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Art & Science of Compensation: Offer Letters

, , | Oct 11, 2022 5:00:00 AM | By

How many times have you been surprised by a job candidate’s rejection of an offer? After all, by the time you send the offer letter, you’ve likely gone through several rounds of interviews, a skills assessment, and have talked about compensation. A “yes” is a sure thing, right? Not necessarily.

How your company handles the offer can either put the bow on a positive interview process or it can be a red flag that makes enthusiastic candidates wonder if they should keep the job search going.

In this article, you’ll learn how to design an offer experience that helps you stand out from competitors, eliminates friction, and makes candidates eager to join the team. Here are 6 best practices to adopt today.

1. Know the historical payouts

What are the chances of the candidate accepting a particular offer? Historical data can help you make an educated guess. Look at what offers were accepted for that role. What offers were declined and why? Did the candidate come from a much larger company and expect a higher base salary? Do previous objections apply to your current candidate?

By taking the time to review offer data, you can:

  • Anticipate objections
  • See where you may need to make adjustments
  • Spot biases that may have influenced the offer

2. A detailed offer letter

The offer letter is another opportunity to provide the candidate with clarity and transparency. Do more than include the compensation and benefits.

Level up and remind the candidate about all the things you talked about during the interview process, especially how the offer was created and the potential value of equity.


3. Create a system for fast and efficient approvals

Don’t leave candidates hanging. Slow approvals can tank a candidate’s enthusiasm and lose their trust.

To speed the process, approvers must know:

  • The cadence of approvals
  • When an offer is ready for their approval
  • The method to submit their approval or feedback
  • Their deadline
  • The information and context they need to make their decision

Not only does a defined approval process speed things up, you’ll reduce the risk of giving a candidate an offer before it’s approved. It happens!

4. Give approvers easy access to compensation data

Make it easy for approvers to access your pay strategy at every point of decision. Without information like your compensation philosophy or the job level and salary band for the role, approvers could base their decisions on unintentional bias or false assumptions.

5. Have a strategy for counteroffers

Be prepared for candidates — especially those with the most in-demand skills — to come back with a counteroffer from their current employer or other companies.

When considering your response, “think of the business first, not the candidate,” says Marvin Gleaton, talent recruiter at Netflix Games Studio.

“If you’re a Series B startup and they have a counteroffer from Google, there will be budget limitations and internal parity complications if you match the counteroffer,” says Gleaton. “Do your best, but be OK with walking away.”

Kate Bullis, co-founder and managing partner of SEBA Executive Search, advises her clients to increase their offers only when they didn’t present the max at first.

“This person should want this job first,” says Bullis. “Unless the jobs and companies are practically identical, there’s no reason to compete on price and go back and forth.”

To avoid negotiation, Bullis recommends presenting your best offer first.

“Right there you get to tell this person, this is how we operate,” she says. “When you work here, we’re going to tell it to you straight. We’re always going to treat you the best.”

6. Present the offer only when the candidate is ready

You’re ready for the offer, but is the candidate ready? Before making an offer, ask the candidate if they have any concerns. This is your chance to clarify misunderstandings or address possible objections. Don’t let lingering questions muddle their decision-making when they have the offer in hand.

Next steps

Hopefully, after this stage, you’re onboarding a fabulous new employee.

If not, take time to evaluate all stages of the hiring process. Where did things go wrong? Where is there room for improvement? Do you need to update your salary bands? Make adjustments as needed.

With either outcome, add the results and relevant information to your offer database to help you the next time you hire for that role. Data is always an excellent guide.


Make it easy with OpenComp

Intelligent Offers

Develop your compensation strategy, create and send offer letters optimized for acceptance, and everything in between, from a single tool.

Intelligent Offers can also keep your team aligned on compensation decisions to eliminate industry and experience bias, while historical analytics help hiring managers see what offers are most likely to be accepted.



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