One of the multiple hats I wear as a Compensation Consultant is working with executives in transition, helping prepare them for the employment offer so eagerly sought. We look at ways to improve what the employer has put on the table, to position candidates for negotiating the best package they can.
A common misconception is that during the interview process candidates are dealing with only the internal recruiter and the hiring manager. A more accurate picture however is that, when it comes to developing an employment offer for management positions the employer's Compensation function often occupies another seat at the negotiating table, and they have a critical part to play.
The first two participants in this internal triumvirate have well-known roles to play. However, the third? Not so much.
- The Recruiter: The face of the company. These folks screen the candidates, present them to the hiring manager, and as necessary represent the selected candidate in late stage negotiations. They do not create the employment offer but deliver it.
- The Hiring Manager: He who makes the call. Here is the person with the job opening, the decision-maker as to who is selected for the employment offer. They hold the purse strings in the form of department budget, and they will have an offer number in mind.
- Compensation: Thumbs up or thumbs down? This person (Analyst, Manager or even Director+) often plays the role of the gatekeeper or policeman, the one at the table with the policy manual in the left hand and a spreadsheet of employee pay practices in the right.
Like a branch of the federal government, Compensation serves as a check and balance against the other two roles; the objective advisor intent on preventing a blind focus on an individual candidate, to the possible detriment of existing employees or the business. Here is the "bad guy" cop who reminds the others of budgets, precedence and the risks of internal equity issues.
But they're all professionals, right? So why does Compensation need to get involved, when they pretty much stay in their offices for the lower level employment offers?
A Necessary Evil?
Once you reach the upper management/executive level it's common practice for the recruiter and the hiring manager to talk with someone in Compensation to help determine (or simply review) an appropriate base salary offer. Why?
First, it's likely a matter of policy, a double-check requirement that for senior management roles HR must be involved with setting the compensation package. At the upper level there are more moving parts within an employment offer. And therefore the greater likelihood of negotiations.
Then there is the matter of heightened sensitivity, where a limited number of key jobs creates an environment of greater visibility and individual impact. The company can't afford to make mistakes here, as the health of the business itself may be at stake. Even senior hiring managers often look for support when they seek to make such critical employment decisions.
What Compensation Does
When dealing with Management offers Compensation would consider:
- Where the suggested base salary fits within the hiring range, against candidate expectations, the internal budget, the previous job holder and how large an increase it might represent for the candidate
- The salaries of similar or peer job holders (internal equity) and those at the next level (to make sure the new employee doesn't create compression issues with those in larger roles)
- As may be necessary assist with negotiations, to suggest where opportunities exist to improve the offer without harming internal equity concerns, creating damaging precedence or budgetary difficulties
- Serving as counselor to the hiring manager to address the need for balance between immediate staffing demands and likely internal outcomes. Are we doing the right thing here?
- Is a hiring offer being considered for the candidate? There would be questions of eligibility, amount, and impact on the overall offer.
What Compensation Does Not Consider:
- Whether the candidate is qualified. No one would conduct an interview or have any face time at all.
- Organization issues such as title, reporting relationships or job responsibilities. Any of those issues, and some can be problematical, should be dealt with before candidate selection.
- Would not compare the candidate against other employees (performance) except for the potential of internal pay equity issues.
- Would not have the authority to prevent an offer but would have the responsibility to give a controversial offer visibility beyond the hiring manager if a concern is raised. In other words, if consensus cannot be reached and the hiring manager is adamant, it's time to raise a red flag for a higher-level arbiter.
Compensation doesn't decide the offer amount either, though they may make suggestions if asked. More typically they react to what the hiring managers are planning to go forward with.
Compensation's role therefore is one of protection, of making sure that everyone's eyes are open as to the ramifications of whatever is put on the table for the candidate to consider. A winning formula is everyone’s goal, where equitable balance has been achieved and the new employee is excited and engaged.
Chuck Csizmar CCP is the 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 "Confidence," by petesimon
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