives owned some property so I offered to take a lower salary in exchange for reduced rent in his property. The position I took (my salary demands), represented (in part) my need for reasonable housing, and low rent would meet that same need. For a number of reasons the deal never materialized; however, my counterpart was impressed with my openness, my creativity, and my desire to work something out. Our professional relationship grew stronger, and his regard of my negotiating skills was elevated.

This is not to say you should make accommodations at every turn. Quite the contrary, what I’m saying is you should stand firm on your principles and be flexible with your positions. The deal you reach in the end has to be fair as judged by some objective standard, must meet your needs, and the process used should enhance your relationship. Stick to those principles while being flexible with your positions. Do your best to meet your own needs while looking for ways to simultaneously meet the needs of the person you are negotiating with.

This all sounds great in practice, but how do I get someone who hasn’t read this to play along?

First, you should know Deutsch’s crude law:

The characteristic processes and effects elicited by a given type of social relationship (e.g., cooperative or competitive) tend also to elicit that type of social relationship; and a typical effect of any type of relationship tends to induce the other typical effects of the relationship.

In other words, if you act competitively, you will likely get competition in return. If you act cooperatively... well, there’s a reasonable chance you’ll get competition at first. However, if you persevere with collaboration in the face of competition, you have a good chance of changing their style, and if you stick to your principles, you don’t have to worry about being bullied, even while acting collaboratively*. Use your negotiation skills to move people towards principled negotiation.

What skills?

Listening skills are among the most important a young leader can spend time developing. I say young leader because it isn’t likely you’ll be a leader for long if you aren’t a good listener, so make sure to develop these skills early. You’ve probably heard some version of the saying, “You can’t listen with your mouth open.” I’m calling bullshit and saying just the opposite: You can’t listen with your mouth shut. You need to be an active listener. This doesn’t mean fighting to get your two cents in. When you do that, you aren’t listening. Confused? Let me explain.

The first skill you should practice is paraphrasing. There is nothing so powerful as letting someone know you’ve heard them. Does this sound familiar?

Michelle: “I’ve thought about this long and hard and I think we should choose A.”
Charles: “It would be great if we could use B.”
Michelle: [thinking, “I guess he didn’t understand me”] “Really, A is the way we should be going.”
Charles: [thinking “That’s weird, I made such a compelling argument, did she miss that? Maybe I should just raise my voice a hint.”] “No, B is definitely the way we should go.”

Yeah, you know how this goes. And it’s a conversation we’ve all been a part of from both sides. Don’t deny it. You’ve done that. YES YOU HAVE! You see how annoying it is when I don’t listen to you?

So how do you end the back and forth? Paraphrase. Instead of asserting your opinion, try, “It sounds like you’d like to go with A because you value X, Y, and Z. You seem to be weighing X, Y, and Z more heavily than 1, 2, and 3. Is that correct?” Paraphrasing in this way lets the other person know that you not only heard them, but that you understand their position. From that point they will be more prepared to hear your position. This simple act of paraphrasing can completely change a negotiation.

In Getting to Yes, the authors remind us, “Understanding is not agreeing: one can at the same time understand perfectly and disagree completely with what the other side is saying.” Don’t be afraid to let the person you are negotiating with know that you understand the logic they are using even if you disagree with their logic completely.

So, paraphrasing, is that all you’ve got?

Don't just parrot what you heard. Check your assumptions.

Actually, no, but I like your skepticism. To help someone feel heard, ask a probing question, one that calls for exposition: “I hear you’d like to go with A. Can you tell me how you came to that position?” Or, “What standards did you use to come to that number?” These kinds of questions show curiosity and a desire to understand the other person’s point of view.

You can also try testing your assumptions. This technique can be tricky but, when done right, can really help get at needs. “I’m making an assumption here and I’m not sure if it’s right. You’ve said you’d like to go with A, and it seems that you’ve taken that position because you value X, Y, and Z. Is that right? Am I misunderstanding you?” Naming the underlying assumptions will allow the other person to own what they have yet to say or to correct your erroneous assumptions. They might be dancing around the topic or they might not have given much thought to the underlying issues. Either way, when stated as a hypothesis, you give them the opportunity to verify or disconfirm what you’ve said.

Got anything else for me, smartypants?

Sure, try understanding their thinking preferences. They probably have different values, thinking preferences, and data needs than you do. Ditch the Golden Rule; don’t treat them how you’d like to be treated, treat them how they’d like to be treated. Perspective-taking is a really important listening skill. If you do your best to understand the person you’re negotiating with, you’ll be much more likely to find collaborative solutions that meet both your needs.

Also, try to avoid projecting intention onto someone else’s actions. You don’t know their motives, don’t pretend that you do. What you do understand is the impact of their actions on you. So, when giving feedback, especially in a negotiation, name the behavior and describe the impact it had on you. Instead of saying, “You’re a racist,” try saying, “when you said X, it made me feel alienated.” Even if they are racist, screaming at them isn’t likely to foster a productive conversation. I’m not saying we always need to have productive conversations with racists. However, if you are trying to have one, try the second tactic. Name the behavior and own the way it made you feel. They can always deny being racist; they can’t deny what they said or how it made you feel. Stick to naming behaviors and sharing the impact they have on you. Avoid inferring motives and making judgments.

Good stuff, what else?

This is the last thing, so don’t ask for anything more. Always know your BATNA (Best Alternative To a Negotiated Agreement) when going into a negotiation. There are times when you simply cannot reach an agreement that meets your needs as well as the needs of your negotiating partner. That’s okay. Do your best to find that out as quickly as possible, thank them for their time, and walk away.

How do I know if there’s no room to negotiate?

Really? I told you that was it from me. Fine, but this time I’m really done. Fisher and Ury posed this hypothetical: What would you do if someone asked you straight up, “What’s the most you’d pay if you had to?”

First of all, this is a bullying tactic. When someone is playing dirty you should call them out on it, or completely ignore the request.

Alternatively, Fisher and Ury suggest you can move past it by answering, “Let’s not put ourselves under such strong temptation to mislead. If you think no agreement is possible and that we may be wasting our time, perhaps we can disclose our thinking to some trustworthy third party who can tell us whether there is a zone of potential agreement.” Relying on a third party? Totally unnecessary now that we have these newfangled devices called computers. (You’re reading this on the internet, aren’t you?) I’ve gone ahead and created a tool for just this purpose. If you don’t think there’s a zone of potential agreement, use this tool to check. If there isn’t, thank them for their time and be grateful you went into the negotiation knowing your BATNA.

*This doesn’t mean that there is never a time for competitive bargaining. It means you should exhaust all options, and your negotiating counterpart as well, with collaboration before you move into a competitive bargaining stance or walk away.

The NBI gives you a profile of your relative preferences as opposed to placing you into a category, and the insights you get are immediately actionable. If you understand your profile, you understand how to be more flexible when working with people different from you. You might be familiar with the distinction between left and right brain, but for people who aren’t, here’s a quick refresher: the left brain is logical and concerned with reason while the right brain is creative and concerned with relationships.

There’s another brain dichotomy, however, that’s less familiar: top versus bottom. The bottom part of our brain is known as the limbic system. This is the oldest part of our brain and evolved at a time when our primary concern was survival. Processing in the bottom brain tends to be operational. The top part of our brain, the cerebral cortex, is more evolved. Processing that happens in this part of the brain tends to be strategic.

The top left quadrant of the brain (L1) uses logic and objective reasoning to process data. L1 thinkers seek to understand the essence of a problem to create long term strategies (think Bill Gates). The top right quadrant of the brain (R1) is oriented toward creativity, big picture thinking, and risk-taking. R1 thinkers like to use pictures and metaphors to convey ideas and understand new information (think Steve Jobs).

As the logical, operational part of the brain, the bottom left (L2) uses reason as a survival mechanism. This is the part of your brain that creates lists and procedures. L2 thinkers like order and operational excellence (think Jeff Bezos). The bottom right quadrant of the brain (R2) is operational and relational. To help us survive, this part of the brain learned empathy and the ability to work in groups. R2 thinkers are playful, pick up on non-verbal cues well, and understand the importance of connectedness (think Tony Hsieh).

An important note about thinking preferences is the difference between skill and will. If you’ve read Delivering Happiness, you know Tony Hsieh thinks deeply about relatedness (R2). He’s also a creative visionary (R1). This, however, doesn’t mean he lacks L2 skills. In fact, it took logistical brilliance to make Zappos a success. His ability to create structure and logical operational processes has to be off the charts. L2 is likely a place where he has very strong skills that are counter-preference. Working counter to your preferences is energetically expensive. At the other end of the spectrum are activities that align with your preferences, which are energetically expansive. Think Bill Gates plotting ways to gain market share.

Not only can understanding your preferences help you understand how to allocate your energy, it can also help you communicate with others. It’s easy to communicate with people who think the same way you do because they want the same information you do. It’s a bit harder to see eye to eye with people who have preferences which are lateral to your own (L1 to L2, for instance, or R1 to L1). You have enough in common with these people to make a connection; it just takes a bit more work. Communicating diagonally (R1 to L2 or L1 to R2), however, is very difficult. In these instances your information needs and the needs of the other person are diametrically opposed.

Imagine Jeff Bezos and Steve Jobs arguing over costs. Bezos would be looking to find the cheapest way to provide the product (L2), while Steve Jobs would be looking to fulfill his vision completely (R1), regardless of cost. Can you imagine trying to get them to agree? It would seem impossible until you realize they both care deeply about the customer experience (R2). If you can get them talking about customers and using their R2, you might be able to help them communicate better. When you find yourself interacting with someone whose needs seem so different from your own, communicating laterally (moving one quadrant away from your preference and towards theirs) can give you common ground and a better chance of meeting their needs.

Why should you care about thinking preferences?

As an entrepreneur you want to make sure your team has people with skills from each quadrant and the will to use them. In addition to increasing your team’s capacity, however, the complexity of thinking preference diversity will also increase conflict. Conflict is good when people with different ways of viewing a problem debate the merits of their positions to create superior integrative solutions. However, conflict can impede group functioning when disagreement leads to relationship conflict--that is, when task conflict turns personal.

As a founder you might be tempted to avoid conflict by hiring people similar to yourself, but avoiding diversity makes it harder to understand your customers’ problems because they are not likely to be as homogenous as your team. When your team is composed of highly similar people, it's also painful when something needs tending that no one on your team enjoys doing.

The Golden Rule Sucks

It's better to embrace diversity early and to capitalize on the tension it creates. To do this, you need to “flex-style” and communicate in a way that meets the needs of the person you're talking with. Throw the golden rule out. Talking with other people how you want to be spoken with is pretty egocentric. Instead, communicate with other people the way they want to be communicated with. This will make you a far more effective and persuasive communicator.

Understanding your preferences and those of the people around you can help in situations ranging from negotiation, to education, to teamwork, and sales. Understanding and respecting different preferences can be difficult work. However, when we persevere, those differences can be the source of great creativity.

Find out what your entrepreneurial thinking preferences are with my free, five question assessment, and if you're interested in taking the full NBI assessment, reach out and I'll get you started.

Also, don't forget about my online Skillshare course on organization design: "Killing Hierarchy: Org Design for Startups". Thanks to all the interest I received after MODes was featured in Fast Company and in Inc, I've got more than 100 people signed up. Use the code BIGDEAL and you'll get a ticket for 75% off (that's a $5 ticket!).

A few caveats:

1. For this to work, clarity and transparency are required for everyone in the company with respect to mission, vision, and strategy.
2. Constant, open communication is a necessity. Don't be afraid to repeat yourself. Create slogans, mantras, and trigger words that keep everyone on point and pulling in the same direction.
3. A keen sense regarding changes in the energy, needs, and tempo of your company is essential. Too much structure too soon can really limit flexibility and stifle your group. Too little too late will lead to conflict and people stepping on each other’s toes.

In the same way that building a minimum viable product minimizes waste and helps keep your company lean, building the minimum structural requirements necessary to run your company efficiently at any given point will keep you from creating bureaucracy. Technical debt, however, is tracked closely, while cultural and structural debt is not. Remember, the interest rate on cultural debt is higher than it is on technical debt.

With that, let’s turn to the AEIOUs which help you maintain fluid architectural structures and a flat organization while also ensuring communication and coordination happen and work gets done.

• - Accountability
  • -- Make sure everyone knows what they are accountable for and the metrics you’ll be using to hold them accountable.
  • -- The person who is accountable for outcomes is authorized to guide the overall process and has control over resources.
• - Execution
  • -- Make sure everyone knows who’ll actually do the work. Often this is not the person who’s accountable, though it can be.
  • -- A person with execution responsibilities is authorized to do the work. Ultimately they’re responsible to the person who is accountable.
• - Input
  • -- Make sure everyone knows who will be providing input in order to give clarity, knowledge, expertise, etc.
  • -- A person with input responsibilities provides insight, but has no authority to dictate. They should be available as a resource to those executing.
• - Oversight
  • -- Make sure it’s clear who has oversight. This can be a formal reporting relationship, or some other system that provides checks and balances.
  • -- Someone with oversight holds others accountable and, if necessary, overrides decisions. They’re responsible for giving feedback and making sure work is done.
• - Update
  • -- Make sure the appropriate people are kept in the loop and know what’s going on whenever there are dependencies or vested interests.
  • -- Some people will expect to receive updates with regards to changes in scope or expected completion dates. Make sure those updates happen.

That's it. This works equally well for an organization-wide role document as it does for a project document. In fact, I’d suggest you have one for each project in addition to the overall one, though the project one should be very lightweight. Don’t spend more than 5 minutes creating it.

Those are your AEIOUs for creating clear structures. Memorize them, talk about them, revisit them often. When you know your roles, you'll be surprised how much less you rely on hierarchy and how much more quickly your team can execute.

Thanks to all the interest I've received after MODes was featured in Fast Company and in Inc, I've decided to teach an online Skillshare course on organization design. You can get 75% off "Killing Hierarchy: Org Design for Startups" with code BIGDEAL.

Here's a freebie for you. Download this pdf and discuss with your team.

Awesome job here by Rebekah. In this talk Rebekah explores how H.Bloom manages talent. She hits on the metrics they use, the new leader programs they've set up, and more.

Formal vs. Informal Design
Formal architecture comes from a need for clarity around decision making, roles, responsibility, and authority; creating too much formality in the architecture can lead to less flexibility and a reliance on titles and positional power, as opposed to ideas and knowledge, in decision making. The need for clarity around problem solving, collaboration, and communication leads to formal operational processes which can reduce ambiguity and create more predictable results. Operational processes that are too formal, however, can erect barriers to creativity, create bureaucracy, and lead to less coordination across the organization.

A Model for Organization Design (MODes)
Crossing (formal and informal) process with (formal and informal) architecture creates a grid of four MODes of organizations I’ve named the Hive, the Forest, the Fractal, and the Sandbox. Curious where your organization fits in? Take this assessment.

Organization Design for Startups
Startups begin in the sandbox. As they grow and feel the need for more structure, they often formalize their architecture instead of clarifying their process; by creating titles and reporting structures in the hopes of clarifying how shit gets done, they move towards the forest. While their need is greater clarity with regards to decision making, role authority, and responsibilities, they create titles titles and reporting structures in the hope that architecture will clarify process. This is a mistake and leads to prematurely hierarchical organizations.

An alternative is to do what we did at SumAll. Instead of moving toward the forest, move toward the fractal: clarify processes while keeping the architecture lightweight. You can achieve this by clearly delineating individual authority, roles, and responsibilities without assigning titles or creating reporting relationships. In this way processes help structure how work gets done while the architecture remains fairly informal. Fractal designs keep organizations relatively flat and free of artificial power structures. Creating a flatter organization empowers people throughout the organization to make decisions based on their expertise, experience, and the strength of their ideas, not their hierarchical position.

Organization Design at Scale
The question is, can an organization remain a fractal at scale? That really depends on the culture and management. If the organization cannot, the best way to manage a more complex system of relationships is to move to the hive, by creating clear lines of authority. Managing complexity through greater architecture, however, means less flexibility. The trick is to layer on as little formal architecture as possible while supporting it with operational processes that make it easier to coordinate and collaborate. The danger with operational processes, of course, is the creation of bureaucratic procedures that inhibit coordination and collaboration. At each stage of growth you have to determine the minimal structural requirements necessary to manage your organization’s complexity.

Thanks to all the interest I've received after this post was featured in Fast Company and in Inc, I've decided to teach a Skillshare course on organization design. You can get 75% off "Killing Hierarchy: Org Design for Startups" with code BIGDEAL.

If you're wondering how you'd implement this in your organization, signing up for the class above is the best road, though this post will also give you something to work with.

SumAll helps businesses track metrics. Perhaps an SAP integration is in the future?

Help People Understand the Value
One thing I’ve learned over the last few years working for startups is that those of us working in organization development (OD) have to integrate with the core business functions better than we currently do. That means understanding the entire business, not just the people side, and learning how to communicate our value better. I’ve been chewing on this for quite some time and I’m starting to create a thesis. We need to use the same metrics our businesses do to track our progress. I’ve been working mainly with SaaS companies and SaaS metrics fit nicely onto OD work, so I’ve started to talk about the work I do in the same way.

The organization’s employees are the customers of the OD function, which is a service provider. The OD function should be concerned with the same things the business is concerned with: acquisition, retention, and engagement.

What Metrics To Track
The products OD sells are culture, structure, opportunity, and the benefits of working at an organization. The customer, in this case that’s the employees, pay for the product with their labor. Google employees (the customers of their OD function) have a yearly ARPU of $1,000,000, with an average COGS of $800,000 for a net profit of $200,000 per customer per year. To manage the bottom line, OD has to function like a finance department and track CAC, LTV, COGS, and ARPU. OD is a high touch service and revenue comes from high prices on a low volume of transactions. However, in organizations where employees are both the biggest asset and cost, OD is not a luxury, but a necessity to remain competitive and drive real business value.

Negative Churn and Expansion Revenue
Above all, OD should be obsessed with churn. More importantly, finding ways of creating negative churn. OD should closely track why customers (the employees) churn (quit), which customers are about to churn, and upsell like crazy to create negative churn (by increasing employee and organizational capability, the OD version of expansion revenue). The upsell is where OD excels. We create culture, structure, and systems that enable innovation, communication, and engagement, and we also promote and develop employees. These activities can vastly increase our current customers’ LTV (by enhancing the value of their labor), to create expansion revenue from existing customers and, thus, negative churn. Some churn is desirable though, because certain customers will have very low or even net-negative value. In those cases OD has to identify these customers and help them churn to avoid misallocating resources.

This type of thinking leads you to see employee engagement as a way to build community (similar to the way you’re desperately trying to create a community for your SaaS product) and OD has to function like marketing. Onboarding new employees becomes just as important as onboarding new customers and partners, so OD functions as business development. Organizational structure is like the UI and organization design is like coding the front end, while culture has clear parallels to UX; in this way, the OD function is also responsible for design, engineering, and product management.

Love the Problem, Not the Solution
The last thought I’ll leave you with today is that, just like any entrepreneur, you’ve got to be obsessed with the problem you’re solving, not the solution. Understanding the organization’s values is like knowing your business’s value proposition.  It’s your elevator pitch and your guiding star. You have to understand the problem you are solving so you can build solutions. The values define the problem you are solving because they define your culture, and in the end that is in large part the service you are providing your customers. Trying to make culture haphazardly without the focus of values is like building a product out of cool stuff you’ve heard about from other services. Drag-and-drop upload here, share button there, connection-to-a-shopping-cart API here – you end up with a franken-product driven by solutions to an unknown problem your customer probably doesn’t even have. Policies (20% time, free lunch, etc.) are the services OD provides to our customers in order to fulfill our value proposition. These are the solutions that have been created to enact and live the values, the problem OD is solving. Be obsessed with the problem, not the solutions. Experiment and learn and pivot with respect to the solutions. Measure relentlessly. Use cohort analysis to figure out how you’re doing. Pursue the problem doggedly.

Simply put, run OD like a business.

Comment on Hacker News

I'm really excited to be able to share this video with you all. It's our first People Side event and went really well. Dane's thoughts here should be required watching for every entrepreneur. It also gives a really good overview of the incredible work I've been helping SumAll with over the past two years.

When I came to NYU as an undergrad, I thought I'd study math. I’d always been good at and enjoyed math, so it seemed logical to major in it. One semester of intensive calculus later, however, I’d decided math wasn't for me.

In Psych 101, my freshman elective, you’re required to participate in experiments. One of the experiments I participated in was run by an Industrial-Organizational psychology grad student. I was fascinated by the field and decided to take a course the following semester. I loved my I/O course and was lucky enough to have Jon Rhoades (who was amazing) as the professor. At the end of the semester I volunteered as a research assistant for him and a number of grad students, my first taste of research.

My psychology advisor was really wonderful and worked hard to find me an internship that summer. I wound up at American Express running statistics for the training and development department. I had a great summer there and Juan Brea, the director of the department, took a liking to me and asked me to stay on as a consultant. It turns out no one was running statistical analyses for the department at the time so I got some truly amazing experience at a young age.

At one point my boss (not Juan) asked me if I'd be comfortable making a presentation to the VP he reported to. I was excited to do this and saw an opportunity, so I asked for a raise. I figured someone making presentations to the VP should be making more than $6.50 an hour. I was told it wasn't possible, though, since the other people my age (~18 years old) were being paid $6.50. I contended that running statistical analyses and making presentations to VPs was more important than making copies and getting coffee, but he didn't relent, so I resigned.

Shortly thereafter (following a very brief stint in retail where I thought I'd be able to meet women), I got a job at Score!Prep, an at home tutoring agency. I loved that job. As their head math tutor, not only did I get to see some of the most amazing apartments in the city (tutoring the children of celebrities and hedge fund managers), I got to use my I/O skills as well. I was trained all the new math tutors and worked on curriculum design as well, both important skills in my professional toolbox to this day. When Score!Prep merged with Kaplan and I no longer had the I/O responsibilities, I left and started my own tutoring business; my first true entrepreneurial pursuit. I did that through my first year at grad school.

Early in grad school I was also a member of Dr. Warner Burke’s research group and helped him on several consulting projects. For those of you who don’t know who he is, Dr. Burke is a star in the field of OD, so working with him was a HUGE thrill for me. After Dr. Burke's workgroup I took a position at Pfizer in their global learning and development department. I was part of an internal consulting group with a bunch of PhDs doing organization development. In my time at Pfizer I had some amazing mentors including Ross, Terry, Dennis, and Darryl.

When my time at Pfizer was up I decided to join C Global consulting. I immediately jumped on several awesome projects. One with an NGO doing relief work in Africa, another doing diversity training for the Federal Reserve and, of course, work for Pfizer (keeping up with your network is really important).

Then, I had an idea to create a customizable 360 feedback solution for consultants called LeaderNation. Building a business was an incredible learning experience for me; as valuable as all the school learning I've had. Unfortunately a lot of that experience was learning what not to do when building a business. When my time at LeaderNation ran its course, I left C Global to consult on my own to startups in NY.

Working with SumAll was my entre to the community and led to introductions to other startups. Working with Harvest, Urtak, the incubators, and others has been awesome. I love this community. I still have designs on doing big things on my own, though being a small part of other people's success has been and always will be exciting and an honor for me.

That’s how I got to be where I am right now. It has been an incredible ride so far, and I can’t wait to see what comes next.

First, I think about what I’d like my yearly salary to be. For me, that number is $175,000. Why am I worth that, you might ask? Well, I’m ABD (this means I’ve finished everything but my dissertation in a Ph.D. program) from Columbia University in the 22^nd best paid profession in the US. I also have 15 years of experience in my field (I started working for AMEX in their L&D department in 1998) and am one of only a handful of I/O psychologists serving startups. Most I/O psychologists work for large enterprises and have no clue how to operate in the startup world.

Now that you have a number for your yearly salary in your head, bump it up 30-40% for benefits. Remember, as a consultant you don't get paid vacation, sick days, health insurance, matching 401k contributions, stock options, etc.

Take that number and bump it up 40-60% for the time you’ll spend marketing, networking, finding work, and admin. You would be shocked how much time I spend trying to land a contract. On average I went to two events every week last year just to meet people (these include Meetups, networking events, Skillshares, GA classes, etc.). Throw in the lunches, coffees, drinks, and dinners I make to create connections. Now put in all the time I spent making videos, maintaining my website, blogging, holding office hours, doing presentations, talks, and mentoring. Finally, there’s email. Oh, email, how I loathe thee. I spend more than 5 hours each week just on email. You might be surprised to know that I spent about 30 hours / week marketing myself last year.

Okay, now that you have a number (and you’re going to be shocked at how big that number looks right now), divide it by the number of days you expect to work in the year. 250 is a good number (5 days per week, 50 weeks per year; though this doesn’t take into account sick days). You’ve now go your daily rate. Divide that number by 8 and you’ve got your hourly rate.

What does this look like for me? Start with the salary I’d like to make: $175,000. Now divide by 0.6 to add in my benefits and you get $291,667 (that is how much I have to bill per year to make my salary!). Now, I’ll find the number of hours I want to work this year. I’m a hard worker, so 60 hours per week is actually a low average for me, but let’s go with it. Take 60% of that time for non-billable things and you get 24 hours of billable time per week. I’d like to take two weeks vacation, so multiply that 24 by 50 and you’ll find that I’m working 1,200 hours per year. Divide the amount of money I need to bill ($291,667) by the number of hours I have to work (1,200) and you’ll find my hourly rate: about $250 per hour. Of course, working with startups means there are more ways to be compensated than cash. There are times when I’ve taken equity in lieu of cash compensation as a consultant, but that has to be a straight cash for equity transaction, just like an investor paying you for equity. I understand that is probably more painful (psychologically at least) to an entrepreneur than paying a consultant, but I’m not likely to see that money ever, so don’t expect me to take a discount there. If you don’t believe in my services enough to compensate me fairly, I’m probably not the right consultant for you.

If I’m being hired for a long term project where I can bill more consistently and need to spend less time marketing myself I can afford a lower rate. If the project is a half day, which usually means I’m taking a full day’s time to do it, I have to bill a higher rate. There are also projects that have a ton of work that isn’t billable. For those I’ve got to charge a higher rate.

As a consultant, when you take days off you aren’t billing and, worse yet, you aren’t building business for your next pay check. The cost of not building is actually more painful for an independent consultant than the cost of not billing.

For you aspiring consultants out there, I hope this was helpful. I created a calculator you can use to figure out your own hourly rate. For all the clients who hire consultants out there, please remember this the next time you get mad at a consultant who bills you for writing an email. If you don’t pay them for that time, who will?