Friday, December 5, 2014

Evaluating a Developer Job Offer Part 1: Understanding Risk

Few decisions can have a larger impact on your financial life as a software developer than accepting (or not accepting) a new job. Unfortunately, you'll have a difficult time getting a good evaluation of your offer.

Your recruiter and the hiring manager have conflicts of interests. You may not feel comfortable discussing your financial details with friends or colleagues. The internet has lots of information, but some of it isn't thorough, some of it isn't credible, and a lot of it doesn't address the kind of offers you get from a software or startup company.

The seed of this essay was planted more than two months ago when an engineer friend asked me about his dilemma. We had long phone call, and I still felt like I missed some key financial issues. Even my followup email seemed lacking, so I kept getting feedback and improving it. You're reading it. Let me know what you think... This is part one of a long essay on the financial considerations when evaluating a software developer job offer. Update: if you prefer your reading in book form, this same job offer advice has been compiled together with a new introduction in paperback and Kindle format as A Developer's Guide to Job Offers.

If you’re considering taking a new job, you first have to figure out the risk involved in the move. Anytime you switch jobs, you’re in the position of leaving a well-understood, stable situation for a poorly understood new position. You have to learn about and deal with a new boss, a new role, new coworkers, and a new environment… and compared to your old job, you understand very little about these things. If the new job doesn’t work out, it’s doubtful that you can simply return to your previous job. Understanding the ways things can go wrong can help you correctly decide how you should be compensated for them.

Switching jobs is like moving into a new home. The new house seems great until you move in and discover that there is a roach infestation, the water pressure only allows one shower at a time, and the neighbors have a garage band that practices until 2 AM every Monday morning. It won’t take too many nasty surprises to make you feel homesick for your last place.

Luckily, unlike a job search, when buying a new home there are standard steps people use to help reduce their risk. It’s rare to buy a home without an appraisal and a home inspection. Even those steps miss things, like the 120 volt death trap I discovered in my house’s attic. Just because a home is new and has passed inspection doesn’t mean there aren’t a pair of exposed live wires where a light switch should be.

Just like with a house inspection, even the most heavily researched new job can hold many unpleasant surprises. And unfortunately, most people don’t do enough research.

Maybe your new manager will make you a scapegoat for a failure that has been simmering for two years. Maybe your new teammates won’t pull their weight. Maybe you’re given an impossible deadline. Maybe everyone will get mandatory pay cuts just a few months after you arrive. There’s just no way of predicting everything that can affect you in your new job.

For instance, when I worked at AMD, every salaried employee received a mandatory 10% (or more) paycut. At the time (and still today), AMD was a Fortune 500 company. Even though it’s a large, publicly-traded company, it is still unpredictable. And if a large company is unpredictable, just imagine what can happen at a smaller company.

Don’t forget that a new employer can simply fire you if you don’t work out. Some companies even have an explicit probationary period in which you can legally be dismissed for any reason–or for no reason–without severance pay. If you’re terminated, you’ll have to be prepared to make ends meet while you look for a new job. Except for a few weeks of salary, the employer will be no worse off than they were before hiring you. If you end up hating your new employer, you’ll have to endure it for as long as it takes to search for another job.

I’ve only reviewed a few aspects of risk here, but there are many more risks inherent in taking a new job. (Keep your eyes out for future posts on specific types of risk and how to assess them.) You probably will never have a full understanding of the risk at a job before you’ve worked there for some time. Usually you can’t just switch back to your old life. It only makes sense to get compensated for that risk up front.

If you'd like to systematically compare a job offer to your existing job, or just get a feel for the what you'll be making after general costs of living, I've prepared a spreadsheet to guide the process. Fill out your email below, and I'll send you the calculator. Don't worry, I won't sell or share your email, and you can unsubscribe at any time.

Get the Job Offer Calculator

* indicates required

*Moving Average Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Buying items through this link helps sustain my outrageous camera addiction and is much appreciated!

No comments: