Compensation behind the scenes – Are you leaving money on the table?
Updated: Sep 5, 2022
Have you ever discovered that a peer of yours is making more money than you? This is often a tough realization. I know – I’ve been there. It is also an incredibly powerful piece of data. It’s important to note right off the bat that compensation is much more than base salary. Yet, it is often base salary that we use for comparison. This is an important but incomplete data point, especially for more senior leadership positions. For example, my base salary as an executive is less than 50% of my total compensation. Compensation can have many components to it and the importance of each of these will vary from person to person. Here are some typical ones to consider: base salary, performance bonus, equity options, benefits, pension, vacation days, culture, values, and work/life implications.
As a senior leader of many different Tech and Data organizations, I've been making compensation decisions for employees for many years. All these decisions involved three imperfect components – people, processes, and budgets. I had the benefit of having processes in place to ensure I was doing my best to pay people fairly and competitively. I relied on HR to pull market stats and additional info to help me. I had access to a lot of compensation details for team members in my organization (across many different countries), which helped me compare different salaries within the context of the role and market dynamics. I've had people reporting to me that made more money than me. I’ve also had situations where I felt an employee was being paid competitively (based on my thorough assessment), and yet they were offered more money from another company, for a similar role.
Market dynamics that impact compensation decisions not only consider supply and demand of your skills and experiences, but they also consider this in the context of the specific role, company, industry and/or region you are working in. I could have made more money if I moved from Canada to the USA. I could have made more money if I moved back into the Tech Industry from Banking. My point is – there are a lot of nuances behind compensation decisions – both in what is offered by the company and what is accepted by the candidate or employee.
I’ve been fortunate to work for companies that are well intended and thoughtful with employee compensation. This is not the case for everyone. Some companies have little in the way of processes, support and/or mechanisms to ensure their compensation processes are effective, equitable and hold managers accountable for their decisions. Not all leaders take the time and/or have the ability to leverage the support around them to make equitable, competitive offers. I certainly don’t always get it "right" despite having good intentions and support around me.
Even the best-intended humans and compensation processes are inherently imperfect.
Here’s an example to illustrate this point. It can happen that new employees joining a company receive higher compensation than existing employees in "comparable" roles. There are several reasons as to why but in short, especially in larger companies, this can be the result of HR processes and more specifically the way in which compensation budgets are structured and given to managers for distribution to their employees. Increases for existing employees are usually part of an annual compensation cycle with its own budget. The budget allocated is often “averaged” across the size of each organization. This “bucket” of money while often of reasonable size overall, is not personalized to each employee and so everyone usually gets something, but larger increases may be more difficult to make with the money available. So, the yearly raises don't bump up some salaries enough and the competitiveness of those salaries wane overtime. The process for new employees typically provides access to a recruiting budget that is set up differently and personalized to the candidate and the market at that point in time. The good news is that managers usually also have access to a process and budget for "off cycle" or "special" requests to bump up salaries. I've used this many times but not all managers know about this, know how to use it, and/or feel comfortable making the case to tap into this special budget.
Let me pause and make two statements in case they aren’t as obvious as they should be.
First, your compensation does not indicate how valuable you are. You are 100% valuable and 100% worthy no matter what. Second, your compensation doesn’t necessarily indicate how valuable your skills and experiences are either.
As I’ve shared, there are number of factors involved in making compensation decisions that have little to do with you. Some of these you have little control over but there is still much that you do have control over.
Here are my tips to help you decide whether you are leaving money on the table or not when it comes to your compensation.
1. Always know how marketable your skills and experiences are.
Literally KNOW it yourself, like in your bones. What do you believe about the contributions you are willing and able to make? Think about this in the context of your knowledge, experience, network and your unique “super-powers”. Become unshakeable in your self-belief. Check out my blog post, Sharing Your Power Story, to help you build this belief as a continual practice overtime.
2. Reach out to your network to get perspective on the market and comparable compensation for similar roles.
It’s important to get context from others who may have access to compensation and market data that you do not. Invest in asking mentors, sponsors, HR, and recruiters what a competitive salary would look like given what you bring to the table and the type of accountabilities you have in the role. Ask if they can provide some anonymous examples of other people’s compensation for comparison. True story: I reached out to a trusted recruiter at one point to check whether an offer I was made for an expanded role was competitive. I really had no idea. He was able to share the typical range for the role and given I would be growing into it (not as much experience in some aspects of it), suggested I’d likely land lower on that range. I decided where I wanted to land based on that info. I was offered less but still within the range. I asked for what I wanted (see point 4) with some fear but also a lot of confidence (see point 1). We had a productive and open discussion, where I was able to share what I bring to the table, and my knowledge about the market. The hiring manager did not change the offer but agreed to revisit it in 4 months. I hit the ground running in the role, and received a sizeable increase 4 months later, getting me to my initial ask.
3. Apply to and/or explore jobs outside your organization.
It’s incredibly empowering to always have a feel for what other options exist for you. You don't have to want to change jobs to explore other jobs. That learning about yourself, and your options is GOLD regardless. In many cases, it may reveal all the reasons why your current role is exactly where you want to be right now.
4. You must be willing to advocate for yourself
If you don’t feel you are being offered competitive compensation, you must ASK for what you want! This is often the hardest thing to do, especially for women. Don’t assume or expect someone to do it for you or for it to automatically happen when it should. As mentioned already, there are imperfect people and processes at play.
Ensure you ask these foundational questions to help set up a partnership with your manager around this topic: What is the salary range of this role? Where does my compensation fall within that range? What do you do to ensure my compensation remains competitive? Why do you feel this is appropriate compensation for me at this time?
Be open to their feedback, willing and able to state your desire to them informed by research you've done, and most importantly be honest with yourself about what you are willing to do if they say no. Keep in mind that most managers want to ensure they are paying you competitively. If you provide them with additional info to help them do that, it is a win-win for both of you.
If you need help becoming unshakeable in your self-belief, and/or figuring out what you want and going for it with courage, check out https://www.jennifergibbscoaching.com/work-with-me. I’d love to coach you forward.