In the March 31, 2020 Ask The Headhunter Newsletter a reader says hiring and job offers should not be based on your tax returns.
I was once asked for my tax returns after a job interview, evidently to determine a job offer. I thought you priced a salary to a job — not what you might have to pay a candidate to hire them. I declined the job because the request displayed the kind of people I would be working for. They were forced to sell the company shortly thereafter. What’s your opinion on how to set a salary and job offer?
I don’t believe in setting compensation based strictly on the job. That’s shortsighted because it assumes a job cannot be done in a way that increases its value to the business. I think sound job offers are based on the value of the job at that company, and on the added value the best candidate brings to the job. In other words, if it recruits effectively, a company spends more than it planned because it finds a hire who can do more than it expected. HR managers will want to hang me for that.
Consider the example of a job posted to write computer code using computer language X. Hiring a programmer who knows language X would get the job done just fine and within the budgeted salary. A programmer who is facile in languages X and Y (languages unexpected and not required by the job description) shows it would take less code and time to produce a more powerful program in language Y. (Software developers don’t hang me! This is an over-simplification.) But this programmer expects a salary 25% higher than the budget for the position. Does the employer calculate the benefits of investing more in that programmer?
Hiring: How are job offers determined?
A smart company has to start by (A) pricing a salary to a job. But that means management has a realistic idea of the value of the job. That is, how does it contribute to the bottom line? I don’t know many companies or managers that could explain how any particular job contributes to profits. Of course, it’s a game of estimating, but I think few even try. They focus strictly on the overhead cost of filling the job.
Once that number is set, I think a company needs to (B) look at the market for availability of candidates, and adjust how much to pay accordingly. Of course, that’s an estimate, too. (I do not advocate relying on salary surveys.) We must assume employers are rational and that they calculate expected profits before making hiring decisions, right? Or, how could they defend their business model and be successful? (Yes, those are loaded questions and snipes.)
Job offers test the employer
As an employer, you find out how well you understand your business when you actually make job offers. Your job offers are a test. If you get turned down by your best candidates, then your (B) estimates are probably incorrect. You’ve failed.
But it’s also possible your (A) number is off — and I think that means you have to reassess your business assumptions: Is that job really valid? That is, does it really feed the bottom line, or is it actually busywork? Put another way, can your company afford to hire someone to do the job? The accuracy of your job offers — Do the best candidates accept them? — tests the viability of your business model.
If you can’t afford to hire the best workers, there may be something wrong with your business.
Learning from candidates
I think the fun starts when you talk with candidates who can upend your (A) estimate. That is, they show you they can do the job in a way that increases profitability beyond your expectations. This is where the interview process really pays off if you do it properly. You’re learning about the candidate, but you’re also learning from the very best candidates, who will show you how to tweak the job and the work to cover higher compensation and to produce more profit.
Do your interview protocols identify such candidates? Does your compensation policy enable you to hire them?
Perhaps a candidate has unexpected skills and expertise that would boost creativity and efficiency in that job, thereby increasing the value of the hire. (That means you’re recruiting well!) Isn’t that the “dream candidate” every company would love to find? Isn’t that who HR is really advertising for when the job posting says, “We’re looking for stars who think out of the box!”
Is hiring a cost or an investment?
I find this is where most companies blow it — especially if their HR department is mired in policies that interfere with re-pricing a job to a higher compensation level. They absolutely will not consider paying more to get more.
Rather than change the parameters of the job and the compensation to suit an exceptional candidate, they reject the candidate “because they cost too much.” (Age discrimination, anyone?) But that exceptional candidate is not a cost. They are a potential investment that can pay off handsomely — if the company steps up to pay more to get more. (Of course, management must also know how to properly exploit exceptional skills.) This is an incredibly important part of a company’s learning curve, and I think too many companies don’t recruit to find that kind of value. They’re potentially blowing an opportunity to boost their return on investment.
So much for “We want to hire people who are off the performance curve!” They’re also off the normal compensation curve. They’re pricier!
How companies blow it
It’s one thing when a company prices a job inaccurately. That is, when it gets its estimate (A) wrong. But I think a company really blows it when it inaccurately estimates (B) the value that’s available in the candidate market — and refuses to pay more to get more.
The problem is HR policies that make the very best candidates walk away. For example, “Our salary range is fixed. We cannot consider a higher salary.” Or, “We can’t proceed until you give us your salary history [so we can preemptively destroy your ability to negotiate your new salary].”
Or, as in your case, “We can’t proceed without your tax returns.”
These are all silly practices that drive away the very best candidates. (See Your Approach to Hiring Is All Wrong.) Exceptional hires return the investment required to get them, and then some. But again, I think the key is that management must know how to measure the value of both a job and the candidate who is going to do it.
Perhaps more to the point, management must understand the basic idea that the ROI of a job can be enhanced by investing more in a hire who can do it better.
Regarding the company that was sold shortly after you turned it down: It seems you heard the message loud and clear. “We rely on some other company’s judgment of your value (reflected in your tax returns). We have no competitive edge because we have no idea how to judge your value to our business! Run!”
What are you worth to an employer? How does a smart company figure it out? Here’s my challenge to you, dear readers: If you’re dealing with an employer that can’t figure it out on their own, is it worth making the effort yourself to explain it to them? (That is, to show them why you’re worth more?) How would you do that?