Employer Strategies to Succeed in a Candidate’s Market: Lead, Match or Lag
Part 2 of a 2-Part Series on the Important and Timely Issue of Hiring in a Candidate’s Market
When I turned 21 years old, I was in my Junior year at Bowling Green State University and had just changed majors from Music Education to Business. It was then that my dad gave me my first $500 to invest in the stock market. With it came a book by Louis Rukeyser titled, “How to Make Money in Wall Street.” In that book, Mr. Rukeyser introduced me to an axiom of investing that no doubt predates him, but I found the application well beyond investing: “A bull makes money, a bear makes money, but a pig goes broke.”
The axiom was referencing a rising economy (as in the horns of a bull pointing up) and a declining economy (as in a bear swiping down for its prey). But the reference to the pig is about those who invest with greed, trying to time the markets and get rich quick rather than selecting the appropriate investment strategy for the current market flow. Now, I’m not a market prognosticator here to tell you how to make a quick buck on Wall Street, but the axiom has some interesting applications that can make or break your company if you know how to apply it with three critical human capital investment strategies.
The last article, “Employer Strategies to Succeed in a Candidate’s Market,” addressed various direct and indirect compensation elements that can be flexed in order to build customized and compelling offers to attract top talent in the current competitive candidate’s market. In addition, the need for a compensation philosophy and strategy was outlined. What are these strategies?
Simply put they are: Lead, Match or Lag. Piece of cake, right? Well, as with all things in business, it’s not that easy. Let’s understand what they mean first.
- LEAD: This is the most straightforward. In short, you pay more for the talent than the going market rate. After all, who wouldn’t want to take a job that pays more than anyone else in the same role in another company?
- MATCH: On second thought, perhaps THIS is the most straightforward. All you have to do is match the current market. Surely candidates will buy into the fact that, “this is the rate… take it or leave it?” Right?
- LAG: Then there is the biggest money saver of them all and an employer’s dream. Pay less than everyone else for the same talent to do the same job. You’ll rake in the money and not have to share!
Well, maybe not. Unfortunately, they just are not as easy as they sound, but they are the strategies that need to be employed and each really does have its own place.
The compensation philosophy of the organization should include an understanding of the underlying strategy you choose from the above. Understanding where the market is will help you better set the appropriate compensation for each position and situation. The hard part is when the market is changing right before your very eyes— as in today’s market! As SHRM points out in their article on planning and design, “There is not one strategy that will work for every employer and organizations will need to ensure the approach they choose matches their mission, vision, and culture and supports the overall business strategy.”
Rather than adhere to a singular strategy across the organization, especially in the current candidate’s market, consider implementing a combination of each. As an example, you might choose to:
- LEAD: A great option for those mission critical and hard-to-fill roles where attracting top talent in a timely manner will make or break organizational success.
- MATCH: A recommended option for mission important and challenging roles that could just be a pain to have to fill and where there is a high potential of attrition due to market perception.
- LAG: Many businesses have roles of lower importance where labor may still be plentiful or where vacancies are less damaging to the organization. For those roles where the time sensitivity or mission impact is low, this is an excellent option.
Spreading out the strategy in this fashion across roles by importance and impact can soften the blow to your P&L and provide the cash flow necessary to apply the “Lead” strategy used in other roles. However, let’s not fixate on cost too much. Remember the tools in the toolbox from the previous article? Not all of your tools revolve around base compensation, direct compensation, or even compensation at all! That’s right, the strategies COULD conceivably look like this:
- LEAD: Mission critical, hard-to-fill roles include a robust relocation plan, signing bonus, and/or a diverse set of PERKS not offered to any other role in the organization (but offered to all roles in this category).
- MATCH: Mission important, high attrition and painful-to-fill roles include lump sum relocation of a defined range based on need, flexibility for remote work, a retention bonus for 2-3 years of service and/or an attractive but narrow array of PERKS.
- LAG: Low time sensitivity or mission impact roles include a retention bonus for 3-5 years of service and/or a narrow array of PERKS.
Still, many hiring managers, particularly those with no budgetary control or line-of-site often jump right to, “I want XYZ person so just pay them more!” If you cannot reasonably do that because you will blow your budget and risk pushing the organization into the red, then you cannot always lead the market. Leading the market may not always be the right answer for your company and may not even align with your organization’s mission, vision and culture.
Here is where Mr. Rukeyser’s investment axiom comes into play. As human resource personnel, compensation managers, or even accounting/finance professionals, basically the function that often holds this responsibility in small and some mid-sized companies, we need to be prepared to educate our hiring managers around the axiom of bulls, bears, and pigs. Where necessary we should instill proper controls to reel in the wild rogues, without unnecessarily restricting the creativity in application for the passionate adopters. When you invest in your people with the appropriate strategy, you will make money when the market is tight (bear when it comes to labor) or slack (bull when it comes to labor) and enjoy continued successful operations and growth. However, if you are insistent at just throwing money at the problem, you are like the pig and doomed to go broke. Lead, Match or Lag… The choice is yours.
SOURCES: Society for Human Resource Management (SHRM)
If your company is need of assistance to develop compensation strategies in a candidate’s market, we can help — contact us today!