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  • Writer's pictureVirginia Lloyd

Compensation tragedy.. err, strategy.

For anyone who's ever interviewed for a new job, the experience is typically less than pleasant. Throughout the process, there is usually a significant amount of stress, anxiety, and preparation involved. This ultimately leads to the traditionally awkward moment of negotiating the salary. At this point, I would venture to bet most people feel drained and hope to never go through the experience again (at least not for a few years). The reality at this point is that many people change jobs every 6-18 months. One major reason, especially within tech, is that we're working within such a competitive landscape that if our current company doesn't value us, we can easily find another that will.  Salaries should be based on impact, not years of experience. Years of experience is a starting point, but when it comes to compensation, the impact an employee makes far outweighs the number of years they've been working in their field. Assessing someone's value in terms of years doesn't reward progress and tangible results, it rewards the assumed correlation between time and progress. I've seen candidates with one or two years of experience perform at the level of a mid-career employee, and I've seen candidates with 10+ years of experience perform at a mid-career level. The quality of the experience is what matters. How much you've learned, accomplished, and achieved in terms of impact matter significantly more than the number of years a person has been doing a job. Unfortunately, it's extremely difficult to fairly assign value to every level of every role in every company. It takes a lot of research to develop the right approach for each organization. If there was a proven method, we'd all be using it by now.  Currently, we have to rely on location, industry, market (supply and demand), the value other competing companies are placing on talent, and many other factors to determine what each employee should be paid. For this reason, without fair, transparent, and well-defined compensation strategies, employees will ultimately realize they may not be valued fairly and make assumptions that may or may not be true, resulting in unhappiness and lost productivity. At most companies, HR likes to believe compensation is confidential, but in reality, many colleagues are also friends and share that information with each other at some point. So, when Jane Doe finds out she's being paid $35k less than her colleague who is doing the same job to the same level of impact, the consequences can be devastating. Aside from a drop in motivation and productivity for the underpaid employee, it breaks any trust they had that the organization was treating everyone fairly. This can lead to resentment, venting to other colleagues, and a circulation of negative feedback that will likely lead to resignations, poor reviews on social sites like Glassdoor, and definitely bad word-of-mouth. The indirect costs are difficult to measure, but many passive candidates see reviews online and hear feedback through their networks. If the experience of working at a company appears to be fenced in by a culture of mistrust and unfair treatment of employees, it's likely some great talent will opt out of applying. Missed opportunities are some of the hardest to measure, but that doesn't make them any less real or impactful. The inevitable dumpster fire we call salary negotiations. In all the years I've been a recruiter, I've never heard anyone say they specifically enjoy interviewing. In reality, I would venture to bet most people dread it. From the initial decision that you want a new job, to finding a company that you're interested in, to applying to a job that excites you, to being contacted, to interviewing and being judged by half a dozen strangers, to receiving feedback on those judgements, to finally negotiating your value with someone that may or may not have your best interests at heart, it's stressful. It's really, really stressful. And many people are not good at it. But what's worse, is that many companies are not good at interviewing either. In fact, many don't know what they really want and the interview process is used to compare and contrast different candidates in the hopes that it will help them figure it out. It's extremely inefficient and creates an unfortunate situation for candidates who are forced to navigate each interview process differently. I've seen very few companies develop a fair compensation strategy where candidates are fairly assessed based on their qualifications, market data, and how they compare to current internal equity at various levels of impact, rather than their ability to negotiate. A strong compensation strategy incorporates all of these factors in order to arrive at a fair and unbiased conclusion. When there is not enough data to back a compensation decision and decisions are left to subjectivity, it becomes more likely that people will feel disgruntled and untrusting of the outcomes and eventually leave. Being forced to negotiate is considerably less fair for women and potentially minorities, as well. I could go into a philosophical breakdown of the social reasoning behind this, but what it ultimately boils down to the fact that many people don't understanding their own worth and how to determine their worth in numbers. Many companies have annual performance reviews. To date, I haven't seen any of these programs done in a manner that actually provides a truly fair approach that can be backed, defended, and accepted by all parties. It's typically a few people including the employees' manager and a Human Resources representative that decide on how valuable a person is to the organization. Aside from a very skewed perspective on a person's impact, performance reviews are essentially examining the most recent performance, not the employees' performance overall for the past 12 months.  Developing a fair and strategic compensation plan involves a lot of research upfront, but is well-worth the efforts in hiring and retaining the best talent for your company. Being able to determine and explain each person's value through data and a structured process builds trust and ultimately allows employees and candidates to rest assured that they will be paid fairly. One of the worst feelings for any employee is coming into an organization with excitement and vigor, only to find out they are being paid less than they should be - and at that point, there's nothing that can be done about it except accept it or quit. And for those who accept it, most will not perform nearly as well or stay nearly as long as they would have if they had felt valued from the start. The sooner a compensation strategy can be devised and implemented, the better off a company will be long term. Leaving it open and subject to biases will only create room for lawsuits and a negative reputation as an employer. Doing the right thing can be time consuming, but it will ultimately save incredible amounts of time, avoid many indirect costs, and develop a culture based on trust within your organization.

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