The Myth of the Discount Hire

Submitted By: Priscilla Rosenwald, Principal, Leadership Recruiters

Recently, a service-oriented business in the Philadelphia area was conducting a search for a senior position. The fact that many of its neighbors and competitors had laid off some of their executive talent hadn’t escaped them; they were hoping to scoop up corner-office talent for a bargain basement price.

Once they had a candidate in their sights, they asked me about offering the candidate about two-thirds of the compensation that he could usually demand in a better economy.

I strongly urged them to reconsider.

I told them: “Don’t fall for the myth of the discount hire.”

Some executives mistakenly believe that an economic downturn offers a Machiavellian advantage to a company looking to hire and tempts them to lower their compensation packages to a candidate. The impulse is understandable. If jobs are at a premium, it might stand to reason that a qualified candidate would be willing to take a lowball offer.

However, even if a lowball offer brings short-term benefits, the negative long-term impacts far outweigh them.

Often, a candidate who accepts a position for lower than average compensation is a short-term employee, as the low pay can seriously affect performance. Or, there could be mitigating factors that not only affect why he accepted the job, but his performance. Alternatively, if a new hire outlasts an economic slump, he or she will certainly begin to compare her compensation with the rising demands in the job marketplace.

In any case, it’s the company that suffers the most.

If a new employee leaves shortly after being hired, it’s back to square one in the hiring process, which takes time and resources away from regular operations. If the employee stays, it can be a constant struggle to get optimal work from an under-compensated employee.

But there are still a number of ways a company can alter course in tough economic times:

• Conduct a full needs assessment. There may be ways that the right hire can service multiple needs in the company, increasing its return on investment. For instance, in conducting a needs assessment for a CFO, a company might find that its legal department is also under-capacity. In that case, the company could include legal experience as part of its criteria for finding a CFO.
• Get creative. Compensation isn’t always about cash. Other factors, including the ability to work from home, flexible hours or creative incentive structures could attract top-notch candidates without paying top-dollar.
• Talk with a pro. Professional recruiters can help make sure that you’re offering reasonable compensation for the position. And, they can help attract the best talent and screen out others, all without taxing your valuable time.

Even when money is tight, a company looking for the best talent still has plenty of options. But, offering low compensation and hoping for top performers shouldn’t be one of them.

Priscilla Rosenwald is founder and principal of Leadership Recruiters, an executive search firm specializing in recruitment and development of executive talent (www.leadrecruit.com).

Contact Priscilla Rosenwald at prose@leadrecruit.com.