The interviewing process is imperfect.
Hiring managers and HR are on their best behavior. They are selling candidates on the job’s responsibilities, the people they will get to work with and for, the company culture, and the vision/mission of the executives.
Candidates are promoting themselves and aligning their interview question answers to what the employer wants to hear. They are anticipating how to best present their capabilities and experience.
And in the end, it takes time to know what you really have with that new hire you just onboarded.
The process of determining what to pay a new hire is challenging for HR.
· You consider what other employers are paying for similar work (aka market data).
· You review the pay of employees who are doing the same or similar work (aka internal equity).
· You can’t ask how much the candidate is earning today.
· You must consider the time of the year and whether to include a merit increase early and make them ineligible for one in the first quarter of the new year.
· You think about the prorated bonus amount they get from you for joining during the performance period, and the bonus the candidate may be leaving behind at their current employer.
· If the new hire will receive a sales commission instead of a bonus, you need to consider how that will impact the candidate’s decision to accept or reject your offer. And you need to explain the sales incentive plan, so the candidate knows what they are saying “yes” to.
· And if the candidate has unvested equity with their current employer, then you need to analyze when that will vest in relation to when your new hire and annual grants vest. The size of grants matters too.
· And, of course, the hiring manager has an opinion about what should be paid and why. Plus, they have a budget they need to consider.
· Oh, and don’t forget the benefits side of rewards. The candidate will need to know those details so they can make a comparison and figure out if you are offering something better or worse than what they have today. You may have to do a sign on bonus, increase your base pay offer, or do something else creative to solve the “worse than” issues that may exist here.
And some candidates overstate their capabilities. They are over selling themselves in the interview process and you assume that they can perform at a higher level than they can deliver. The result is that you are paying more than you should to the new hire.
Or the candidate understates their experience and skill level. Then you find out that they can do far more than you anticipated. The result is that you are paying less than you should to the new hire.
Do I have an answer to this problem? I’ve learned to ask good interview questions. And then ask additional follow up questions to dig deeper. Check references. Ask for examples of their work. If you are going to ask a candidate to do work for you, pay them. Don’t be a jerk.
But don’t drag out the interview process because candidates are talking to other employers who are probably going to make the hiring decision faster than you.
No new hire pay decision is perfect. The best you can do is decide based on what you know today. Then revise your approach as you get more fact-based information in the future.
Let go of those bad hires. They just drag everybody down. And they create a mess you need to clean up.
Celebrate and reward the great hires that exceed your expectations.
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