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Grand Rounds-Starting a New Job: Part II-Contract Negotiation

Judy Rosman and Troy Payner

August 10, 2012

Transcript

- Hello, ladies and gentlemen, this is the second part of the three-part series discussing the principles of contract negotiation in your new neurosurgery job. Thank you for joining us.

- So most of the time when people have an offer, they think that they have an offer and that they're pretty much done. And then they think they're gonna negotiate the contract, and a lot of times, once people have the offer, they think that what they do when negotiating the contract doesn't really matter that much. That's not true. Actually, I consider the contract negotiation, the last step in the interview process. It goes both ways. If you are not reasonable in contract negotiations, or if you're abrasive or confrontational, the hiring practice may decide that they don't wanna hire you. And at the same time, if you are really reasonable and really trying hard to make things work, and the other party just won't bend at all and is making no effort to understand your point of view or address your concerns with the contract, you may very well decide that you have no interest in working with them.

- Right, so obviously you're never gonna get a contract, it's almost never gonna get a contract that's perfect. And you have to decide what are the issues most important to me? What am I not willing to compromise on? And where do I have room to compromise? And that applies to both sides. If there's a practice that has a long track record and all the shareholders have the same contract, it can be hard for you to get a different contract and be in that group. But you also have to assume, if you're getting the same contract as the 10 doctors in that group already have, it's unlikely that they're trying to screw themselves over, if you're getting the same deal, they're probably not gonna screw you either. Or at least you're all gonna get screwed the same. And at least, you know in that sense that they're treating you fairly. Even if there's terms you may not be delighted with, at least everyone's living under the same rules in that scenario. I think in the first two years or three years before you become a shareholder, it's when you have the most room for negotiation. And at least if you're joining a independent physician group and that's where you could say, "Well, what if I wanted leave, what happens then?" Or what happens... There's little things you can negotiate on. On a hospital employed situation then I think it's a little bit different and maybe you can speak to that, but those are usually shorter term contracts that become renewable. And the terms you get upfront are probably the terms you're gonna be stuck with for a long time.

- I agree with all of that. I think that those are a great points and some things actually that we're gonna address in a little more detail in just a couple of slides.

- Okay.

- This is an important and interesting point, I think, it's especially something that comes up when people are very, very interested in living in a specific location and they are picking from the best job available in that location. Or if people are very interested in the money and they are looking for a contract, a kind of a baseball contract with a real high dollar item. People look for a quote unquote ironclad contract. They get very, very hung up on the terms of the contract. And so I would like to ask everybody true or false can a contract force people to live up to their promises? And an answer to that, I'd like to give everybody the advice that my contracts professor gave me first day of contracts class in law school. He said the most important thing about any contract is the people on both sides of the agreement. If you have the right people on both sides, you're generally not gonna have any problems. And if you have an ill-intentioned or untrustworthy person or a person who really doesn't understand the deal on either side of that contract, you are generally going to have problems. A contract can't really force somebody to do anything. It provides evidence of the agreement that you've come to and it can provide the consequences if somebody decides not to follow the terms of the contract. It is important to have a contract, memories are short, but really you can't fundamentally, usually force somebody to actually do exactly what they said. Usually when it comes to an employment contract, people can terminate it. We don't have indentured servitude, we don't have slavery and nobody's forced to own anybody in this country. So if somebody breaks their contract, the question is what are the consequences? And really nobody wants a lousy job in a lawsuit. I have seen situations where people negotiated very, very hard for particular compensation terms in a contract. And you would think that those terms would have stuck. I mean, they are in black and white on the contract, clear as day. I had one surgeon call me, he had negotiated a contract with a very, very low base salary and a very, very high production bonus. And after just a relatively short period of time, after about a year into the contract, which was a long-term contract, the people who he had negotiated with, came to him and said, "You know what, you're making too much money under this WRVU deal we negotiated. And we didn't really realize how well you were gonna do under that, and we need to renegotiate the terms of the contract." And if you think about this practically, it was all there in black and white. It wasn't like they didn't agree to it. There wasn't any dispute about whether or not they agreed to it, but the neurosurgeon's choice in that situation as well. I can insist that you live up to the terms of the contract and sue you, if you don't. I can get arbitration, if that's permitted under the contract, I can have some dispute with you about it, or I can renegotiate with you about it, or I can move. None of those are great options. It would have been so much better if the person on the other side of the table were trustworthy and able to live up to their agreement, but the contract couldn't actually force that situation. And we've had many other contracts where people think that they have a long-term deal. For example, somebody negotiates a three-year contract or a five-year contract. And they think that they have a guaranteed income for that full period of time. And they don't really see the fact that there's a 90 day out clause or a 60 day out clause in the contract where either party can terminate the contract with 60 days notice or 90 days notice. Which is usually desirable for a lot of reasons, but what that really means is that you don't really have a five-year contract. It means that you have, sort of a 60 day contract or a 90 day contract continuously renewable over a five-year period. So your income might not be as guaranteed as you think it is. And people, even when things are agreed to in black and white, if somebody is not a trustworthy partner in the contracting process, the fact that you have a contract, doesn't stop somebody from necessarily telling you midstream that you know what, the deal is not good for them anymore and they wanna change the terms. When you are negotiating that important contract, it's really important to shop for the right kind of lawyer. A lot of times people wanna use a lawyer that they trust because the lawyer is a family friend, or it might be a business lawyer that they have used for other things, but that person might not really be experienced in medical employment contracts. And I think it's very important that you get a lawyer who's experienced in the area of law, that they are practicing for you. Just like if you had a neurosurgery problem, you would go to a neurosurgeon and not a general surgeon. I think it's very important that your lawyer have experience in this area. So they're familiar with what's customary, so they know how to move things along in a negotiation process. And so they know what is and isn't reasonable to ask for. Also, sometimes people, especially people who are very nervous, find themselves attracted to and comforted by, a lawyer who is going to super duper protect them by fighting every single provision, finding every single thing in the contract that could be wrong. And they're gonna make sure that they protect their client, the poor physician that might be taken advantage of by the person doing the hiring. And usually that lawyer will blow the deal for you, that is my experience. If you have a lawyer that resembles the green gray guy in this picture, it's my advice to find a different attorney who has a very collaborative approach to problem solving when it comes to negotiating a contract.

- So I had an interesting experience in it and one more point, I'll make, when hiring an attorney to review a contract for a job, you probably are better off finding an attorney in the state where that job is, as opposed to the one where you live. There's the laws different in every state and as an attorney in that state can frequently help you better than one in your own state if you're looking for a job out of town. When I moved to Indianapolis, I needed an Indiana attorney, and so I asked people in Cincinnati where I was, who would you recommend? They gave me the name of a guy, I called him up, said, I'm wondering if you could review this contract that I received. I'm looking to move Indianapolis. And I told him more about it. He said, "Well, first thing I gotta tell you is that, I cannot help you with this. The second thing I'll tell you is that contract is excellent because I wrote it." So by chance, I called the attorney that was already working for the group I was joining. So you never know what you'll find, but he gave me a referral to someone that he recommended and it worked out fine. But it's important, I think that you find an attorney in the state where you're gonna be looking for the job.

- I think that's a really great point. And a lot of times people don't feel comfortable doing that because they don't know how to shop around for that person. One of the mistakes that I think people make is they call the local bar association and ask for a referral. And what people don't usually know is that normally the referral lists that are kept by the local bar association are basically lists that lawyers who aren't that busy pay to be on, in order to get referrals. So it's, I still think that, either networking or researching in a more old fashioned way, rather than looking for a referral from a referral service is a much better way to go about finding a lawyer with real expertise. And I think it's very important when you talk to the lawyer that you don't just ask them, if they do medical employment contracts, and if they're comfortable with it, but interview them same way that you would interview a surgeon, ask them, how many of these contracts have you done in the last year? How much of your practice is made up of medical employment contracts? I think those are good questions to ask, just the same way you would ask a surgeon, how many of these procedures have you done in the past year? And what percentage of your practice is this kind of surgery? I really liked the steps Troy that you outlined about prioritizing what's important. And I think that is critically important when you are negotiating a contract. It's very important to review the contract in whole with your attorney and then make a list of all the different things that you'd like to negotiate or change, and then look at your hierarchy of needs and decide on the things that really are most important. And if there is something in the contract that is really a deal breaker, put that at the top. I don't advise that you necessarily ask to change every single little thing in the contract that you might wanna change, because people might think that they can give you some gimmes on the things that are easy to change and not address some of the harder issues. I think it's much more important to really focus on the things that are most important to you. And it's important for you to remember that your lawyer really is acting on your behalf and the way that your lawyer behaves will reflect on you. I have had more than one candidate lose a job offer because their attorney was inappropriately aggressive with the attorney or the hiring authority that they were negotiate with. So I think that's really important.

- I agree. I sometimes, I think it's, I mean, you should look at all the things you wanna change, decide what's most important, narrow down your list to the things that are most important and maybe put something on your list that you don't have to have, so that it doesn't look like, I mean, you gotta look like you're willing to compromise. And I think both sides may put things on there. Okay, I'll let you have that, that's kind of the gamesmanship of a negotiation, but I think that as long as you put your most important things first and emphasize, these are the things that I think are important to me for this contract, leaving yourself a bit of room for compromise.

- I do think that that's really important and I'm sorry, I didn't make that point, but I'm really glad that you made it. If you have 25 things to change, you're probably not gonna get through that whole list, but it is really good to have, one or two gimmes, at least, in your list that you can ask for that know the other party is, likely to be able to grant and vice versa. I think it's important to know when you do review the contract, not to get scared by your lawyers advice, your lawyers job is to tell you everything he or she can tell you about your contract and what you could do to protect your interests. But, it's very similar actually to medicine. If a physician looked at me as a human being, I'm sure that you could find all kinds of things wrong with me, but it doesn't mean that they're all worth fixing. You know? So it's important to that your lawyer give you advice about all the different things that maybe could in an ideal world should be changed about the contract, but then your job is to decide which battles are worth fighting, and what's really important to you. And it's important when you are negotiating to understand that some employers very legitimately have more flexibility in negotiating than other employers. If you're dealing with a large employer that has a lot of people on the same contract or dealing with a group practice that has recently hired other people on the contract that they are proposing for you, it's gonna be very hard for those practices to give you a contract different than what they've given everybody else. And especially, it's gonna be hard for them to give you a contract that's significantly different than the thing that they gave the last new recruit that they had, especially if that wasn't long ago. Small practices who have not recruited recently, typically have the most flexibility in the contract terms and hospitals that don't have a lot of neurosurgeons on their staff, and maybe don't have a lot of employed specialists also tend to have more flexibility than places that have a lot of people on a similar contract.

- I agree.

- Well, this is something that you need to know. This is a lesson in how to be irritating to your future employer and lose your job offer. I'm sure that everybody would like to know how to do that. So I'm here to teach you. First, ask for something and give them a chance to grant it, which they probably will and then ask for something else and see if they'll grant it. And when you get your response, then come back and ask for something else and then repeat the same thing over and over again. It's a great way to lose your job offer and to be very irritating in the process.

- Yeah, I think you have one shot at it. You make your list of things that you want changed in the contract, and once you come to terms on those, you can't give them a new list.

- I agree with that. It's important to think about the contract negotiation process as the beginning of a long-term relationship. Negotiating a contract for a job is very different than negotiating a contract, say for a car. If you're negotiating to buy a new car, to buy a refrigerator or something else, you're talking about a one-time transaction. If you're negotiating a contract, you're negotiating with people that you are gonna be working with in the future. And you're gonna be, it's the beginning of your opportunity to develop a reputation in dealing with those people. So it's important to know that after you're done haggling with those people, you're gonna have to live with them, and to know when to say when and when to know that the relationship is really more important than all of the terms.

- Kind of like a marriage.

- That is very much like a marriage. And most of us see so much more of our coworkers than we see of our spouses, don't we? One of the difficult things that people struggle with is how to successfully negotiate the terms of the contract while maintaining Goodwill. What do you do if you really have things that really must be changed and you don't want to engender bad will while trying to address them? First of all, I think it's very important, if you can, to have a backup option, when you're looking for a job. If you only have one option, then oftentimes you don't have very much leverage to negotiate, use your options to educate the other party, but make sure that you never come across as threatening or demanding. When you do have something that you need, or if you do disagree about something very fundamental. For example, if you are looking to join a group of neurosurgeons and they have an income sharing practice, and you really think that people oughta be compensated based on their productivity, it's important that you approach that as a problem solving kind of exercise. How do we work together to solve a problem instead of a confrontation? I think anytime you're in an argument with anybody you lose and you definitely don't wanna have an argument with people that you are hoping to be partners with in the future. I think that the most successful negotiators and Troy, I think is the most successful negotiator I've ever heard of, really appreciates and respects the fact that there are differences in perspective when you're approaching a contract or almost anything else. And it's important to work, to understand and acknowledge the other person's perspective. That's important when it comes to a non-compete or the terms under which somebody who's employment could be terminated. You might object to the terms, but it's important before you do, that you talk about it and first listen, before you express your opinion. Ask them why the disagreeable provision is the way it is, and what is the thought process behind it? And, is there something that they're nervous about or afraid of? And asking questions will help you understand the perspective of the other party. And then if there are things that you disagree about, then try to be creative and collaborative to see if you can find ways to meet your goals while giving the other party something that it wants. I'm sure there's nobody that has better advice on contract negotiation than Troy Pinger, so Troy to you.

- So one more point, and you've made excellent points. I use all of these principles when I negotiate. Sometimes I think it's fair to just say upfront, "Listen, I really like this practice, I like all of the doctors that I hope to work with, but working out a contract is just a necessary evil. And I want you to know that I respect you. And this contract negotiation is not personal. This is a business negotiation. And even though we may disagree and have to negotiate and finally come to terms, it's not personal. I'm still gonna respect you at the end of this. I hope to be work with you and be your friend longterm." So when you made the point earlier, don't forget, you gotta still live with these people. Assuming you come to terms to take this job, you don't wanna make them so irritated during the negotiation process that they can't get over that how painful it was that they don't wanna work with you anymore. So I think sometimes you just be honest about that. Say, this is not personal. This is only about us coming to terms to make our long-term relationships successful.

- That's great advice. Well, what if it falls apart? I think if it falls apart, you just move on and as quickly as possible. The contracting process is really an opportunity for you and the other party to see whether or not you can work well together. And if you can't do it, you can't do it, it's better to know earlier, rather than later. Chances are, you wouldn't make very good partners if you can't come to terms over the contract. So don't be upset, and just move on. After the contract is signed and sometimes before the contract is signed, depending on your timeframe, it's very important to fill out your licensing and credentialing of paperwork. I've had more than one candidate actually lose their job offer because it took them so long to start the licensing process. They couldn't get the license in the timeframe that was needed. And sometimes people were just really unreasonably slow about getting it done and it doesn't make a very good impression. It made the other people in the practice wonder, is this person really coming? I've had hiring practices repeatedly call me and say, "Are you sure this person is coming? They haven't filled in their paperwork yet." And I know everybody's very busy, and a lot of people feel like, "Well, once I've got the contract done, I can rest. And I don't have to deal with something for a little while, and I can focus on my work and deal with the licensing and the credentialing paperwork later." But unfortunately that's not the case. It's really important to be prompt about that paperwork, to let everybody know that you are operating in good faith and also to make sure that you can start on time.

- So that's very important. And if there's anybody listening to this from the hiring side of things, one of the ways we handle that is that we offer either a cash advance or even a signing bonus, assuming they get their paperwork completed by a certain deadline, and that incentivizes people to get it done.

- I love that idea. I'll adopt that one too. I'll say it is from you.

- Okay.

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