Monday, June 19, 2006

What Salary should you Offer ... Part 2

Wow, a few very good comments on the first post. Let me first respond to something that I want to make sure was very clear.

The option of applying the 15% raise almost blindly, based on the employee's previous salary, is a typical HR tactic. It is not something I personally believe in, and don't ever blindly advocate. Sometimes it works out that the proper salary to offer someone is a 15% raise, but that is based on merit and coincidence, not some arbitrary program.

I can classify the rest of the suggestions into two categories: a structured, planned incentive program, or paying market value on hire. Both options have their pros and cons, and I just wanted to play devil's advocate a bit here.

First, the structured incentive program. This looks like the best option for both employee and employer. The employee doesn't pre-pay without seeing performance, and the employee has direct compensation incentive for performing. While this is great in theory, there are two major roadblocks I've come across with this one. The first one is bureaucratic, and probably only applies to larger organizations. In a large, publicly traded company, it is not that easy to ever process through an adjustment of more than 10%, or more often than once a year. This is usually a mechanism put in place to maintain some centralized control over expenses, and allows a pre-planned bump in quarterly expenditures for

Wall St . Most raises over a certain % also require either senior management or executive management's approval. The other risk that comes into play when following this course of action is that it could create a jealousy / competition scenario with your other staff, and all of a sudden you're being asked to put in a bonus / incentive program for the whole team. Again, something that probably makes sense for a small team, but far less feasible in a larger organization.

The advice to just pay market value up front has one big risk, identified by Jacob,

Hiring people is a very real risk. Someone can look very good on paper and present himself well and turn out just not to work.

I couldn't have said it better myself. This is the big risk. You are paying for perceived performance, rather than results. If you are hiring a superstar, then excellent; but what if hire a dud? What if he doesn't mesh as well with your team as the interviews led you to believe? These are the types of decisions that in aggregate will make or break your management career. If you have to fight to get the offer you want to offer, and the candidate bombs, everyone will forget the candidate, no one will forget that you fought for an employee who didn't work out.

At the end of the day,

A manager is nothing more than someone empowered to make decisions, and trusted by senior management to usually make the right ones.

As another commenter said, "you can be replaced with a calculator" if you just follow an inane formula and don't use the judgment you are paid to impart.

I'm hoping for even more comments on this post, so fire away .....


Link: Original Post

Technorati : , , , , ,

13 comments:

Anonymous said...

Large companies also have a major advantage - specialized hiring staff.

Ivan said...

Everyone is different. What motivates one employee may be different than another. I think "compensation" is best viewed in this light. Someone may want more money. Someone else may want more equity. And a third may want more time off, or unusual hours, the ability to work from home, a free bus pass, or the opportunity to change roles/careers. The key is making the employee happy. Happy employees are productive employees.

Jacob said...

Two comments:

First, get the budget before you even start looking for a candidate. You have work that needs to be done and that work has a certain value for your organization. Going this route minimizes your internal budget exposure. Stick to that figure. If a candidate is worth more, he/she is likely a poor fit for the job (likewise less).

Second, you can't be afraid of making mistakes. Fact is that any employee is going to make mistakes (we're human after all). Nobody wants to make them, but they will happen. How you and your organization handle mistakes that are made is very important to understand and the sooner the better. That said, mistakes are a function of risk. If you cannot tolerate risks (you the manager or you the collective company) then recognize that you will also forgo the improved payoff potential that risks represent.

And a corollary: if your personal risk tolerance is different from your company's risk tolerance, then the sooner you recognize that the better. Usually you can adapt (and you should, but that's a whole 'nother topic), but if you find yourself chafing under the difference, it's probably time for a lateral move :).

Scott Sehlhorst said...

Great posts. I'd like to build on something ivan said.

People will make their job-changing decisions based on utility (money + other stuff).

You are forced to operate under corporate constraints on money, and probably some of the 'other stuff'. But you aren't constrained on everything.

When you make the offer, consider saying "the offer is $X, and lets define some other stuff".

For example, most department managers can introduce a notion of limited flex time even in large corporations. If an employee wants to take a Friday off to go fishing, and asks to work an extra 2 hrs each day that week to 'pay for it' - encourage it. There's no cost to you, and a utility gain for the employee.

Anonymous said...

The Internet Marketing Genius, Carael Knight The source for information on internet classified advertising and the cheapest advertising method to boost "ANY" business online or off! Think targeted classified ads. Make Money Online using unique state-of-the-art classified advertising strategies.............................

Anonymous said...

"TOP Rated" Money Making Program Online The source for information on internet classified advertising and the cheapest advertising method to boost "ANY" business online or off! Think targeted classified ads. Make Money Online using the most profitable state-of-the-art business classified advertising strategies. Profitable Home Based Business

Anonymous said...

"Slaving For Peanuts-vs-Graving For Walnuts"

Let me tell you a story about me..............................Carael Knight
(TRUE STORY........)

When I first started building my company, MajorEnterprise,
I had started at the bottom. For years, I had worked SO hard "busing-my-hump" for a worthless salary. I mean
No Benefits At All........................................What kind of stability is this? And now, that I look back, the only thing
that comes to mind is, "Man, I worked for some complete "Dummy's" (a.k.a "Bosses.").

The majority of "J-O-B-S" that I have ever worked, I been fired from. I have never been really good at
working for somebody else. I guess one of the main reasons would be that they knew I was humble. Or maybe they
feared me being so intelligent that I would possibly take over the company or something.

They would say stuff to me like "your not being productive enough" or "we need
to talk about your work ethics". It had been times where I wanted to literally laugh in there face! Why? Well, one reason
would be...........................................

1. I have been commented on my "work performance" so much that it would feel strange NOT to be questioned about my work ethic.

2. What benefit will it be to me if I worked "twice as hard" and doubling my workload for still the same pay rate???

3. If I was to get a raise on a "J-O-B", it wouldn't be much because most "J-O-B-S" only give a person cents on the dollar.

4. In life, if I work hard at something, I would rather "bust-my-hump" doing something I love to do rather than wasting my time doing something to make another man richer!

A lot of people won't tell you these things because there "scared" that they may get laid off or have someone think
differently about them. But as for me, I'm my own individual. I'm taking the gloves off! I'm taking a stand to let any individual that feels
like there isn't hope, know that if I can be successful, so can you! Hear my clear, "The only way to truly be happy in life and be successful
is to do what interest you"! Find your niche. Get out and explore new things and opportunites. Find something that you love to do and pursue it.
"NEVER, EVER, EVER, GIVE UP". This is one of the formulas of success! I've always looked at things in clear view in terms of business and personal
finance.

MajorEnterprise

The road was never easy for me but if there are people out there that have overcame hardships ten times as worst as mine, then this should be
a piece of cake for me! That's how I've always looked at it. This is the game of life. Just because a person starts ahead in the race doesn't mean that he
will always finish first. Statistics show that just about every person who is "self made" had to start from the "bottom of the barrel" and "work there way up the ladder". You can too. Being successful and become a shining star in life is not going to be easy "BUT" it isn't impossible either......................................

This has been my true story that I felt I should share with the world..........................................................................

"A Person Never Understands The Sun, Until They've Came Through Rain"........................................Carael Knight

For More About Me And My Company, Visit:

MajorEnterprise

Anonymous said...

The Internet Marketing Genius, Carael Knight

Information powers our world. The more information you have, the more money you make. It used to be you had to go to an expensive business school or spend years becoming a doctor or lawyer to have valuable information people would pay big money for.

Not anymore. Today ANYONE can use FREE classified ads to sell information demanded daily by MILLIONS of people. Think about it. These days when somebody wants to know how to do something, they GO ONLINE and look for INFORMATION to tell them how to do it.

My name is Carael Knight. I started Major Enterprise about seven years ago with a vision and a plan.

The vision was to show people how to start, run, and operate their own profitable online business. Now that led me to create the plan, which was the process of carrying out the vision!

Click Here for more information:

The Internet Marketing Genius, Carael Knight

Anonymous said...

Nice Blog. I will keep reading. Please take the time and visit my blog about: Internet Marketing and Making Money Online

MajorEnterprise

Anonymous said...

There is alot of debate whether you can Make Easy Money Online and with so many scams out there it is bound to be a little bit dishearting!

So are there any legit ways to Make Easy Money Online?

Well, Yes you will be glad to know there are legit ways to Make Easy Money Online the only thing is all of them require hard work!

I know there are websites out there that claim you can become a millionaire overnight but if you think about it this is just not plausible!

That said with a bit of work on your part you will be suprised how easy it is to Make Easy Money Online and you should start off by searchnig for more info on Google and maybe join a few groups with like minded people!

If you really want to know how to Make Easy Money Online I would suggest investing in this manual, but only if you are serious as they will give you the keys to the door but you must open it so to speak!

One guide I would recommend that was created by an internet marketing genius, Carael Knight that made it big is called "How To Get Rich Selling Information Through Classified Ads"!

For more info on MajorEnteprise and how you can start to Make Easy Money Online, click the link below:

Make Easy Money Online

Anonymous said...

QLx3 Best Income Program The Most Powerful Business Social Network and Income Program On The Web!

Anonymous said...

Anyone looking for a great home business opportunity needs to check out a recently launched program called the EDC Gold. We are having tremendous success with this program. You can check out the program at http://www.amazingopp.com/ In addition, we also provide a guarantee of success with this program for member of our FREE website called the Global Home Business Resource Center . You can check out this website at http://www.globalhbrc.com

Anonymous said...

Very interesting blog. With valuable information and tips.
It is a pleasure to read, even the archives.
Take the time to visit the following info at Click Here!"