5 BIG Risks when Pitching a Low-Ball Offer

 

Hiring a talented candidate at a discounted salary is a win-win situation, right?

Wrong.

The notion that you’re saving thousands of dollars by having low-ball offers accepted ignores a number of factors that prove disastrous for a company in the long run.

  • The reason why low-ball offers are bad is because when you decide to pay employees below their worth, you risk facing low performance, a negative attitude, and wasted time.

Discontent breeds discontent and by the time you realize a low ROI, your brand name might have already sustained serious damages.

Not to mention the fact that the US is currently enjoying our lowest unemployment levels since the early 1950’s. We are firmly in a CANDIDATE DRIVEN market, with DEMAND for qualified candidates far exceeding SUPPLY.

  • There has never been a less forgiving time to have a company have a policy of trying to get a bargain in terms of employee compensation.

Many other aspects of having a good match between a Candidate and Hiring Manager are intangible, but financial compensation is as tangible as it gets, and the losses you incur as a result of paying below market value far exceeds any monetary savings.

In this blog, we will list 5 reasons why making low-ball offers is not a great idea.

Inability to Hire High Performing Employees

  • In today’s Candidate Driven market, the chances of having a stellar candidate that is juggling multiple job offers accepting a low-ball offer are slim to none.

Therefore, not only will you be struggling to gain a foothold by hiring star performers within your niche, but chances are you will not be able to keep up with backfilling current roles because of the attrition factors.

This inability to be competitive in hiring talent and maintaining head count puts companies at a distinct disadvantage.   

Employees Will Leave

Even if you do end up recruiting a talented employee at a low salary, there’s a high chance he or she is going to jump ship the minute a better offer arrives. Not only will you then have to make up for the lost time, but according to a report published by the Center for American Progress, the average employee turnover cost is around 30% of an employee’s annual salary. Add loss of momentum, corporate knowledge and customer relationships to make attrition rates something that smart companies pay a lot of attention to.

  • By paying below industry standards, you set yourself up for all the pratfalls that accompany high attrition, and that is for the ones that take your offer to begin with.

Factor in the lost opportunity of hiring true superstars because they decline the low offers in the first place, and one can easily see how a policy of paying below industry standard is destined for failure.

Decreased Productivity

Employees who feel that they aren’t being paid their due worth will be less engaged even if they do decide to stick around for a while. At the end of the day, you get what you pay for, and by paying below industry standards, you are essentially diminishing the employee’s worth.

  • It’s difficult to expect an employee to remain motivated if they feel as though they aren’t valued.

 

Poor Company Culture

 

 

These days, job seekers weigh company culture as closely as other key factors, and research shows that for many millennials, company culture consistently ranks in the top 3 components when evaluating job offers.

  • Employees need to feel valued and appreciated in order to gain satisfaction and feel content in their work.

Underpaying employees does not lead employees to feel either, therefore job satisfaction levels are low and attrition is high.

Does it Hurt to Make a Low-Ball Offer?

YES!!!

Yes, it hurts to make a low-ball offer, because you are toying with your soon to be employee’s good will. Making a career change has a massive impact on someone’s entire life, and it warrants careful consideration.

After the interview process is complete, and at the point when the company feels that a candidate would make a positive addition to the team, coming up with an offer below what they are currently making is not a great idea, if the ultimate goal is to bring someone into the folds of the company and encourage them to build a long career.

In a perfect scenario, the subject of compensation should be broached during the interview process, and the hiring manager should have a clear idea of what it will take to procure an acceptance on the interviewee’s part prior to putting an offer on the table.

Ideally recruiters will serve that role, finding out what a candidate absolutely has to have, and wants to have, and then working with the hiring manager to ensure that the offer is as strong as possible.

It is wise to have a company make their very best offer from the onset, to generate good will, and to message that they see the value in the candidate and are excited to work with them.

  • We occasionally see a company begrudgingly come up to what a competitive wage would be after fiercely negotiating and starting low. Compared to companies that make solid offers from the onset, it is easy to see the difference in attitude from the employees at the starting blocks.
  • If you are able to pay x amount go ahead and pay it from the start. The additional good will you will receive from the recipient of the offer will be high.
  • If you are truly restricted financially, ADDRESS THAT! Actively explore other ways that you can make the job attractive….would working from home half the time be a nice benefit? What about flexibility in start times, benefits, bonus potential, etc. The point is to acknowledge it and actively listen for other ways that you can equalize the compensation package to make it more competitive. And the best way to find out from a particular candidate what would be most attractive to them? ASK!
  • Praise costs nothing, and study after study reports that the vast majority of employees would pick being praised amongst their peers as more valuable than a cash bonus. So, do that and do that liberally…praise often and loudly!
  • Create an infectious, positive culture that people want to work for, and compensate them to the very best of your ability.

When looking to cut costs and lower overhead, the absolute worst place a company should ever look is employee compensation.  Treat your workforce right and your business will flourish. Treat them poorly, and you will have unhappy, disgruntled employees, and that type of workforce has never led a company to success.

Ann Zaslow-Rethaber is President of International Search Consultants. ISC has been a leader in executive search since 1999. You can reach Ann directly at 888-866-7276 or via e-mail, at

Anna Souers is Director of ISCs team of Financial Services Recruiters, and she also leads ISCs team of Executive Assistant headhunters. Anna can be reached via e-mail at AnnaS@ISCJOBS.COM  or direct dial at 800-450-3808.