How to navigate salary discussions as a product manager
How to navigate salary discussions as a product manager
How salary discussions work, what can affect them, and how product managers can navigate various situations to maximize what they get out of it.
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Salary discussions are challenging. If a person asks for too much, they might seem greedy or out of touch with their own worth. If they ask too little, they might be undervaluing themselves, thus leaving money on the table. In this article, I’ll be discussing three occasions when product managers are engaged in salary negotiations and how to prepare for such events: being recruited for a job, getting new responsibilities, and yearly salary reviews. But before we get to that, I’ll paint a general picture of what can affect salaries and how those are drafted.
As a fair warning, while many of the facts captured here will apply to other roles outside of product, often, this article will narrow down to product managers specifically.
Location, company size, economic situation
First of all, and likely to the surprise of no one, salaries are heavily dependent on the geographic location, the size of the company, and the economic situation.
Switzerland, Luxembourg, and the United States have some of the highest gross average monthly wages, but of course, every salary needs to be compared to the cost of living, too. Urban areas and capitals with more company/talent competition often pay better, while smaller cities adapt to local expectations.
The bigger a company is, often the more budget it is operating with; thus, it can afford somewhat higher gross wages than startups or scale-ups, where some of the cash is replaced with share option packages. But the company size can also dictate different role expectations: a senior PM at a small company might be equal to an intermediate PM at a larger organization. A Group Product Manager or Product Director at a FAANG company can easily match a startup CEO role.
The economic situation also affects the job market and, therefore, salaries. Due to the economic instability in recent years and mass layoffs at even big-name companies, dropping demand for product (and many other) roles is observable. With generally more people looking for jobs, companies can afford to pay less (or offer a lower increase), as there is less fierce competition from other organizations recruiting talent away.
How product managers compare to other roles
Product managers are fairly paid at most companies: they’re part of the R&D organization, so they earn similarly to software engineers in the same seniority. This amount is often more than what people in other corporate functions earn, like communications, HR, sales, or support roles. Naturally, this can change based on what is in top demand for a specific market or industry — if there is a swarm of product managers but only a few talented developers (or, nowadays, AI researchers), that can change things.
Salaries for different job functions are also planned a year in advance, so the compensations depend on how the company performs and what’s expected. In a good year, bonuses will be given to employees; in a bad year, some people will not even get an inflation correction. This just underpins that there is no unlimited amount of money to distribute, and if more is allocated to salaries, then something else needs to be dropped.
In addition, people managers receive a guidance on effective salary ranges, both in the recruitment stage (where things are often more flexible), as well as for the later salary negotiations. Managers judge the salary to be awarded based on the person’s perceived seniority and expertise, their background and relevance to the job, their ask, how peers currently earn at the company, and how urgently they want to fill the position.
In most cases, the budgets are higher for new recruits than for existing employees, simply because it’s harder to recruit new talent than to retain one.
Being recruited for a job
When pursuing new job opportunities, we learn about the salary range from the company disclosing it as part of the job advertisement (they might be required by law in certain locations), or once we announce our expectations at the initial screening round. The latter is a standard process, so recruiters can figure out if the ballpark expectations of a candidate match with the company’s budget — if someone is asking for way too much, why continue the process?
Coming up with the salary number can be difficult, and product managers need to consider their relevant experience, the company’s location, the company size, and the overall economic situation. The more screening rounds someone goes through at similar organizations, the more awareness they gain about the salary figures. Recruiters rarely tell if a candidate is asking for too little (hiring agencies might because their compensation depends on the ask), but they will always signal if the number is too high. A reasonable strategy, especially when we know less about the market, is to ask for a slightly higher salary than what the right number seems to be based on the years of experience. Recruiters will tell if the ask is somewhat higher than what the budget is, especially if it’s not an unrealistic ask. And in turn, candidates can use this information to tune their compass for the next discussion.
In the recruitment process, candidates have one more opportunity to negotiate a better salary: before accepting the offer. As the offer might be higher or lower than what our previous ask was, or we could have learned more about the company, the role, and the overall compensation, it’s also the right time to pause for a moment.
Before we look at potential ways to negotiate a better offer, let’s state the obvious: challenging the figure can have negative consequences, like the company going with a different candidate or rescinding the offer, so tread with caution here.
The best offer negotiations are grounded in evidence:
the candidate might compare it with their current compensation,
how the new role expectations are different (if higher) than the previous one, or
they might refer to discussions with other companies with better compensation.
Negotiating an offer is not unheard of, as long as the candidate’s counter is realistic. At best, the company will be able to match all or some of the ask; at worst, we’ll learn the limits of a role and our experience.
Receiving new responsibilities
Salary discussions might also be due when transitioning to product management from another function inside a company or just changing what we work on as a PM.
From other functions to product management
Product managers are not born ready; they come from all walks of life. Sometimes, there is a formal educational background, and other times, people get interested in related topics and end up in the role. When someone transitions from a different role into product management, there should be a compensation discussion.
As discussed earlier, product managers earn better than some other roles, and a company can’t expect someone to keep a previous salary but receive new responsibilities as long as they don’t already earn similarly. If companies don’t think an employee is ready to take on new challenges, they shouldn’t give them the opportunity. But if they assess someone as ready, they should match that with a reasonable wage.
To a more senior product role
Another type of transition is when product managers level up. They either start a people manager role after being individual contributors, or they get higher on the seniority ladder. In any case, it’s sensible to have a compensation discussion at this stage, too.
There could be cases when company promotions and salary adjustments are handled in separate phases (so one might not receive an instant wage bump), but those shouldn’t be over 6 months apart. If that’s the case, or the seniority change does not affect the salary, it could be a serious red flag.
To oversee different responsibilities
Roles can’t just change vertically (from a lower level to a higher one); they can also change horizontally (overseeing a different product area). Discussing compensation here can get tricky, as it often really depends on the exact case. That said, there are a few principles to keep in mind.
If the new role involves working with a bigger team, more stakeholders, or a more complex product area, that could easily translate to a seniority change discussed above. But if the new position is roughly similar in complexity to the previous one, it might be unreasonable to ask for a change in compensation. For example, companies do product rotational programs where PMs shift from one area to another every couple of months, and this doesn’t mean that they should be earning more with each change.
Yearly salary reviews
At most companies, there is a yearly performance discussion round, somewhat coupled with a salary review. In these sessions, employees and direct managers discuss what happened during the year, what individual targets the employee did or didn’t reach, and often, feedback from other colleagues. At the end of the talks, employees often get one of the three ratings: below average, average, or above average — although the exact naming or the number of the tiers can vary from one organization to another.
These ratings might be impacted by different biases, and employees can do a lot to affect the results, both during a year and just before a performance review. Eventually, the performance rating is connected with the salary review that follows.
As a preparation for both review meetings, product managers are advised to go through:
The job definition/expectations of their current role
Relevant company and individual goals set earlier and their progress
Key achievements from the period with specific examples
Public recognition from colleagues or external parties
Projects/impact delivered beyond job expectations
Any forms or questions provided as part of the process
Being conscious and vocal about one's own achievements is important during the review meetings while remaining sensible. The best advocate for ourselves is often our own self, and having a prepared discussion with the direct manager will also enable them to vouch for us, especially if it affects compensation.
Companies operate with defined budgets, and this is the same case for salary increases. The additional salary budgets are often broken down to functions, which then, broken down again to specific groups, and finally, to individuals. People managers often have a say in how their “salary increase” budget should be allocated among their direct reports.
This is when performance ratings come into the picture, as it’s unlikely that everyone will receive similar amounts. While some companies use stack ranking to come up with best and worst performers, others follow a more flexible approach, where the manager mainly decides what score to give and how it translates to salary changes. Being mindful how we rank compared to peers in similar roles can also help provide context about our own performance.
One last aspect to consider for yearly salary reviews is inflation. A few markets have regulations in place to automatically compensate for inflation every year, but it’s far from a common standard. If such a measure is not included in the process, consider the local inflation when discussing any compensation adjustments. As $50 from five years ago is now worth less in terms of purchasing power.
Conclusion
Salary discussions can be challenging, and one needs to be prepared with enough context about the market, the company, and how similar roles are compensated.
The three scenarios covered in this article (recruited for a job, new responsibilities, yearly reviews) provide an overview of where most conversations take place and how to handle specific parts of the process—where someone could push for more and where it’s unrealistic to get a significant wage bump.
When discussing wages, it’s always advised to treat the topic with respect, both to the manager and to the organization. Budgets are not infinite, and one company might have valid reasons to offer less/more than another firm.
And while new recruits often have more leverage in negotiating salaries (where the company has an urge to fill an opening), keeping a good, ongoing employee-employer relationship also depends on how the parties feel about the right level of compensation.