Pay It Forward

Straight Answers to Real Questions

Question: I’m the CFO of a $300mm software developer and I’ve recently been in the market for a Manager Financial Planning & Analysis. We’ve zeroed in on what I think is a very good candidate (she’s currently in FP&A with another software firm) but she’s close to the top of what we pay managers at this level (she’s at $115,000 and other managers are making around $120,000).

The candidate is looking for about $125,000 which would put our salary parity scale for this level out of whack. I’m going to suggest to the candidate that we pay her a little bit less now ($118,000) so we have room to give her a raise later on. What do you think of that idea?

Answer: This is not the first time I’ve come across this situation and I’ve seen this particular piece of logic offered many times. And I’ve never been able to grasp how paying someone less now so you can pay them more in the future made a whole lot of sense.

If you pay her $118,000 now, even if you bump her up to $130,000 in a year, she’ll obviously still have made less over the course of twenty four months than if she was making $125,000 from the outset. $118,000 + $130,000 = $248,000).

If you start her at $118,000, you’d need to raise her salary to $132,000 in twelve months to equal what she’d net if she worked for $125,000 for two years (and it’s highly improbable that she would work for two years without getting a raise).

The other thing for you to think about is how your salary scales align with real world compensation ranges. I’ve done a lot of work with software companies and I can tell you that the pool of accounting and finance professionals with software industry experience may be wide; it’s also very shallow (there are lots of small development firms and very few large ones with a depth of accounting talent).

The fact that the candidate you want to hire for your Manager Financial Planning & Analysis job is already making close to what your more experienced managers are earning should raise a flag that you may be behind the curve in what you’re paying your people. And since you’re in a highly competitive talent market, I’d be more concerned about what you’re paying your current talent pool than I’d be about what you need to pay new talent.

So circling back to your original question, from the potential employee’s point of view, I don’t see how this is a win for her. Unless your candidate is over the moon about this job, I think you’re going to have an uphill climb on this one.