The Compensation Conundrum: How to use data to hire and keep staff
We recently chatted with Raleen Gagnon, VP and general manager of Total Talent Intelligence at Magnit, about the challenge of finding skilled candidates to fill open positions. Can you compete with Microsoft or Google? Can you use Google to help you research the market? Is higher compensation the only way to attract employees?
Here’s an edited version of what she had to say.
Editor’s note: This is part two of a three-part series. Stay tuned for the third part. See Part 1 — The Compensation Conundrum: How to keep your hiring competitive in today’s tight job market
Where can I get the data I need to make these decisions and stay competitive?
Raleen Gagnon: You know, the first thing I would say is, and I say this with as much respect as possible, I mean, the census data, especially the most recent census, which finished right before all of the migration happened related to COVID. The census data is about as accurate as the history books that I was taught from, you know, 30-plus years ago, which, by the way, don’t even have any of the same content that my children had in their history books. So, it’s a matter of perspective. And you know, that census happens each year and different countries do it in a different cadence. It’s a 10-year span between the actual surveys. But then each year, the government does its best to make some adjustments. And in every case, especially when I’ve even worked with different cities or states, from a public sector perspective, even they know they need more precise data than what’s readily available to them from that information.
So, you know, there’s a few things, and I’m a firm believer in you get what you pay for. There is information that’s available for free that will give you a starting point, to see if there’s truly a problem, or if you’re close to the mark. I mean, you can do something as simple as Google and just simply go into Google, and type in average pay for software engineer in Bloomingdale. You can do a quick search on Indeed, and pull up other job postings and see, you know, what people are putting in for ranges. Here’s the problem. Google is aggregating all of this different data that shows up in these various places. Oftentimes, census heavily influences the answer that you see. It’s almost always reflective of what people have historically been hired at, usually over the past year. And so it’s a good start. Because Google is saying that you’re below the average pay, well, they’re already below what the actual competitive pay is today, what you’re seeing in that result. And so if you’re below the historical results, that’s a true indicator that you’re likely really below what’s being competitively offered today in the marketplace. You know, doing a quick search on Salary.com or Payscale.com, you can get a few searches out of those. But again, it’s not structured, and pulls in all of the available information that you could be looking at, and it’s certainly not up to date.
What we’ve developed at Magnit, we have a proactive approach to tracking all of the actual transactional data that’s happening in the marketplace, so that we can very clearly see all of the components of compensation here for this role in the city, at this experience level, is really looking at and being asked to share. So, let me see if I can do that very quickly.
You know, you could of course, as I was showing you earlier, just Google. But if you really wanted to understand, you know, what does a software engineer look like? Think of software systems engineer [Searches on her system.] So you can see the difference there. And then, you know, I saw some folks coming in from Florida. So, let’s look at Florida. And then let’s look at a market like, say, Miami. Right now, I look across all industries. Obviously, if you look inside of computer technology, the rates might be more aggressive and competitive. And so we can break that down by industry as well. But if you look just across the board, now you can look at full-time, more contract data. So, very quickly, you see, what do people get paid as their take-home pay for the full-time roles versus the hourly contract positions? I’m already set up here to do this. I’m gonna just leave it on contract right now. And you can very quickly see, what does that look like? So, what is the median pay? And for this with contractors, you can actually see a comparison of what are the competitive wages that these contractors are being paid versus what is the total cost of those contractors that you may have to pay out to a supplier. Then you get a sense of, you know, where do you have the most opportunity, and I just looked at a couple of localized areas, right. So I started with Missouri. And you can see if we compare Missouri to Florida, there’s a 1% difference between the two. It’s 1% less in Florida than in Missouri, Kansas City, and the overall rates in Missouri are very similar right now; there’s not that much of a difference. But if we were to look at a city like Miami, Miami is not as competitive as the state of Florida overall. And it’s actually 6% higher than the state of Missouri. And you can very quickly look and see if I adjust years of experience, you know, how does that impact what this looks like? And this is very different from just doing a quick Google search and getting one number. Because not everyone that you interview for a particular position is going to be worth the exact same number. That’s not what pay parity is about. That’s not what the transparency laws or any of these regulations are about, right? It’s also about being able to see, what does the range look like? Because, of course, there’s different aspects of experience or someone was a very specific competitor, or worked with a software extensively in the past.
So, as we think about the opportunities we have today, I mean, wages have gone up substantially. But we do have this opportunity to hire remotely. And it’s not an equal opportunity for small- and mid-sized organizations, it’s a greater opportunity, because you have the ability to hire and still work closely within your business and within your teams, as long as you work on recruiting out of the right areas, which may have a higher population of those particular skills that you’re looking for. You can look on CareerBuilder, or any of those resume job boards and see where there’s greater clusters of those candidates. Or you can actually leverage a tool like what we offer, which is Talent Intel, which actually shows you how those various markets shift based on the migration of talent, about hiring new talent into different communities. So, I’m going to show a demo of that in a moment. But what I really wanted to say is, it’s the combination of the two that’s going to make you most effective.
Being able to look across a broad range of markets and see, how do the wages shift? Where is there an opportunity for me to have less competition with these three organizations who’ve taken a lot of our people recently, so that I can be an employer of choice. And, you know, it’s about being competitive with these wages. But we already started talking about it before. And I’m actually going to blow this slide up for a second time.
Raleen Gagnon: If I think about this, we talked about that employee value proposition, you know, I hit on a few of these, but this is a pretty important checklist, you know, making sure that your balance of what your people need versus want is taken into account when you think about what your organization needs and wants. And I would go one step further and say, think about the culture of your organization from a hiring standpoint. Does your organization hire like a business? Or does it hire like an employer, because they are two very different mindsets. And I think those companies that are really investing in EVP are actually the ones who are really taking ownership of what the employer concept is evolving into now, where it is something that is a support mechanism to the life of the worker, right? No more is it people becoming a company man and sitting down and, you know, going into the office from nine to five, and giving them all of the daylight hours. That’s just simply not the way this is working any longer, especially on the professional side.
Now, wage transparency. You know, that’s one piece where if you are operating in a state like California or Colorado, or even in the Northeast, where you’ve got New York and New Jersey, Boston, other cities and states that have passed the salary history bans, if you don’t have confidence in the compensation that you’re offering today, if you have not been effectively looking at what others are offering for similar jobs, you do yourself a disservice. Because if you’re putting non-competitive salaries or wages on your job postings, it’s going to impact how many candidates apply. I mean, if your job is in the $75 an hour or $85,000 a year, and it’s being compared to and coming up in search results for candidates with jobs that are making closer to $100,000, or making closer to $85 an hour, which ones are the individual going to click on? They’re going to click on and apply to the ones that are going to impact their take-home pay the most.
So again, that’s why it’s so important to actually take the time to do this sort of diligence. And, you know, I recognize that not everyone has access to a budget for tools to go to that next level, which is why I say start with what’s available on Google or Indeed. But if you find yourself being very off base, that’s when you would want to invest, right? Every company has its own budget, but every organization today should be thinking about how many people can I lose? Or how long can these positions remain open without impacting the bottom line and the profitability of our business or the pipeline for this product launch? Or, you know, the sales objectives for this team? I mean, at one point or another, this goes beyond basic business disruption because the longer you’re missing key staff in certain areas, it’s like a traffic jam. It has a ripple effect so you don’t hire until two months after you wanted to. Everyone is delayed, and other projects that are dependent on it are now being impacted. And then you do bring them on board and it takes months to get them up to speed and get them to where they need to be. So now, because you wanted to save $10,000, and you didn’t want to offer fully remote for the right candidate, it’s now costing your organization hundreds of thousands of dollars because they would have helped you to do X, Y and Z. So we feel we all have, whether you’re a public company, or you’re a private company, you have a budget, you set the budget at the beginning of the year. And you may adjust it on a quarterly basis. But your budget is designed to help ensure your profitability and meet all of your business goals. But people are the largest line item in our budgets. No matter who the company is, the cost of personnel, the cost of benefits, the cost of hiring, it ends up being a very large portion of our operating expenses for any organization. And trying to cut that budget too much has an impact on the productivity of the business.
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