5 Things You Must Consider When Making a Job Offer
Extending an offer to a job candidate can be a stressful proposition, especially for a startup. Getting ready to do so? First, assess whether you’re making the right offer by considering the following five key variables.
Variable 1: Compensation History
Make sure you have a complete understanding of the person’s current compensation. What does their current package (cash, bonus, equity, benefits) look like? The first thing a potential hire does is compare what they’re giving up with what they will potentially receive. You need to know this in advance in order to help identify whether leaving their current company for yours will even make financial sense for the person. Most people have a mental block against moving backwards in compensation or title.
Variable 2: Expectations and Motivations
Next, you should begin to talk about other expectations and motivations. What does the person care about? Commute time, specific research, autonomy? Something else entirely? Focus your conversation on individual motivations and address each of their work-related interests. Figure out what their current role isn’t offering them and use that your advantage. This can help candidates see how this new role aligns with their goals.
Variable 3: Macro Market
Understand how your offer fits within the market. Does your current offer package fall in the range of other companies that are in a similar space and stage? Make sure you get real-time data to ensure your offer falls within a fair band. Warning: if you’re a small startup, Google is not a peer! While you might hope to be a Google, at this stage, your compensation should not look like Google’s, and the right candidate won’t expect it to.
Variable 4: Micro Market
Make sure you know if the person has received similar offers and, if so, how your package lines up against the others. If the candidate wants to negotiate, get them to commit to accepting if you meet their demands. Negotiating for the sake of negotiating is a waste of time, make sure they’re ready to join before starting that dialogue. If you are unable to afford to pay as much as they’re asking, explain why and use data to back up your argument. Be forthcoming about it; people appreciate honesty and help with their decision.
Variable 5: Internal Compensation
Think about how the offer falls within your company’s compensation structure. In the early stages, having inconsistent compensation is okay, you do what you have to in order to hire your first few employees. Once you get a little larger (50+ people), think about how to ensure that people with the same roles are receiving similar compensation. This will help you avoid potential unease among employees. If you currently have large compensation discrepancies, actively deal with it to help close the gap.
What most people care about is that their compensation is fair and inline with the market. Use data and try and get compensation out of the table as quickly as possible. Spend most of the time figuring out what a person’s primary motivations and goals are. Make sure to address them during the interview process. They should understand why a job at your company would be more gratifying than the one they currently have.
