As the economy strengthens, negotiating compensation will become a huge part of the recruiting puzzle. Before you even get to the negotiating part, navigating through the maze of compensation issues will become a prerequisite for sourcing, recruiting, and hiring great talent, whether they’re passive or active.
This series of articles will help you handle candidate compensation issues at every stage of the process. Success using these techniques will enable you to minimize the overall compensation paid to top performers, reduce the chance of a counter-offer, and ensure that your opportunity stands alone amongst competing offers, even those that include a heavy compensation increase.
Following are the big topics we’ll be covering in this series of articles:
1. Presenting the case for a “Growth Maximization Strategy” vs. falling into the black hole of a “Compensation Maximization” approach to career management.
2. How to put compensation into the parking lot on first contact.
3. Navigating compensation during the interview.
4. Testing the offer and closing the deal.
The Max Growth or Compensation Career Management Strategy
One of the key differences between top performers and everyone else is that the best people typically have some type of formal career plan in place. The last few years have generally been unkind to these plans, but once the recovery gets some legs they’ll be dusted off and put back into play. Companies can take advantage of this in a number of ways. The most important: offer these top people a career opportunity, not a lateral transfer. Unfortunately, during the rush to source and hire these people, this long-term career concept might get lost in the hustle of negotiating the offer. In fact, once people start shifting seats en masse, your best prospects are likely to begin each conversation with a recruiter with some form of a “what’s the comp?” question. If you can’t answer it properly you’re likely to unnecessarily lose a lot of these great people before they even get in the door.
To ensure these people who think compensation is important get into your prospect pool, you’ll need to understand the differences between a growth vs. a compensation maximization career strategy. In future articles in this series I’ll show you how to naturally insert this concept into whatever comp question is asked.
A career growth maximization strategy is based on the concept that rapid growth and learning leads to bigger jobs and more rapid promotions. Significant compensation increases follow growth rather than lead it. A compensation maximization strategy is based on the idea that a person needs to make sure each move results in a major compensation increase. Over time this approach will lead to a rapidly increasing compensation package. At least that’s the way the thinking goes. It’s flawed thinking and recruiters need to make sure they don’t fall into this trap.
A lot of bad things can happen when a short-term compensation maximization strategy is used to make long-term career decisions. A comp max approach typically puts the new hire into the upper levels of a salary range, leaving little room for future salary movement, even for doing good work. This is frustrating. Worse, higher salary levels leads to higher expectations of performance, and when not met, the person is considered underperforming. Since the person is “overpaid” given his or her experience level the person is unlikely to meet the elevated job expectations, and even less likely to exceed them. This leads to a cascading negative effect and deep frustrations for both the new hire and the hiring manager. This is how a comp max strategy can quickly lead to career stall and a plateau.
A lot of good things can happen when a growth maximization strategy is used to compare and select one of several competing job opportunities. For one, by entering in the middle to low end of a salary band, job expectations are somewhat lower. This gives the new hire a real shot at beating the lowered expectations, being given above average raises as a result, and more important, being assigned to take on bigger projects. Successful performance on these projects in turn leads to promotions and consequently bigger raises. A good rule of thumb when advising others (and even for yourself) – there’s more upside being underpaid than overpaid for the same work.
Managers and business executives tend to be more open-minded with people who are willing to “prove” their worth rather than having to be paid in advance for it. This psychological aspect alone offers a huge benefit to those who pursue a growth max career strategy. There’s much less strain in negotiating the offer, and much more tolerance on the part of the hiring manager when things go awry. Just the negative aspects of negotiating an offer for someone who wants to get the best offer possible put the new hire in an awkward position. In my opinion the short-term gain in compensation is not worth the long-term costs.
Top people innately know that progressing rapidly is the key to maximizing compensation. Average performers tend to focus on maximizing compensation in the short term while ignoring the long-term costs and negativity involved. As recruiters, it’s important to quickly address this difference whenever a candidate asks about the compensation before being willing to discuss the career opportunity. This is a critical step in the recruiting process you need to deftly handle.
Many top people use the comp question to quickly filter out the cacophony of opportunities that come their way. Interestingly, most of these same people will make a career-oriented approach to evaluating different opportunities once they’re presented with the facts about the opportunity. That’s why recruiters need to fight through this question in order to present their opportunity-based case.
The key to this is with some type of attention getting mechanism. We’ll cover a number of these in Part 2 of this article series, but here’s one of my favorites to get you thinking about this important transition point. Whenever someone asks me “What’s the compensation,” I ask for a time out. I then ask the person to think about an extremely satisfying job-related experience. I then ask if the high degree of job satisfaction was related more to the work the person was doing, or to the compensation received. Most say the work itself. Bingo! I then ask, “Wouldn’t it then make sense to talk 5-10 minutes just to see if the opportunity I’m handling offers this same type of career satisfaction as long as the comp package is competitive?” Most readily agree.
During the pursuant conversation I’ll describe the differences between the career maximization vs. compensation maximization career management strategy. This is a great way to differentiate yourself as a recruiter and establish instant credibility with a top performer. They’ll quickly see you as a career advisor and someone worth knowing. Whether you ultimately decide to pursue the candidate or not for your opportunity is up to you, but you’ll certainly want to connect with this person on LinkedIn (link to me). Don’t be surprised if you get some great referrals in the process.
In Part 1 of this series on handling all topics related to compensation, I made the case that too many candidates focus on a compensation maximization strategy instead of a career growth strategy when comparing opportunities. It’s a bad compromise. In fact, a new book, Chasing Stars by Harvard’s Boris Groysberg, suggests it’s the kiss of death.
Faster career growth drives compensation increases. Which is a good thing. Big comp increases, on the other hand, can short-circuit a promising career. For one thing, premium comp packages come attached with increased performance expectations. These are always more difficult to achieve, and when unmet, things can go south quickly for those that are also relatively “overpaid.” This is a pretty easy case for a recruiter to make whenever a candidate starts evaluating a job by emphasizing the comp piece over career growth.
In this series of articles I want to present some ideas on how to navigate through the murky swamp of negotiating compensation. If you master these techniques you’ll be able to eliminate compensation as a hurdle when recruiting and closing candidates.
Back in the mid ‘80s I was losing a lot of great candidates due to comp problems. Either they opted out too soon because the comp range wasn’t high enough, or we couldn’t come to terms during the negotiation. I vowed then to never lose another person due to compensation issues. The key was to present the opening as a career opportunity, not a lateral transfer. This made all the difference in the world. It starts by converting traditional skills-infested job descriptions into performance profiles. This, in combination with a thorough understanding of the growth vs. comp max career strategy, is all you need to make sure you never lose another top candidate because you didn’t have enough money in the budget.
In this article I’ll show you how to handle compensation issues during first contact. For reference purposes, here’s a quick summary of the articles in this series:
Part 1 – Understanding the difference between a “Growth Maximization Strategy” and a “Compensation Maximization” approach to career management
Part 2 – How to handle compensation on first contact
Part 3 – Navigating compensation during the interview
Part 4 – Testing the offer and closing the deal
Here are some of the typical comp issues recruiters need to handle when first talking with a good prospect who’s either not looking, or is already dealing with multiple opportunities:
• How much does it pay?
• Show me the money, or I’m not interested.
• I’m already getting paid a great deal, and I don’t have time to look.
In Part 1 of this article I described how to answer this type of question. It starts by not answering it. Instead, say something like “Before I say something other than our comp for the level is extremely competitive, I’d like to ask you one short question.” Then proceed with, “Think about the best job you’ve recently held, one that gave you a great deal of personal satisfaction. Was the satisfaction due to the work itself, the team, the company, or the compensation you were getting every month?” Then pause and wait for a response.
When asked this trade-off type question, most candidates will come back with something other than compensation as the core driver for personal satisfaction. With this opening, then ask, “On the chance the job I’m handling offers the possibility of maximizing your personal growth and satisfaction, wouldn’t it make sense to talk just 5-10 minutes to check it out? Worst case, we’ll be able to stay connected until something better comes along. Best case, you’ll have a legitimate career opportunity worth considering.” Most people will agree to move forward on this basis.
If the person still resists, you’ll have to be even more persistent. In this case, it could be time to mention the comp vs. growth max comparison described above and in Part 1. Here’s one way to insert this into the conversation. Start this second round by suggesting that your comp plan is really dependent on the level of the person hired into the role, so this could increase significantly if the right person who saw this position as a career move came along. Because of this you’re reluctant to get too specific and you don’t want to close the doors on anyone, too high or too low.
Remember that all you want to do is to get the person to tell you a little about him or herself. Most people will be open to this if you push your point about the 5-10 minute conversation and the chance to network. If not, then just ask the person if he or she has a growth-oriented career plan they’re working towards, or a compensation maximization career focus. This will stop the person in his or her tracks.
Once you mention the growth vs. comp strategy they’ll ask you what this means. Describe it in detail and give some examples of people you know who have taken the high road and those who have fallen into the dark side. Mention the book, Chasing Stars, as part of this. This should be all you now need to do to get them to tell a little bit about themselves.
To help matters, when you first call the person make sure you’re a little vague about the job title and location. Something like, “Would you be open to explore a critical senior-level design position if it represented a significant career move?” should do the trick. Once they say yes, immediately say, “Great. Could you please give me a quick two-minute overview of your background, and then I’ll give you a quick overview of the position. If it makes sense career-wise to pursue this, we’ll schedule some time later to explore this further in more depth.” Then immediately, without pausing, get into a short work-history review.
By mentioning career evaluation at the start of your call, and in your voicemail, it will be easier to shift the conversation to a longer term career perspective if the comp question is brought up. Top people will always judge your opening based on its career value. Unfortunately, money often gets in the way of this type of meaningful conversation. Good recruiters need to steer around these roadblocks and leave compensation in the parking lot as part of the drive moving forward.
In Part 3 of this series I’ll describe some techniques on how to position your job as a career move, while ensuring that compensation is related to a lower order need.
If the job itself offers the candidate a true career opportunity, compensation premiums and bidding wars are unnecessary. Unfortunately, too many recruiters drop the ball here, and mishandle the basic compensation questions and issues. In this segment of the four-part article series, I want to summarize some techniques you can use during the interview and assessment process to better align your job with the candidate’s career needs.
We cover these in depth in our recruiter training courses, but these summaries will provide you with a good idea on how to handle these important issues.
Technique 1: Offer the candidate a 30% increase. As you start the interview process just tell the candidate he or she shouldn’t take any job unless it offers a 30% increase. Then tell the person this 30 percent should not all be money. Most of it should be career stretch, meaning the person will be handling a bigger job with more learning and more impact. Another part of the 30% should be career growth. This means the person is put into a company and situation that will enable the person to continue growing at a rapid rate. Collectively, job stretch and job growth should represent at least 20-25% of the total increase. The rest can be compensation. Then suggest to the candidate that she should evaluate your opportunity with this 30% multi-component approach as a guide. Reinforce this by saying that whenever compensation becomes the bigger part of the package, the person will wind up slowing her career, rather than growing it.
Technique 2: Create an opportunity gap and get the candidate to sell you. As you interview the candidate look for areas in your job opening that fill in gaps in the candidate’s background. This could be industry, job scope or impact related, to name a few. For example, management stretch can be demonstrated if the candidate has managed a team of five people and the open position has eight direct reports. In this case mention that part of the career growth in the job will involve managing and developing a bigger team. Suggest that the person will really have to demonstrate strong management skills to compete against those with more experience. Then ask the candidate to describe some major accomplishment related to management. Don’t be surprised if the person works hard to convince you she’s qualified. Of course, if there are no gaps between your opening and the candidate’s background, the job is legitimately not big enough. If the gaps are too big, the candidate is too light. Regardless, using these well-defined gaps is invaluable in positioning your job as a true career move.
Technique 3: Don’t wait until the end to negotiation an offer. By then it’s too late. Instead, use each forward step in the assessment process to gain some concession. An example best describes this important technique. Rather than just set the candidate up for an interview with a hiring manager, first ask the person is he’s interested, assuming the hiring manager is agreeable. Mention that this is not guaranteed, since while you like the person a great deal, it’s possible the hiring manager might not find the person’s background perfect for “reason A” or “reason B.” You have to develop these as you assess the candidate, and most of the time they’ll relate to the “gap” created using technique 2, above. You’ll want to gain a concession, like compensation, from the candidate as the price of going forward. In this case, saying to the candidate, “Since you’re a little light on the management side, the hiring manager will be more open to meet you on the understanding that the compensation would be at the lower end of our range.” This method is a great way to get the candidate to understand the growth vs. compensation trade-off at each step in the process. By the time you finish the assessment process and are ready to make an offer, the candidate will have agreed to the package before it’s ever formalized.
Technique 4: Put compensation in the parking lot to test interest. Before the final round of interviewing, and certainly before serious negotiation begins, ask the candidate this question: “Without any consideration to comp, is this a job you want? Then wait for an answer. If the comp is the primary reason the person is taking the job, I would be very concerned about making the offer. If the person takes your position without it offering the best career and growth opportunity among the candidate’s options, the person will most likely underperform. Other than for sales, comp is rarely the primary motivator for job success. That’s why this question and the answer are very important. If the candidate sincerely wants the job, then say you’ll do the best you can to max the comp package, but recognize ultimately that this is a career move, and part of a growth maximization approach to career management (see Part 1 of this series.)
These steps are vitally important. You can’t wait until the end of the interviewing process and then begin negotiating an offer with your finalist. By this time the candidate knows he or she is the one selected, and is in a stronger negotiating position. Of course, you’ll still hit some negotiating potholes as you move toward the finish line, but with these interim steps in place first, they’ll be easier to deal with later. In the final part of this article series, I’ll describe how to convert your top finalist into a great hire, without paying unnecessary comp premiums.