Of Course It’s About Compensation!

In this era of spin-doctoring, I continue to be amazed by both hiring companies and employment experts who downplay the importance of compensation in the eyes of candidates and employees. The latest hiring company touts their industry-leading innovative solutions and thought leadership, only to be outdone by their transformative modern culture. Sounds impressive. Too bad I’ve heard the same thing from nearly every other organization. Meanwhile, management consulting experts point to the many employee surveys that rank the importance of compensation below nearly all other critical factors, coming in just above Tacky T-Shirt Tuesdays, Red Sox ticket raffles and ping pong tables.

One VP Sales told me how he took a pay cut to join the company and expects others to do the same. Well, bully for him! I’m sure he’ll offer candidates the same generous equity allotment he gladly accepted. News Flash: It is no longer 2009! We are in the midst of a candidate-driven market, one that has raced past prior employment surveys and compensation benchmark studies.

No doubt, all the trappings of a great gig need to be in place: discernible career advancement paths; supportive and constructive culture; phenomenal product or service in a growing space; equally phenomenal people; acknowledgement for work well done; attainable goals; openness to new ideas; absence of politics and needless bureaucracy; sensitivity to work/life balance; strong financials; growing customer base; and leadership that embodies passion, vision, and ability to execute. Yet, nearly every hiring company paints a reasonable facsimile of this picture. That brings us to the elusive issue of compensation.

My hiring clients that have been winning the talent wars are the ones who prioritize getting the right people on the bus over managing to a rigid line item in a budget spreadsheet. I’m not suggesting that hiring companies abandon fiscal responsibility altogether and approach the talent market with a blank check policy. Rather, I strongly encourage companies to take a more accurate pulse of the market right now and at the same time, build in the flexibility needed to craft a compelling offer to the right candidate. While hiring companies have been flaunting everything except compensation, I’ve noticed how candidates are bringing it back front and center.

Of course, compensation means different things to different candidates. The weighting of base salary, variable compensation (e.g., bonus, commission), equity, and benefits gets distributed differently from candidate to candidate. Some prefer the perceived security of a stronger base while others desire greater upside via an uncapped variable with accelerators. There is another group that gravitates towards early-stage companies for the equity lottery ticket, betting on an exit event that could yield a far more significant material impact.

The point is we all work for several reasons, with making ends meet and achieving personal financial goals at or near the top of the heap. And in the current candidate-driven talent market, hiring companies can ill afford to sweep this reality aside. There are many exciting companies to work for these days. They offer promising futures, positive environments and best-of-breed innovative solutions. They have very compelling stories to tell. However, for every one of them, there are twenty others offering up the same attributes. At the end of the day, one of them will win out on hiring the candidate five others were also vying for. And it won’t be because of Halloween costume parties or Call of Duty tournaments.


Action items:

1.  It behooves both candidates and hiring companies to gain a real-time snapshot of the current market conditions as it relates to compensation. Ask trusted recruiters who work in the same space. Ask other hiring executives. Ask other candidates who have recently accepted a new position.

2.  The inability to attract and hire top talent in a timely manner is by far the greatest barrier to achieving business objectives. Companies ought to assess their recent hiring performance and come to grips with why open reqs are taking months instead of weeks to fill.

3.  Upon putting together an offer for a finalist candidate, don’t just send an offer, hoping it gets accepted. Take the time beforehand to engage the candidate in an open and honest dialog about compensation and what it would realistically take to get them on board. Socializing an offer first allows both parties to fully understand what’s important to one another while facilitating a verbal meeting of the minds. By the time a formal written offer is sent to the candidate, the offer terms should be no surprise.


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