4 Reasons Fixed Compensation is the Answer

We have all been through those amazing salary conversations. The ones where the manager calls, knowing your expectations, offering 10k below where you know you should be. You have a bit of back and forth over a two-week period to negotiate somewhere in the middle where neither is truly happy. Or you have the other case in which you accept because you want to be part of the team and are now being underpaid. Having a “they like me, they really like me” experience sounds better right? By using a fixed compensation method, we have taken our offer acceptance average to less than 24 hours and have a 97% offer acceptance when following this process. In addition to that happy ending, you save two weeks of your time and the managers’ time. So, here is the data from the last two years of our fixed compensation experiment and why you should consider implementing it too.

Here’s how we did it:

First, we did our own compensation survey with searching a minimum of 3 salary websites to aggregate the data and analyze. After analyzing, we set up a compensation spreadsheet that detailed what each year of professional experience would mean and what salary the role would pay based on those years of experience in the mid-range of the local market. This is certainly bandwidth restrictive and there are lots of services out there that will provide the compensation bands for you, but I like to be frugal. Once the comp spreadsheet was built for each role, we would send it to the comp committee for review. For positions that we hire frequently, we would do a quick salary analysis to make sure market had not shifted. For positions we hired infrequently, we would do the same analysis on a next-hire basis. This is a straight forward, no negotiation approach.

What did that mean internally?

We found that we needed to space out some salary increases for a few of our engineers. It also meant we needed to have a few conversations around setting raise expectations for those who were far above the set salary band already.

Why should you do it?

1. Transparency – If your company values include anything relating to open, honest, or transparent communication, this is a great way to help reinforce those.

2. Disparity abolishment – Remove questions about who gets paid what, especially in similar roles.

3. Offer experience – No negotiation means: we should be in the same planet and excited to work together.

4. Manager time commitment – Less of your managers time spent interviewing candidates you can’t/shouldn’t afford. More upfront work done to reduce the continuing time of your managers after you build out your candidate personas.

Statistics show that 56% of employees dread the salary conversation, so we eliminated it. Statistics also show that females make 71% of males in similar roles. We eliminated that too. With this fixed approach, we presented the compensation after the first interview. Our interviews ranged from 3 to 6 steps depending on the role. After the traditional screening meeting or call, the candidate gets a follow-up email with a detailed list of benefits, availability discovery questions for the next step in the interview process, and a statement at the end: “Sounds like you have 5 years of relevant experience for a marketing specialist. If the interview process goes well, in addition to the x,xxx shares of TransLoc, you will have a salary of xx,xxx upon receiving an offer.” Transparency at it’s greatest when it comes to the dreaded salary negotiation. We realized and accepted we would lose some candidates that were interested in ladder growth or compensation growth, but what we got is people committed to the company purpose. Candidates seemed to really appreciate the up-front approach.

With presenting salaries on a role-based market criteria, we were able to take the protected classes biases out of the picture. We were hiring people based on market rates for the role, regardless of how much they made in their last role or heard other people were making. With this approach, everyone (and we mean everyone, regardless of gender, race, age, or status) had the same entry point based on relevant experience.

Since all the compensation information was being presented up front, the conversation at the end of the interview became a call from their new manager (#boss) saying, “We really enjoyed the interview and would love to have you as part of the team. Ryan sent you all the details, do you have any questions?” Typically the answer is no. “Great. When can you start?” Skipping all the negotiations can really save an impressive amount of time.

Those negotiation weeks were not the only time saved. I have spoken with many managers who talk about the candidates they “fall in love with” only to realize they can’t afford them. Sure, there is some value to interview practice, as well as hearing candidates and interviewers’ ideas and thoughts during that process. But how much of the candidates’ time, as well as everyone involved in the interview process, did you just spend? By presenting all that information up front, it just falls to the recruiter. There are people who want to be at the top of market and that completely fine for them. Before I spend 6-7 hours of their time, I want to spend 30 minutes and realize if we are in the same planet. If not, no big deal, maybe there will be a role in the future or maybe they connect you with someone else in their network. It’s never a bad experience. Did I mention that email also eliminates those counter offer people? You are giving them an email that says what that offer would be, so they can take it to their manager and say “I want some mo!”.

Being an agile company, we’ve iterated since initially rolling it out our fixed compensation plan two years ago, but based on overall projections of scheduled hires, we were right on plan with targeted salaries. Due to making a few necessary unscheduled hires, we did end up going over projections, but we have been really happy with the success. Notably, the statistics included here are based on Google research and do not reflect our incredible diversity increase from 12% to 52% (female and minority).

By taking a bit of a disruptive approach to the compensation disparity phenomenon, we were able to not only eliminate it, but also reclaim some needed productivity time previously spent in the talent process of candidates. We were able to secure the right candidates, at the right salary, for the right opportunities in the right amount of time. Increases in diversity representation and decreases in interview and salary negotiation times were just the data focused pieces of the solution we developed. Increases in employee satisfaction, retention, and overall, dare I say, happiness are things to continue tracking. Two years certainly isn’t sufficient time to say this is the solution for everyone, but it definitely worked for us.

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Ryan Batchelor is a published trainer for social sourcing and the Founder of TalentARB and HRFuel. TalentARB helps companies take their talent attraction, talent retention and employer/talent brand to new heights. HRFuel is a hands-on conference where HR and Talent professionals can have high octane interactions and walk away with a plan. Ryan has spent the last 15 years in various HR disciplines and currently specializes in: candidate attraction (talent acquisition), employer branding, recruitment marketing, and employee retention.