Competing for talent — Hiring Managers’ Dilemma

Here’s a scenario that plays out every single day for the engineering leadership in most companies in the valley — from startups to large organizations.

• You are actively hiring for engineering talent
• The average base cash compensation in the valley now starts at 175k/year for an individual contributor with about 6 years of relevant industry experience in coding and design. The total compensation (bonus + RSUs or stock options) will take this to about 300k/year. In all these years of hiring, I have never seen compensation packages this high in the valley. Surprisingly, even the functions such as product management/technical marketing/security/developer advocacy that are not directly relevant to core engineering has similar cash compensation trends. If you are hiring a director or a senior director, the base cash compensation will come around 260k.
• And there is this negotiation that goes on — candidate claims that he/she has an offer from GOOG or FB or they want to talk to their families or they have few more interviews with AMZN or NFLX or that they got counter offers from the current employer. Some of these are genuine but you will never know if this is the truth or this is being used as a tool for negotiation
• You don’t want to start the interview cycle again. Interview cycles (phone screen, resume reviews, on site interviews, engineering time etc.) cost the company — about 22k/hire in a recent study. You will probably end up increasing the comp a bit more to “close” the deal
• You make the final offer, check references and all that good stuff and close the deal. You cross your fingers and pray that your new employee will show up on the first day. There are times I thought that I closed the deal but only to find out that the candidate didn’t show up on the first day. You can cry foul but just can’t do anything about it. More frustrating when you spend the time and money, end up sponsoring work visas and they don’t show up
• This is all normal and where is the ethical dilemma in this process ?

Here comes the issue that most hiring managers don’t think about. By closing a higher compensation deal with a candidate, you might be (or you are most of the times) putting your existing team at a disadvantage. The folks that you have hired just in the last 24 months and putting in a lot of effort might still be at a 150k base package. Once you put someone in a compensation system (this is true for mid size to large companies), you just can’t give a 20% hike to everyone in your team hierarchy. The most you can do it a 5 to 6% adjustment per year.

When you make hiring decisions, I recommend that you take your overall team’s current compensation into account. If you feel that offering an very high comp deals to new hires will put your current team at a monetary disadvantage, then just walk away from making that unreasonable offer and move on to other candidates. It’s going to cost you time and resources but at the end, you will come out as a leader who is fair to everyone.