Cafe Classic: The Third Wheel In Recruiting

Editor's Note:  The Compensation function plays (or should play) a key role in the staff recruiting process, as Chuck Csizmar details in his Classic post. What has your experience been?

One of the multiple hats I wear as a Compensation Consultant is working with managers in transition, helping prepare them for their next employment offer. We look at ways to improve what the employer has put on the table, to ready candidates for negotiating the best package they can.

A common misconception among these managers is that the interview process involves only the internal recruiter and the hiring manager. A more accurate picture is that, when it comes to developing an employment offer for managerial positions the employer's Compensation function often also occupies a critical seat at the negotiating table.

• The Recruiter: The face of the company. These folks screen the candidates, present them to the hiring manager, and as necessary represent the candidate in late stage negotiations. They don't 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 which candidate is selected. They hold the purse strings in the form of department budget, and they have an offer number in mind.

• Compensation: Thumbs up or thumbs down? This 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 players; 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 others of budgets, precedence and internal equity issues.

A Necessary Evil?

Once you reach the management 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 offer.

Firstly it's likely a matter of policy, a double-check requirement that for management roles HR must be involved with setting the compensation package.

Then there's 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 a critical employment decision.

What Compensation Does

When dealing with management offers Compensation would consider:

• Where the suggested base salary fits within the hiring range, vs. 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 and those at the next level, to ensure the new employee doesn't create compression issues with those in larger roles.

• As may be necessary to assist with negotiations, to suggest where opportunities exist to improve the offer without harming internal equity concerns, creating damaging precedence or budgetary difficulties.

Compensation would typically not consider:

• Whether the candidate is qualified. They wouldn't conduct interviews 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.

• Wouldn't compare the candidate against other employees, except for the potential of internal pay equity.

• Typically would not have the authority to prevent an offer, but would have the responsibility to give the 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 create the offer either, though they may make suggestions. More typically they react to what the hiring managers are planning.

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 the goal, where internal equity has been maintained 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.

Comments

[E. James (Jim) Brennan]

Thanks, Ann, for recycling Chuck's classic accurate analysis of the supporting role the compensation function plays in recruiting.

Having worked long periods in every single spoke of the HR and Total Rewards universe, I totally agree that employment recruiting and selection is the most critical function. Without good people, no enterprise can succeed.

Hiring is greatly facilitated by helpful comp input, while bad comp input eventually gets corrected by push-back from market realities. If the "pay police" low-ball the talent, the organization suffers rejections or (even worse) selection of marginally acceptable bottom-feeders unworthy of the nominal market-clearing rate for reasons that become obvious after their hire. Barely competent workers struggle while solid performers leap ahead, each producing at their individual levels. Strong talent pull the unit ahead while the weak are a brake.

Bottom line: the compensation function can hurt the organization much more than it usually is permitted to enhance it. The maximum positive synergy that can be leveraged by Total Rewards, of course, is another story, best related by those who have scars from both fields of battle. But without recognition of the relative priorities, maximum activation of human potential will never be realized. Thanks for the reminder!

[Chris Dobyns]

Similar to Jim, I liked this very good "re-run", as it paralleled almost one-for-one the practices I recalled with former employers. Compensation plays no role with my current employer, which could explain at least something about the shortcomings in the federal government.

Pay-setting is always a partnership (I like the "check and balance" analogy") with the other two parties, really with the shared-goal of anchoring an offer (or range of offer) that the organization is able to afford, and that the candidate should reasonably be willing to accept.

And our Comp Team always liked the idea of establishing a "range" (which had to translate into a single number), since it gave the hiring manager a feeling of "control".

[E. James (Jim) Brennan]

One Fortune 50 where I was in HQ comp had single "job values" for every position, but they were very smart about how they administered it. No "ranges" were imposed, but common sense logic and sensitivity to geo diffs, hiring rates, unique unit values, internal equity, personal capital and cumulative experience ruled. It was great. Worked very well, too. Corporate HQ advised but unit managers decided how THEIR payroll budgets would be distributed.