Want good people? You need to pay for them.

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We might have a little salary range crisis in North America these days. Let’s paint up the picture.

First: even though in some respects it makes no sense, most companies still compete on cost-cutting plays.

As a result of that: bigger companies actually have an incentive/desire to drive down wages, which is the opposite of what your mom and dad told you for generations.

Third little pickle: most people don’t know what their salary represents and are terrible at trying to negotiate it.

The overall ecosystem gives a lot of power to the company side. They feel like “Well, we can find someone else.” (People are usually irreplaceable to decision-makers, sadly.) On the employee/candidate side, there’s a bunch of frustration. You feel like you have all these skills and are in debt because you built up your education bonafides, and now everyone is trying to undercut you.

Told this story in other blogs but once I saw a bullet list of 17 items for a job description. Needed tons of experience. Marketing “director” position. (We all secretly know directors are paper pushers but ignore that for now.) At the bottom, salary range? $55,000-$60,000.

Sorry Company A, but you ain’t gonna get someone with 17 skills and a MBA at $60K. They’re gonna go chase other butterflies.

Eventually Candidate B will accept the job — because he has to, dude’s been out of work — but it’s not what the hiring manager wanted. So he’ll bellow about a “skills gap,” then offer the same job at $50K to the next batch of candidates.

Final fly in this ointment: the “job-hopping stigma.” It’s impossible to make more money in the modern age without job-hopping. That’s almost a 100 percent true fact. It makes perfect sense, too: if you do well in your job and your manager is kind of an idiot, what incentive would that manager have to move you? You make them look good. This isn’t brain surgery here. It’s basic human psychology.

Let’s talk on this stigma for one second with some MIT research around the salary range issue.

The salary range and good young managers

MIT hit this ditty about retaining quality young managerial talent recently, and this part pops out:

We know that today’s young professionals are inclined to always be looking for better opportunities. Monika Hamori, Burak Koyuncu, Jie Cao, and Thomas Graf reported in “What High-Potential Young Managers Want,” an article in the Fall 2015 issue of MIT Sloan Management Review, that one reason, obviously, is salary. Hamori et al.’s research showed that pursuing frequent job changes was a successful strategy: “We found that, over a period that averaged five years, the frequency of employer changes increased pay for these workers. While those who stayed with the same employer received average annual pay increases of 11%, those with two employers received 13% average annual pay increases, and those with three or more employers saw average annual pay increases of 15%.”

That’s the stigma thing above. You want an annual pay increase of 15%? You better hop jobs three+ times. Unfortunately HR at many companies operates on Industrial Age principles, meaning some biatch in HR who doesn’t know the business model can say to a hiring manager, “I don’t trust this guy. He jumps a lot.” Meanwhile Danny jumps because he’s got three kids and a mortgage and every boss he gets is like “Stay at that level, Danny. You’re good.”

So now we gotta figure out about how to do salary range right.

Yea. How do we do salary range right?

It’s not that complicated.

Market research: Even though this should be dying out in favor of user data, many companies still love market research. Consulting firms love it too. ($$$) Almost no companies I’ve seen do market research around hiring and salary range, which would mean:

  • What rivals or local companies have similar roles open?

If you get a range on competitors and then answer those revenue questions, that’s your first step. You need a contextual baseline on salary range.

We should be having more open discussions about salary and compensation, right? I point to research on that in my newsletter. Once a week. Sign up.

Make it transparent: Most execs would kill their firstborn before they do anything on salary transparency, but it’s important. Why? Let’s say you know you need a sales guy. You think it’s a $90,000 job. Open that up to the sales team and see what they think. Some might go nuts — probably the ones who make less than $90,000 — and some might have good observations. But this guy/girl is about to become their colleague, so why not cue it all up? How much they make, what they’ll do, etc.

Stop lying: I hate, hate, hate, hate the interviews where the recruiter is like “No salary range on this yet…” No company with a CFO/accounting team would ever let a job post without a salary range. So base level let’s just be truthful on the range when we post.

What this all comes from

Many of us are brought up being told not to discuss money — or sex, or politics, or religion — with others. This means financial literacy is often in the toilet, which again gives the advantage back to companies. They set a supposedly fair “salary range” and they just assume people will take it because:

  • They need a job

If someone good won’t take it, chances are a hiring manager in marketing isn’t gonna bang on the CFO’s door about “talent.” He’s just gonna tell the good candidate, “Well, have a nice life!”

So in reality where it all comes from is this: executives should spend a ton of time thinking on people and hiring, but they don’t care. Processes and products, baby! Scale me! Salary range being an ultimate circle-jerk is just a reflection of that.

You ever seen a place where salary range was done well/fairly?

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Blogging, largely about work and how to improve it. How I make (some) money: http://thecontextofthings.com/hire-freelance-writer-ted-bauer/

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