Would you Rather be Overpaid or Underpaid? By Lou Adler of Adler Concepts
Being overpaid for the work you do is not good. It will stunt your career growth. Begin slightly underpaid is good. It will provide more options to maximize you career growth and in the long run maximize your total compensation. Compensation growth must follow performance, not lead it.
In my 30 years in recruiting I have personally negotiated more than 500 offers, and advised on about 500 others. In most cases, rarely was the company willing to pay what the candidate thought he or she wanted. Yet I closed most of them within the budget range. Even better: the candidates never felt short-changed, and in the long run it was the right decision for the candidate.
Whether you're a recruiter, hiring manager or candidate, take heed: it's always better to be underpaid. Here's why, and how I advised my candidates to think about compensation:
1) If you're overpaid, everyone will expect more of you. Consistent great performance will be anticipated, every mistake will be magnified, and raises will be minimal, to get you back within the range.
2) There won't be a honeymoon period. You'll be under a lot of unnecessary pressure during the learning and ramp-up period. It will be impossible to deliver, since everyone assumes you already know everything.
3) You've unnecessarily burned bridges that don't need burning. Getting a salary premium, beyond the normal range, always requires the hiring manager, the recruiter, and the hiring manager's boss to make a special deal with HR and compensation. They'll get lots of heat for this, and if you don't deliver right away, they won't be able to cover for you, nor will they want to.
4) Bigger jobs will be few and far between. Since it will be very difficult to achieve the unfair and inflated performance objectives, promotions are less likely and your salary will put you out of the range of other inside opportunities. If you decide to leave as a result, recruiters will screen you out since your compensation is above what's available.
Collectively, slower long term growth is what happens when candidates unknowingly pursue a short-term compensation maximization strategy. Instead, I advise candidates to consider a career maximization strategy. The idea behind this is to select jobs that offer the most upside potential, rather than those that offer the most money. If you're a candidate, fight for a bigger job, an earlier review based on your performance, and a chance to be visible. When a recruiter calls, never ever first ask about the compensation. Instead ask about the job, who it reports to, the challenges involved and how these relate to a bigger project or the company strategy. When comparing offers, including a counter-offer, don't go for the bigger bucks, no matter how big, go for the job with the biggest upside potential.
Just before getting ready to negotiate the offer, I ask my candidates if they really want the job, regardless of the compensation. If the answer is no, I stop right there. You should, too. If you don't want the job and you're only taking it for the money, you'll be disappointed. In the long run a career maximization strategy will maximize your compensation. Compensation growth must follow performance. It must never lead it.
Note: Lou Adler is the Amazon best-selling author of Hire With Your Head (Wiley, 2007) and the award-winning Nightingale-Conant audio program, Talent Rules! His new book, The Essential Guide for Hiring and Getting Hired, will be published in December, 2012.