Considering the Compensation-Recruiting Inflection Point

Relationship with your recruiting cohorts a little rocky these days?

There has always been, will always be, an element of tension between compensation and recruiting.  Recruiting pros want to bring in the best candidate and offer the package necessary to make this happen -- with their compensation colleagues often functioning (in their eyes) as the biggest obstacle to achieving this end.  Compensation pros often feel they are the last line of defense for the integrity of the pay program, seeing their recruiting counterparts as wielding the wrecking ball that will bring the delicately balanced house of cards tumbling to the ground.  I hold to the opinion that its a healthy tension, and I particularly appreciate the position of those in HR whose role demands that they perform and balance the objectives of both functions.

Today's talent market is a particularly challenging one, demanding that we who design and manage rewards step out of our comfort zones and explore the new practices and solutions necessary for our organizations to purchase and hold on to people with the necessary skill and competency sets.

Steve Boese -- Co-Chair of the HR Technology Conference, creator and host of the HR Happy Hour Show and my favorite HR Tech blogger -- wrote a great post this week driving home some critical points about today's talent market, from a recruiter point-of-view.  In his post, Steve shares a striking chart (see below) about the degree to which (over the past few years) candidates or employers are in the driver's seat, compiled as part of MRINetwork's biannual Recruiter Sentiment Survey, which features the responses of 235 recruiters.

The chart shows us that this group of recruiters are reporting a dramatic shift in terms of who holds the power and leverage in the marketplace for talent.  Related to this power shift, the survey also reports the following highlights and observations (with my comments in parentheses):

More than ever, highly skilled and top performing candidates are in demand.  It is sometimes difficult to communicate this fact to hiring managers and other company stakeholders (including, I suspect they mean, the compensation department).

Candidates have more options than they have had in years.  Yet companies still want to give low-ball offers.  (A function of policy and internal equity considerations that push hiring in the lower half of the range, perhaps?  Managers that are out of touch with labor market reality?)

Some companies are not adjusting to this market change and, as a result, dragging out the process and losing good candidates (probably struggling internally to find a compromise that will land the desired candidate without upsetting the internal equity applecart).

It isn't my intention to paint compensation as the bad guys here, or our efforts to manage compensation as unnecessary. (And I do realize that recruiters bring their own issues to the table.)  Too often, we are stuck feeling like the little Dutch boy with his finger in the dike, hoping to stall the flood waters.  Mostly that's probably legitimate, but sometimes we may be trying to hold back necessary change and progress in our pay practices and solutions.

At any rate, I think it's always helpful to get a glimpse into what our colleagues on the other end of the talent management train are dealing with.

Your thoughts?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a range of client organizations.  Ann and fellow Compensation Café writers, Margaret O’Hanlon and Dan Walter will soon be releasing a new book on communicating compensation - stay posted! Ann serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

Creative Commons image "Fault Line in Þingvellir National Park" by Jon Connell

Comments

[E. James (Jim) Brennan]

Your chart and comments resonate as quite sensible, Ann.

Made me think of the similar "conflict" between a ship's navigator and pilot, where one plots out the optimal preferred course but the steersman/woman must alter speed and direction according to the actual changing sea conditions. Compensation people can no more accurately prophesy the economic future next month than navigators can forecast the weather next month. Recruiters have their fingers on the pulse of the actual external market, which has no respect for internal pay policies.

Replacement time has always been an excellent indicator of necessary changes in entry rates. Messy, but life is that way.

[Tony Bergmann-Porter]

This, of course, has nothing whatsoever to do with the fact that contingency recruiters are compensated on the basis of the first year total compensation of their placements; or, for that matter, of the availability of H 1-B visas.

[E. James (Jim) Brennan]

Commissions have always been a reality affecting headhunter behaviors; no change seen there over these years. There are strict quotas on H 1-B permits (yes, they fluctuate from year to year per congressional action) but most are snapped up by employers within a week or so each year to be issued to their high-value alien imports whose pay must exceed the BLS OES survey high norm. Not that many H 1-Bs exist, so doubt they could affect national candidate hiring rates for all jobs.

[Herb Peters]

The survey was done with outside recruiters, not internal company recruiters. Does this make a difference? Don't company recruiters have a better feel for hiring people at salaries that are appropriate for the company? Don't outside recruiters have a tendency to try for the a highest possible salary because it is linked to their fees?

[Ann Bares]

Jim:

Agree and well said "recruiters have their fingers on the pulse of the actual external market, which has no respect for internal pay policies".

To Tony's and Herb's points - Yes, absolutely, outside recruiters have biases that likely impact any data collected and reported. I actually had a statement to that point in the post, but removed it. Probably should have left it in, but I thought it deserved longer treatment than I was willing to give it. All research completed by "outside advisors" is going to have inherent bias. Having been employed at and involved in at least one research release and write-up in my own "big firm" days, I can assure that the topic of firm revenue opportunity was absolutely on the table.

So, I don't deny the obvious possibility of influence here. Part of the reason I published this is because it captures what I have been hearing from my clients and their internal recruiters/HR staff -- especially in the area of tech jobs -- for the past year or two. Vetted by my own personal information sources, I thought the trend illustrated was a valid one.

Thanks all, as always, for the observations and comments.

[Jacque Vilet]

I think we need to give our recruiters more credit here. Tech (STEM) salaries are climbing faster these days. Let's face it --the survey results we use in Comp become outdated very quickly. Most Comp people do not adjust pay structures other than annually. And let's admit that doing our "lead, lead-lag,lag" magic is less than accurate.

External recruiters (of any name) do get commissions. That doesn't mean they are all "on the take".

Most companies I know don't use expensive external recruiting firms except for management positions. So I think the best thing to do in working with our internal recruiters is to actually . . . work with them. Each side has a viewpoint. Working together they can figure out a way to make things work.

I wrote about this: http://www.compensationcafe.com/2013/08/hr-is-that-human-resources-or-holistic-resources.html

[Ann Bares]

Thanks, Jacque. Excellent points and thanks for the reminder link to your post.

[John A. Bushfield]

Ann - Interesting chart. I guess its a matter of perspective; one could say that its always been a candidate driven market, since top candidates have always been in demand. One could just as easily say that its always been an employer driven market, since those are the folks with the jobs.

If I were a betting man, I'd bet on the candidate driven scenario. Employers may create the jobs, but unless they offer the right attributes; culture, opportunity, flexibility, and pay, the best folks are going to go elsewhere.

I'd also opine that, in today's marketplace, any tension that exists between comp and internal (as opposed to contingency) recruitment is counterproductive and a waste of energy. At the end of the day both parties should want the same thing, and both need to step up to the hiring bar and figure out the parameters surrounding the job. As it goes in one of my favorite Rolling Stones songs: 'You can't always get what you want, but if you try sometimes, you'll get what you need . . '

[Ann Bares]

John:

Love the Rolling Stones lyric reference - very apropos!

Thanks for the comment!

[Chad]

Compensation gurus have to alter their approach when competition for talent heats up and become engagement assets for their organizations. If they can not effectively package the total reward message/offer for a candidate, the top talent will go somewhere else under the assumption there is more for them there. There's no better defense for offering a comparatively low salary than showing how much more the candidate stands to gain in the entire reward package.

[Ann Bares]

Chad:

Belated thanks for the comment - agree that we in the compensation field need to be responsible to the market for talent, so that we are not unnecessarily impeding the efforts to bring in the right people.