“All intelligent employees will at some point recognize their true market value. When they do, they will perceive that their employer is taking advantage of them. When this occurs, they will seek new employment with an employer that they think will treat them fairly. For this reason, paying new or existing employees less than a market rate, is a false economy, “ says Craig Fowler, a Senior VP in HR with 35 years experience in corporate human resources.
                                                                                               
Often times in a weak economy, the tendency is for hiring managers to nickel and dime candidates because of a weak economy. They believe that they can low ball people, but what they don’t realize is that this mindset may actually cost them more in the long run.  According to the United States Department of Labor, “The unemployment rate is 9.7 percent” (United States Department of Labor). This means that 91.3% of Americans are still currently employed. That being said, the market is nowhere near the point where a hiring manager can set the salary. The market’s invisible hand still guides our economy, and specialized workers are still in high demand.
 
Not too long ago, I was working with a client who was seeking an application developer. The candidate was seeking a salary of 85k. For this highly competent, experienced candidate this was a reasonable transition from his most recent salary of 89k as well as being within the range for this skill set in the Cincinnati market. However, the client came back thinking he had the upper hand since the candidate was not currently employed. Even with our counsel and advice, the client offered 76k and the candidate took the offer unsatisfied. A few months later, the individual received an offer for his original target of 85k at another company and left. The client invested a lot of time interviewing, training, and getting the employee up to speed to then turn around and have to once again re-invest that money and more into the search. The small difference that the manager could have offered would have allowed the employee to come in feeling they were valued and would have been less likely to have ever entertained another offer in the first place.   As Fowler said above, sooner or later employees will “recognize their true market value” and it’s best to be in a situation that employees feel they are ” valued” by the company.
 
Ramifications of underselling:

• It waste both party’s time, and decreases efficiency
• It can cost more in the long run
• You get what you pay for: do you want top talent or average talent to build your company on
• Unhappy employees are unmotivated employees

Ways to maximize your investment:

• Consider an up and comer who can grow wtih the organization at a much lower price
• Offer a onetime sign on bonus
• Get higher skilled and higher motivated workers at a slightly higher price.  These workers oftern time have a much higher productivity rate and that compensates for thier added cost.

 
Conclusion:
The foundation on which one builds his or her company is the key factor between a Fortune 500 company and a struggling mom and pop store. A company should be proud of its work force, and its workforce should be proud of their company. Ask any successful business manager and they will tell you that cutting corners, especially when dealing with the life blood of the company, is never the optimal solution. When a company is built on a solid foundation, it is able to weather the storm.
 
 
By Darcy Gibson, Senior Recruiter