Cheap Talent Can Cost You

Picture the scene:  your company is seeking to employ a Department Manager, and the leading candidate is currently “in transition.”  Human Resources has pegged the market value of the job at $75,000, but you suspect that the preferred candidate (Bob) will accept $65,000.  A seasoned and experienced professional, Bob was previously paid $77,000 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, worried about feeding his family and paying the mortgage.

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

That wasn’t hard, was it?   A preferred candidate has been gained at a low ball price.  The hiring manager deserves a pat on the back for saving the company money.   But . . . wait a minute.   Perhaps it should be a boot in the butt instead. 

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 he be with the offer?  Oh sure, today he’ll be delighted and will celebrate getting a job and finally having money coming in again.  Tomorrow, not so much enthusiasm.

How long before his resentment grows, knowing that he was taken advantage of – gotten on the cheap?  What will happen to his energy level, his engagement, even his morale?  What will he now think of the company, never mind his hiring manager?

The likely future

It's safe to presume that how you treat a candidate will be discovered at some point by that same new employee.  So when Bob confirms for himself 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 might suffer, dropping from 110% to automatic pilot to somewhere south of Satisfactory.  He’ll be going through the motions – not exactly the dynamo you thought you had hired.

• His attitude will turn negative and he’ll morph into another disengaged employee – critical of the company and management, doing no more than he must in order to get by.

• 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 now have is a bad hire - a situation that's 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's the discounted value of a disengaged employee who doesn’t perform as expected or desired?

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

• What's the value of hiring a potentially more expensive replacement (plus agency costs) and perhaps relocation?

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

• Finally, what's the subjective value of a discontented employee in your midst, one who is possibly poisoning the attitude of other employees?

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.  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 clowder of cats.

Creative Commons image, "Appearances," by Bark

Comments

[Jacque Vilet]

Totally agree. Plus in my opinion it's not very "nice" to take advantage of someone that in normal times would be asking $75,000 or more. The fact he has been out of work for a year is no reason to take advantage of him. "Short term gain for long term pain."

[E.James (Jim) Brennan]

Quite correct, Chuck. The ancient British phrase, "Penny wise and pound foolish," comes to mind.

[Jared]

True that. Hard talent is always worth the value. If you are looking around to save bucks, you can do it by adopting a hiring strategy that does that rather than hiring cheap talent and compromising on work quality. There are many sites like hourlyconsultant.com or fiverr.com where you can source candidates from several valid offers to get your job done. That way you would be spending only to the extent of what you need over a period of time.

[Laura]

I was in a "temp-to-hire" assignment for a managerial position. After proving myself for 9 weeks, Corporate flew me to their east coast headquarters, picked me up in a stretch limo at the airport, wined and dined me all day while I met with key executives in the department. They offered me the position and I accepted. Their parting words as I boarded the plane home, "We'll call you next week with a salary package." The agreed-upon salary was $55K annually. They were paying me $14.00 per hour as a "temp", nearly half of the market value for that position. They called 3 days later to rescind the offer. For whatever reason, they were going to keep looking. "Now, we know you can walk out, but would you do us the courtesy of staying until we find your replacement?", they asked. What was I supposed to say in response to that? I'd been laid off 2 years previous, working temp assignments when offered, but no employers were beating down my door, trying to hire me. I was devastated and wanted to "walk", but desperately needed the $14.00/hour wage, didn't have another temp assignment waiting in the wings, and didn't want to burn any bridges. I flatly said, "Of course I'll be here tomorrow, and the next day, and the following day, because where will I go? I have no place to go." All said and done, I was there for 4 months at $14.00/hour performing the exact job my replacement is now being paid the $55K salary promised to me. Employers know I've been job hunting for 2 years and assume I'm desperate and will settle for anything. But I still have some dignity left and know my position's market value. Don't try to short-change me. I am worthy of my hire.

[Chuck Csizmar]

Stories like yours, Laura, is why so many folks hate corporate America. Because experiences like yours are all too common. I shake my head at their short-sightedness, though. Not only because of the points made in my article, but because of the potential damage to their reputation. Word does get out. People will talk. I once worked (for a short time) for a company who reputation for employee treatment was so bad that local recruiting agencies wouldn't touch them. Wouldn't send candidates to interview. They had to go out of state to work with recruiters. Hang it there, Laura. Your day will come.

[Denise]

What many hiring managers have failed to understand is "buy cheap, buy twice". This is what happens when employers take advantage of the LTU (long termed unemployed), if they engage them at all.

I have seen the same job advertise over and over again. The position tasks and qualifications are not matching the pay rate. Employers are filing these position and then finding that the person moves on at the earliest convenience. It makes more sense to pay the LTU the fair value of the position. What the employer will get in return is an enthusiastic and grateful employee. A walking, talking advertisement for the company values.

[Julia]

Excellent article. I have said all of these things to hiring managers and to HR. You may not be paying for "saving money" now, but you will definitely pay for it later. Paying under market for the long-term unemployed is a losing proposition for all involved.