Tuesday, October 16, 2012

Cheap Talent Can Cost You

Picture the scene:  your company is seeking to employ an Operations Manager, and the leading candidate is currently "in transition."  Human Resources has pegged the market value of the job at $ 75,000, but it's known that the preferred candidate (Bob) will accept $ 65,000.  A seasoned and experienced professional, Bob was previously paid $76,000 by his last employer, but was caught up in a restructuring staff reduction.  He's been out of work for almost a year and is getting desperate, worried about feeding his family and paying the mortgage.

When the decision point arrives, other less qualified candidates are already making $ 70,000 and asking for $75,000.  Some hiring managers would look at this situation as a no-brainer.  "Let's hire Bob and save $10,000 to $15,000" would be the smug decision. 

That wasn't hard, was it?   An exceptional candidate has been gained at a low ball price.  The manager deserves a pat on the back for saving the company money.   But, wait a minute.   Perhaps it should be a boot in the butt instead. 

A savvy professional like Bob will have a sense of the competitive market, so he'll be aware of having taken a significant pay cut to land this job.  So how excited will he be with the offer?  Today, he'll be delighted and will celebrate getting a job and finally having money coming in again.  Tomorrow, not so much enthusiasm.

How long before his resentment grows, knowing that he was taken advantage of – gotten on the cheap?  What will happen to his energy level, engagement, even his morale?  What will he now think of the company, never mind his hiring manager?

What's the likely future for Bob?

It's always safe to presume that how a candidate is treated will be discovered later by that same new employee; otherwise you'll be stuffing skeletons into a closet – and you know that trick never ends well.  So when Bob confirms for himself the low ball treatment, what reaction can you expect?

  • Angered by a sense of being taken advantage of he could continue with his job search - looking for a better opportunity - while still working for you.
  • His job performance might suffer, dropping from 110% to automatic pilot to somewhere south of Satisfactory.  He'll be going through the motions – not exactly the dynamo you thought you had hired.
  • His attitude will turn negative and he'll morph into another disengaged employee – critical of the company and management, doing no more than he must in order to get by.
  • And he'll ultimately quit, but on his terms and timing.  His anger will have kept simmering and he'll likely feel little concern as to how his departure affects the organization.

What you have now is a bad hire - a situation that's unnecessary and easily avoidable if you treat candidates fairly.  Look at it from the candidate's perspective; when your back is to the wall and you feel your "rescuer" is taking advantage, that feeling causes a pit-of-the-stomach resentment that lingers and festers.  And it costs.

Let's tally up the cost

The manager claimed a cost savings by the hiring decision.  But when you factor in the longer term ramifications of that decision, how do the initial savings hold up?

  • The hiring decision saved $10,000 to $15,000 per annum by consciously underpaying the candidate.
  • What is the discounted value of a disengaged employee who doesn't perform as expected or desired?
  • What is the value of time lost when Bob quits and the job is vacant while a replacement is sought?
  • What is the value of hiring a potentially more expensive replacement (plus agency costs) and perhaps relocation?
  • What is the value of productive time lost while a new employee gets up to speed?
  • Finally, what is the subjective value of a discontented employee in your midst, who is possibly poisoning the attitude of other employees?

So the next time a hiring manager proudly announces how to save a bunch of money on a candidate who's in transition, take a moment to think it through.  You may want to consider a boot in the butt instead.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Thanks to Chuck Csizmar / Compensation Cafe


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