7.27.2003

How Recruiters Think When They're Trying to Place Candidates

"How to Make Placements in a Soft Economy
By Ken Forrester

Headhunters today are challenged in making placements in a soft economy, not only because of the low supply of qualified jobs, but because of the expanding gap between market compensation and internal equity. The demand for talent fueled by the Internet driven economy has pushed compensation to an all time high; yet salary expectations of job seekers has remained at the same level in today's economy; one that is characterized by global uncertainty, falling stock prices, declining corporate profits and massive layoffs. As a result, headhunters can no longer expect employers to offer a huge pay increase, hefty signing bonus, or offer stock options to meet their candidate's salary expectations in order to make a placement. So, in order improve the odds of making a placement, diligent effort must be placed on curbing candidate salary expectations. This article will focus on the methods recruiters must utilize to narrow the gap between the candidate's salary expectations and the client company's internal salary structure. <Don't believe corporate poor-mouthing for a minute. Corporate profits are at an all time high. They've outsourced work to anywhere they can (other countries); labor costs have dropped considerably over the past couple of years. Stand tough. For the jobs that are available, there is still in many cases a skills shortage.>

Market Salary
To fully understand the dynamics of why a gap exists between the candidate's salary expectations and the client company's internal salary structure, one must first examine market salary from the applicant and employer's perspectives. Most candidates will tell a recruiter that they are underpaid compared to the market. So the question becomes, what is the market and how does one determine if his present compensation is above or below the market? Even though candidates cannot fundamentally justify their supposition <yes they can!>, they will support their belief by disclosing a required salary amount to justify a change in employer. That magical number is the standard 20% increase in pay or the amount:
* A counterpart recently received when he was offered a position at "XYZ Company"
* Obtained from conversation with a Recruiter conducting a search assignment who was seeking potential job applicants at his level of experience
* His superior is presently earning even though he is the one doing most of his superior's work
<And why should any of these be bad reasons? How else do people learn that they are being underpaid? If the shmoe down the row from you goes to another job, gets paid considerably more, and he isn't nearly as talented as you, what's going on? Obviously the market has changed. Recruiters know good and darn well what the market rate should be for a job. If you're not making that, they know something is wrong. If you're underpaid, don't let them know that - know what market rate should be for your geographical region and specialty, and make sure that's the bottom end of the range you will be discussing. And if you can do your boss' job better than they can - why not look for a promotion? As to the 20% number - that's not the magic number. It varies. If you're getting paid 20% less than market rate at your current job, your raise could wind up being much more than that to take the new position. If you're already at market rate, you might not get 20% more than you currently make to take a similar position. This is why switching jobs to get raises is a good strategy. If you were underpaid at Company X and took a promotion, you'd still be underpaid in the new position, because they base raises on prior salary levels.>

Based on 14 years of recruitment experience, I have concluded that market compensation is a variable that changes with every job order. This can also be explained with the economic principles of supply & demand. In the talent acquisition market, supply represents the average salary of the candidate pool of screened applicants for a given job order. This is not the average salary of all candidates with a specific level of experience, but only the applicants that has expressed interest in interviewing for a particular job. Demand is the level of interest that is generated from the publicity of a unique job opportunity with a specific employer, at a specific level of compensation in a given location. If equilibrium price in the economic principle is realized only when supply equals demand, then market salary in the talent acquisition market is the salary amount that a screened applicant from the candidate pool will accept for the given job opportunity. Keep in mind that a job opportunity from an attractive employer will generate a larger pool of qualified applicants than any other job opportunity. With that in mind, the average salary of candidates for a very attractive job opportunity will most likely be lower than the average salary of the typical job opportunity. Based on the numbers, if there is very large candidate pool, a successful hire can be accomplished at a lower salary. If only a handful of active candidates are generated for a typical job opportunity, then it most likely will result in a higher salary to make a successful hire. So the high risk-high reward theory is in effect, in this case, the more attractive the job opportunity, the lower the compensation requirement for an acceptable offer by a qualified candidate. <Job Fairy tactics are useful here. When you let them come to you, you're more likely to be in demand and have the leverage needed to obtain higher compensation than you would otherwise. Just know that when you apply for jobs directly through a company site, you'll be one of the Great Unwashed. Maybe you'll be noticed... maybe not.>

Internal Equity
An employer will view market salary as simply the amount they are currently paying or have recently paid to hire someone at that given level of experience. By design or default, most company's individual pay structure is quite simple. In each of their divisions or departments, the senior managers are paid higher salaries than the mid-level managers are, and the mid-level managers are paid a higher salary than the lower level managers are. Managers progress up the ranks through promotions and merit increases. When a new manager is hired, the HR folks who are typically sensitive to their internal salary structure will always design a base salary that will adhere to that structure because they are very concern about upsetting the apple cart. Morale would be compromised if it became known that a mid-level manager earned equal or more salary than a senior manager did; or a younger mid-level manager is offered equal or more salary than a loyal veteran middle manager. <I have seen this happen. People that work their way through the ranks over the years often do not make what their juniors do, simply because it costs more to hire people these days. Don't let that be any justification for a company or recruiter not to pay you what you're worth. Know what market rate is. Do your homework. And make sure that number is the starting point of your negotiations, not the ceiling.>

Pre-screening Candidates
Most Recruiters will agree that during job offer stage of the recruitment process extensive negotiation is often required to bridge the gap that exists between the client company and the applicant. Extensive negotiation is a requirement because the client company is often focused on the "old school" internal equity issue and the applicant is often driven by the phantom market salary compensation. Therefore, the stressed Recruiter is often caught in the middle, desperately trying to appease both sides to make a placement while time is ticking on the clock. <Poor babies. They make from 10 - 60% of your hourly fee as a contractor and usually have a 3 - 6 month minimum period when you get hired temp to perm, so the client company doesn't have to pay that big fee up front. Plus they can easily charge 25%+ of your annual salary as a finder's fee to the company if they are trying to fill a job slot that requires unusual skills. If they're getting their share of the pork barrel, you need to as well. Don't let them make you feel guilty.>

The "ABC" of successful recruiting is very simple: Always Be Closing. The best time to start closing the candidate is during the pre-screening, interviewing, and offer stages of the placement process. If at any time you determined that a candidate's current compensation is at the high end of the salary range compared to other candidates for the same job opportunity, then it is essential to further probe that candidate to determine how he actually achieved that high level of compensation. If a candidate has a high salary compared to his years of experience, this means one of the following:
1. He is a true superstar and has out-performed his peers
2. There was rapid growth in his division and he achieved a windfall salary because he was in the right place at the right time
3. His division is a "sweat shop" and because of high turnover his employer often-utilizes counter-offer inducements to retain staff
4. His employer is located in an unattractive location and thus must pay top dollar to attract talent
5. His employer/department is high risk (start-up/small fish) and must pay top dollar to attract talent
6. He often changes employers and has increased his compensation with each move
<It doesn't matter which one of these applies to you. When you are in the market to make a change, you are looking to leave because you want more professional challenge. That's the only socially acceptable reason. Don't let a recruiter maneuver you into a box. You should get the range for the position. This will have been artificially racheted down. If the recruiter tells you between 50 and 70K, the employer will want to hire at 60 or less. You will probably be making just under 70 at this point. The position should probably pay 80. Market rate for the position may be 75. Unless you are very well versed in what people are actually making, they'll be able to get you every time. And don't go by the figures that places like the Rocky Mountain Employer's Council publish. Those are lowball, employers-would-like-to-pay prices. They bear no relation to what other people are getting paid for actual work.>

Fast Trackers
If, based on in depth probing, you determined that your candidate is a legitimate superstar, then less convincing is necessary to get his salary expectation in line. That is because if he really wanted a pay increase, he would have the confidence to simply ask for and most likely receive one from his current employer. Therefore, his real reason for seeking a change in employer is more than about an increase in salary. Most closing problems occur when working with fast trackers that are not legitimate superstars. Fast trackers are the applicants that will gladly go to the highest bidder for their service. They will burn bridges with employers and jilt a Recruiter at the altar because they view counter-offers as simply a tool to attain an increase in pay. <Don't make this mistake. Never use a counter-offer to attain an increase in pay. But see how recruiters think the worst of candidates?> To improve placement results, recruiters should simply walk away from the fast trackers because of the low odds of making a successful placement today. Valuable time is often wasted by guiding the fast tracker through the interview process, because most often, he will be eliminated from consideration at the 11th hour. This will be because he is perceived to be overpaid or inexperienced, compared to the candidate pool. However, if the fast tracker is selected for the offer, be prepared for a battle, as he will seek a huge pay increase to accept that offer - or he will use that offer as leverage to obtain a counter-offer from his present employer. If you must work with the fast tracker, then it is imperative from the start that you are firm in educating him on current market conditions, market salary, and internal equity before presenting him to your client. If he continues to work with you, he has a stronger motivation than money for seeking a change in employer. The fast tracker who chooses not to work with you will simply wait for the next inexperienced headhunter that will assist him in obtaining that huge pay increase or a counter-offer. <It's not true that a superstar will just walk up to their boss and ask for more money. And it's even less likely that they'll get it. They are subject to the same asinine annual review policies as the rest of us. If they were superstars coming in, they got their goodies upfront when they joined. If not, the company is underpaying them just like everyone else. People leave because they can't get promoted, have differences with their boss or peers, or the work conditions are difficult in some way (inflexible hours, hour commute one way). Don't give a recruiter much detail about why you're leaving. It's none of their business, anyway. You should be focusing on how your skills match the job description perfectly.> 

Superstars
There are more similarities than differences between the superstar and fast tracker. Like the fast tracker, superstars are also highly paid, but typically have longer employment tenure with past employers compared to the fast tracker. This is because in evaluating a career opportunity, superstars are motivated by the future long-term potential of the job opportunity and are less concerned about the initial pay increase. They will often win acceptable job offers because they sell themselves in terms of being big picture thinkers and problem solvers who understand the employers' business and problems. Superstars are not hindered by the internal equity issues because they are confident that they will be quickly promoted to the next level once their new employer recognize their skills in generating revenue, reducing expenses, and improving efficiencies in retaining clients and energizing staff. <Yes they are hindered by equity issues. You can't put lowball offers in front of people with good skill sets and expect them to be thrilled. You can't dangle a promise of "you'll get promoted soon" to mitigate a mediocre pay package. I can't spend a promise. If you're smart enough to be a superstar, you'll expect no less than market rate compensation.>

Closing
Closing the candidate on salary issues starts from the information gathering stage of the placement process. Here is what the Recruiter should and should not do: Do not divulge a salary amount or a salary range in your initial conversation. The danger in giving out a number or a range is because the candidate will use that specific amount or the top-end of that range to determine his interest level in exploring the job opportunity. That amount eventually will become his salary expectation for an offer, should one be extended. If the candidate requests salary information, simply inform him that you do not have a top end for the range, as the salary will be commensurate with experience, and the company will take into account the amount that he is currently earning plus an increase to construct an offer. Therefore, salary is negotiable. <Make sure you know what market level is for what you do, and for the job you are being offered. Make sure that's where the discussions start. And don't let those discussions start too soon. Only talk about money once the employer wants you. Make sure they do toss out that range first. Believe me, when recruiters have your resume in front of you, they know how much you should be making. If you let them know that you are making more than that, they'll be suspicious. Less than that, and you might as well paint a target on your shirt. Their "range" is quite interestingly and suspiciously close to what you already make, or just a little less.>

In obtaining current salary information, do not ask the direct question, "What is your present compensation"? <If they do, it's market rate for your job, in numbers.> Asking that direct question will increase the odds of receiving an inflated salary amount that can eliminate that candidate from consideration, or surely present closing problems at the offer stage. To improve your odds of obtaining sincere salary information and to gain insight as to the amount it would take the candidate to change employers, you may want to ask two questions:
* Based on the experience that you will bring to the table, what do you feel is your worth in the market today? The amount he tells you is most likely the amount that he is seeking to move up to. <This will be market rate for the job in question. But don't answer this question directly. Counter with questions about the range for the position. It doesn't matter what you want as a particular number... You can't get 80K for a desktop support position. So it does depend on the scale. You just want to make the best deal you can.>
* Where are you currently in relation to the market? He will most likely tell you the exact amount he is earning now because his objective is to convince you that he is grossly underpaid in relation to the market. These two pieces of information should determine your next step with that candidate. <Don't get caught! You never ever want to let a recruiter know you're underpaid. It's like letting them know you're unemployed. It will definitely hurt you in the wallet. Let them know you're at market rate for your current position. Ideally, these two numbers should be no more than 10% different from each other. But it's most important to be at market rate for your current position. The difference can be more than 10% so long as you're at market rate already. Don't try to "impress" a recruiter with how much you're underpaid. These people have no pity. Think of them as sharks, and you'll understand. They want to make the most profit possible on your placement. Their price to the employer won't drop, but yours might be lower than you'd like...>

Do not ask, "What amount of salary it would take to accept the job offer"? If so, you will get the standard "show me the money" answer or "let's see what they will come back with first" response. Ask these two questions instead:
* Regardless of how great this opportunity is for your career, if they came back with an offer, what amount will be an automatic no, just too low for you to consider? <This amount is the market rate for your current position. Obviously you would not switch for no gain in pay, unless you were facing a certain layoff.>
* Here is the follow-up question: Regardless of how great this opportunity is for your career, if they came back with an offer, what amount will be an automatic yes, a "no brainer" decision? You must insist on getting each amount, because the two numbers will give you the high-end and the low-end of his salary expectations. This is meaningful information that can be used to help the employer construct the best offer. If you are unable to obtain these two numbers from the candidate, this is a red alert that there is a slim chance of receiving an acceptable offer. <This amount is market rate +10%. See if you can get that little bit more out of them. Don't make the mistake of being too greedy. Keeping it realistic reduces your chances of being found out if you're underpaid.>

Conclusion
Back in the late 1990's, there were more jobs available than candidates to fill each job, and employers aggressively utilized compensation as a tool to compete for and retain talent. Today employers have less job openings to fill and are more cost-conscious in reducing expenses, including payroll, benefits, and search fees, for that matter. Therefore, in an effort to jumpstart the economy, recruiters must do their part by successfully placing more candidates, which will then create more placement opportunities for other recruiters. However, in order to place more candidates in today's economy, recruiters must be successful in closing the gap that exists between salary expectation and internal equity." <Do you love your recruiter so much that you're willing to be paid thousands less so that he or she can make more money? I didn't think so. Make sure you're getting the best possible deal you can. Letting recruiters or employers make you feel sorry for them, or guilty for asking for what should be yours can prove quite expensive.>

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