How to Save a Buck and Spend Two

Your company is seeking to employ a Financial Accounting Manager, and the leading candidate is currently "in transition."  Human Resources has pegged the market value of the job at $75,000 (midpoint), but it's known that the preferred candidate (Bob) will accept $65,000.  A seasoned and experienced professional, Bob was previously paid $ 76,000 by his last employer, but was caught up in a restructuring staff reduction.  He's been out of work for almost a year and is getting desperate.  Relocation is not an option, and he's worried about feeding his family and paying the mortgage.

When the decision point arrives, other less qualified candidates are already making $70,000 and asking for $75,000.  Some hiring managers would look at this situation as a no-brainer.  "Let's hire our "A" candidate and save $10,000 to $15,000" would be the smug decision.

That wasn't hard, was it?  An exceptional candidate has been gained at a low ball price.  The manager deserves a pat on the back for saving the company money, right?  But, wait a minute.  Perhaps it should be a boot in the butt instead.  You make the call.

A savvy professional like Bob will have a sense of the competitive market, so he'll be aware of having taken a significant pay cut to land this job.  So how excited will be be with the offer?  Today, he'll be delighted and will celebrate getting a job and finally having money coming in again.  Tomorrow, not so much.

How long before resentment grows that he was taken advantage of - gotten on the cheap?  What will happen to his enthusiasm, engagement, morale?  What will he come to think of the company, never mind the hiring manager?

What is the likely future for Bob?

It is always safe to presume that how an employee is treated will become known; otherwise you'll be stuffing skeletons into a closet - and you know how that trick never ends well.  So when Bob confirms the low ball treatment, what reaction can you expect?

• Angered by a sense of being taken advantage of he could continue with his job search - looking for a better opportunity - while still working for you

• His job performance will suffer, dropping from 110% to automatic pilot somewhere south of Satisfactory.  He'll be going through the motions - not exactly the dynamo you thought you had hired.

• Bob's attitude will turn negative and he'll become another disengaged employee - critical of the company and management, doing no more than he must in order to get by

• And yes, he'll ultimately quit, but on his terms and timing.  His anger will have kept simmering and he'll likely feel little concern as to how his departure affects the organization.

What you have now is a bad hire, in retrospect;  that situation is unnecessary and easily avoidable if you treat candidates fairly.  Look at it from the candidate's perspective; when your back is to the wall and you feel your "rescuer" is taking advantage, that feeling causes a pit-of-the-stomach resentment that lingers and festers.  And it costs.

Let's tally up the cost

The manager claimed a cost savings by the hiring decision.  But when you factor in the longer term ramifications of that decision, how do the initial savings hold up?

• The hiring decision saved $10,000 to $15,000 per annum by consciously underpaying the candidate

• What is the discounted value of a disengaged employee who doesn't perform as expected or desired?

• What is the value of time lost when Bob quits and the job is vacant while a replacement is sought?

• What is the value of hiring a potentially more expensive replacement (plus agency fees) and perhaps relocation?

• What is the value of productive time lost while a new employee gets up to speed?

• Finally, what is the subjective value of a discontented employee in your midst, possibly poisoning other employee attitudes?

So the next time a hiring manager proudly announces how to save a bunch of money on a candidate who's in transition, take a moment to think it through.  You may want to consider a boot in the butt instead.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  With over 30 years Rewards experience Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats. 

Image: Creative Commons photo by greggoconnel

Comments

[Laura Schroeder]

Great illustration of efficiency v. effectiveness. It may be efficient to save but not necessarily effective. I think there are cases where Bob could legitimately be offered less than market (smaller company, great career prospects, fantastic culture and/or colleagues, work flexibility) but stiffing someone because they're in a tight spot will almost certainly backfire.

[David Hunt]

You're asking HR people and hiring managers to think long-term and not take advantage of the power they have over job seekers - especially in today's market. HOW DARE YOU!

Yes, I really am that contemptuous of many (not all) in management because the ability of most line managers to see the bigger perspective seems to me to be sorely absent.

[E. James (Jim) Brennan]

That's the perfect example of the old adage, "A need, once satisfied, is no longer a motivator." Much cheaper do do it right from the start and win a devoted fan instead of creating an inequity that will haunt you and eventually cost a lot more to rectify or otherwise handle.

[Yancey Thoma Jr.]

Here's another twist to the scenario. What if Bill is in a "protected class", for example 50 yrs old or has a physical disability? The company then hires a "non protected" class employee at current market compensation for the same position.

The potential for disaster from this added twist makes, "The hiring decision saved $10,000 to $15,000 per annum by consciously underpaying the candidate" even less sense and the "boot in the butt" to make more sense!

[Nivlag]

How do can people like Bob and I get the pay we deserve after we've been at the co. for awhile (year, for example) OR are we just screwed taking the lower pay in the first place and need to start looking elsewhere?

[d_tro]

Leaders lead and Managers manage; Leaders do the right thing at the right time for the right reasons. Unfortunately, they allow HR to have a run-at-it most of the time, seem to take best-advice from them too much of the time, and the end result is that narrow group of HR persons still barracded in their offices in this economy making excuses for hiring no one. Not all their fault of course but certainly they DO contribute to it. I look forward to the day when Leaders lead again.

[Chuck Csizmar]

The question was asked, what can Bob do to get the pay he deserves, after he's accepted a company's low ball offer?

Once you've signed on the dotted line and have become "staff" vs. "candidate" your leverage opportunity has essentially faded away. It's difficult to restart negotiations as an employee. A standard response from management would be that "Bob took the deal."

What you can do is perform, and take notes along the way. Once you've compiled a track record (six months?) you may be able to ask for a salary review, with the strategy that management knows you've taken a cut and are being paid below market. Now you can point at results that demonstrate your value to the organization. From there it's a question of the company's flexibility and sense of fairness.

No guarantees, but your best chance (presuming you're thinking of staying)is to show specific performance attributes and results, and then ask for fairness.

[JC]

You're right.

I am in a situation close to this now with my employer.

Your analysis of the ultimate foolishness and outcome of such actions is dead-on.

;-)

[Dave Opton]

Chuck,

You have, as always, said this very well.

Whenever I have found myself in situations similar to this I have usually told the manager to put himself in the candidate's shoes and ask them what their attitude is going to be once they find out the have been taken advantage of?

You talk about cost!

When it comes to the negotiation around compensation, it is definately in the interest of both parties to make it win-win. There is a relationship that both want and need to be positive not one where the first thing on a person's mind is "how do I get even."