“What is your current salary and what are you looking for?”
A job seeker’s answer, whether on an application or during an interview, gives the hiring company a significant negotiating advantage.
The company ends up knowing what the job seeker currently earns and what he or she is seeking, prior to sharing the range the company is willing or expecting to pay. Also relevant, but rarely shared, is what the outgoing person in that same position is currently earning.
This is known as “informational asymmetry” —meaning a lack of equal information between parties.
Job seekers are in a difficult spot. They don’t want to ask too much and price themselves out of the job. But they also don’t want to ask too little, resulting in a reduced offer, leaving tens of thousands of dollars per year on the table.
Companies can also suffer consequences from this information advantage.
Even if a candidate ultimately accepts an offer, he or she may feel bitter from the perception that they were taken advantage of and aren’t being fairly compensated.
Such feelings make employees, especially the highest performers, much more open to exploring opportunities with your competitors.
Like pulling a loose thread on a delicate sweater, if one of your best employees finds a much better situation elsewhere, more are sure to follow.
Two solutions for the information asymmetry problem come to mind:
- Companies can provide rough compensation information prior to asking job candidates to do the same. This might be after a first interview, so the information is only made available to serious candidates. An obvious drawback is that candidates would have the information advantage.
- Both companies and candidates share* their compensation information at the same time.
* I wonder if companies would use a simple, cheap & secure online service for this? Both parties could confidentially submit their compensation information at their convenience, but it would only be shared once both parties have completed their submissions, so neither has an information advantage. Should I build it? Please share your feedback here.
In both cases, make sure it’s absolutely clear that you are sharing information for their private consideration, and not making or accepting a job offer.
None of this will outweigh problems like poor compensation, uninteresting work, toxic cultures, too many hours, etc., but it’s an important, trust-building step towards what hopefully will become a long and mutually beneficial relationship.
Again, please share your confidential feedback about (1) whether or not this is a serious problem, (2) how effective and practical the solutions above are, and (3) whether or not companies would use a simple, cheap & secure online service for simultaneously sharing and receiving compensation information. Share your feedback here.
P.S. If I get enough feedback to be useful, I’ll keep names and companies confidential, but share their thoughts in a future post. Click the “follow” button below to receive those updates. Thanks!