Where Do These Numbers Come From?

You're interviewing for a new position and prospects are looking good.  You feel that they're going to extend an offer.  You know what salary you want, what you need, what you deserve, but you don't know whether your prospective employer sees your value in the same terms.  You can't read their signals.

When they do present an offer of employment the starting salary may be a good figure, or it may not - but where did that number come from?  And could you have anticipated it?

The employment offer that a company extends a candidate doesn't drop from the sky like a brainstorm of intuitive thought.  Oh-oh, let's try this!  Nor does the offer necessarily mirror what you think you deserve.  It does relate though, to what the company feels is appropriate for the position they have, what they can afford to pay, and what amount fits within their internal pay structure.  If the figure is also the amount you desired, that's icing on the cake.

Candidates often think that what they're offered has a direct connection to what they were making before, or what they asked for.  If that's the way you feel, you'd only be partially correct - because it's not always about you.

Every company has a decision-making process they follow as a guide in constructing an offer.  This process is applied to some extent for every candidate, no matter what final figure is ultimately used in the offer.

First and foremost, the company will have either a hiring range or at least an estimate of what they want to spend (what they were paying the last incumbent, pay rates of similar jobs or peers, what has been budgeted, etc.).  Thus to the company the job under search already has a value, so they can anticipate what they will likely pay, even before they've met you.

So they have a number in mind.  Now you come along and seem like a strong candidate.  They will need to know how your numbers (wants and needs) compare with what they are prepared to offer.  Bear in mind that they may be reluctant to offer too small or too large an increase over your previous compensation.

Do not attempt to withhold your compensation history - or in any way confuse the issue, as this tactic might explode in your face.  The employer might simply say "fine," and move on without you.  As they never like surprises, especially when it shows that they didn't know enough about you before making the offer, any reluctance to explain your compensation history would be a huge red flag.

While hiring guidelines are usually set up for recruiters to follow, exceptions can and will be made, but they'll likely require some justification, some "selling."

Offer amounts can also be restricted by policy or precedent:

• Starting salaries may not exceed salary range midpoints

• Hiring below range minimum may be prohibited

Internal equity is also very important, and may dictate an employer's degree of flexibility.  They cannot afford to anger two employees in order to please one - and they don't know you.

Many candidates lose sight of the company's perspective, thinking of their own value in the marketplace - what they deserve, given their personal background and experience.  For its part the company is trying to fill a job for which they already know the value.  That is what commands the offered salary, not what the candidate is necessarily worth in a universe of possibilities.

Consider a hospital seeking to hire a general practitioner, and a brain surgeon applies for the position.  The brain surgeon may well be worth the going rate for their skill set, but the company is hiring a different position, with a different (lower) value.  They don't need to pay, and likely can't afford the services of the brain surgeon.

What to do?  Ask about the hiring range, how much the company expects to pay for a qualified candidate.  They will have a number in mind.  Best you know up front in case there is a disconnect in valuing your services, lest you both waste time.

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 quaziefoto

Comments

[Mario]

The fact that you do not reveal your salary will not be a big hangup if the employer has an interest in you, in my opinion. Some employers like to know your salary history so they can low ball the salary offer if your salary history gives them that opportunity. It is a good bargaining tactic to not reveal it. Savvy employers know this and respect it.

[Chuck Csizmar]

In my experience (larger firms, international firms) savvy employers would never make an offer to someone without first knowing the candidate's immediate comp background. No discussion, no offer. Move on to the next candidate.

From my perspective holding back is never a good strategy. Companies don't like recruiting surprises.

Perhaps your own experiences (which I respect) reflect smaller organizations, where at times managers may play games with candidates, looking for that "win." Unfortunately, when the person just taken advantage of becomes staff, and finds out what was done (they will), there will be an angry employee to deal with. Not exactly the sort of new hire you want to have.

[Carl]

Hard to imagine a company eliminating their best qualified candidate from consideration because he or she does not want to reveal their salary history. What are you hiring salary histories or people?

[Chuck Csizmar]

Coincidentally I had lunch today with a friend who is also an executive recruiter. I asked him the salary history question (hide or reveal), and his take was that he would NEVER send a candidate to a hiring manager without knowing the candidate's compensation history.

My friend's view was, lacking such key information the company would be at a disadvantage in constructing a proper offer. Additionally they would not like a surprise at the time of offer,and that if the recruiting process went sour because of a candidate's hidden agenda it would also reflect badly on the recruiter as well.

[Sandrine Bardot]

I agree with Chuck. When preparing a offer, the company wants to take into account its internal rules as described in the article, and they also look into the candidate's current salary in order to prepare an offer that is fair to both parties. Otherwise you get a disgruntled and disengaged eployee right from the start - there's no value for the compnay in that.

As a candidate, if you don't want to share your salary information, you are effectively saying to your potential future employer that you don't trust them to be honest - is this the message you want to send ?

I am approached by headhunters on a regular basis. Most of the times, the initial conversation is the one where we decide whether we want to explore the opportunity or not. Headhunter gives an overview of the role. Potential candidate expresses interest or not, if yes, gives overview of how his/her experience could match. Headhunter and potential candidate discuss ballpark compensation figures : candidate explains latest compensation and expectations (may be up or down depending on a number of factors). Headhunter expresses whether this fits the probable range, is too high or even on the low side. At that point, decision is made to continue through a formal interview or not.

As a candidate, what is the point spending time with a recruiting company if your salary expectations can't be met at all ? Sometimes we come with more experience than is required for the role (the brain surgeon vs GP), or we were an expat returning to home country (therefore on a lower package), or we come from an industry with higher salaries (investment banking vs retail). There's nothing wrong with that. I don't see why I'd want to hide my salary - doing so would only expose me to time wasted in useless interviews, and potentially facing disappointment if I am offered the role but find out at the last moment that the company is offering a salary which I consider below my financial threshold.