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How Comp Data & Compensation Planning Influence Interviews

, , , | Oct 7, 2022 3:12:13 PM | By

Record inflation. Fears of recession. Layoffs. Hiring Freezes. Shrinking budgets. Each one can be an HR leader’s hiring nightmare. When they team up during a tight labor market, hiring mission-critical talent can feel impossible.

Tech giants aren’t immune to budget cuts

Even behemoths like Netflix are cinching purse strings.

According to Marvin Gleaton, talent recruiter at Netflix Games Studio, the company is seeing the effects of leaner hiring budgets and overall cost-cutting on its hiring and retention rates.

“If that's happening at Netflix, it's happening in smaller organizations,” says Gleaton.

Hiring executives is also a challenge

The hiring frenzy of 2021 is over, even for executive roles.

Since the economy took a downturn, Kate Bullis, co-founder and managing partner of SEBA Executive Search says it’s become common for executive candidates to get cold feet and withdraw “at the altar.”

“The silver lining is that candidates are leaning into the kind of companies they weren’t leaning into as much in 2021,” says Bullis.

There’s opportunity for private companies to snap up top talent that was previously out of reach.

So how do you close candidates in a shrinking economy?

Smart strategies backed by reliable data can increase your chances of winning candidates who are a great fit for roles and company culture.

In this article, you’ll learn best practices to implement in the first two stages of the hiring process: compensation planning and candidate interviews.

These tips will enable hiring managers and recruiters to make confident decisions with ease, and create a hiring experience that wins superstars who once only had eyes for FAANGs.

When done right, both steps will get candidates excited for the final stage, the offer letter.


Best practices for compensation planning

Compensation planning, also known as budgeting or headcount planning, helps you figure out what compensation is appropriate for the current market and affordable for your company. Don’t post a job opening before completing this step. (And if you’re in a state with active or pending pay transparency legislation, be sure you know what’s required of employers.)

Here are three compensation planning best practices to adopt today:

Mirror the current market

Conduct benchmarking and market analysis to learn what your peers are currently paying for specific roles and how your company compares. For accurate benchmarks, use comp data that is:

  • Less than 6 months old. By now, we all know that the market can change quickly. Old comp data can make you uncompetitive and puts you at risk of overpaying or underpaying.
  • Provided by employers, not employees. Employee-provided comp data is often inaccurate or inflated. This kind of data is often found on free salary websites.
  • Verified by a third party. An added layer of verification ensures you’re working with clean and correct comp data.
  • Relevant to your company’s size, stage, and industry. Compare yourself to your peers. If you’re a growth-stage company, don’t use comp data that forces you to compare yourself to Google.
  • Compares jobs by responsibility, not by title. Job titles may be similar, but responsibilities and salaries can vary depending on a company’s size and maturity.

Create a compensation philosophy

A compensation philosophy is a formal statement about how your company will pay and reward its employees.

Compensation philosophies are typically detailed and designed for internal use. You can create a summary, or compensation philosophy statement, to share with job candidates and employees to help explain compensation decisions. Here’s an example of a compensation philosophy statement:

“We pay all employees in the 50th percentile of the market relative to San Francisco, regardless of their location.”

Create job levels and salary bands

Guided by your market benchmarks, create job levels and salary bands.

  • Job levels define the seniority, expectations, and responsibilities for a specific role. For example, engineer, senior engineer, and lead engineer are job levels, each with its own criteria, responsibilities, and salary band.
  • Salary bands, also known as pay ranges, set the boundaries of compensation for a specific job level. A range is made up of a minimum, midpoint, and a maximum salary.

Job levels and salary bands keep compensation and career progression simple, consistent, and fair. Because they focus on a person’s experience and competencies, you reduce the risk of unintentional bias during hiring and merit and promotion cycles. They also help you explain career progression to show candidates what a long-term career at your company could look like.

On to the next step

Once you’ve completed benchmarking, designed job levels and pay ranges, and developed a compensation philosophy, you’re ready to go to market and start the interview process.


Best practices for the job interview process

As you evaluate a candidate’s fit for the role and your company culture, don’t forget they’re assessing your company right back.

A poor interview experience can shift an enthusiastic candidate from “Where do I sign?” to “Hard pass.”

“This is a trust-building exercise for both parties that will then carry into their employee experience,” says Ashley Brounstein, head of people at OpenComp.

Best practices for the interview process are about conversations with the candidate, as well as the internal processes that affect those conversations. Here are interview process best practices to adopt today.

Confirm internal alignment

Hearing inconsistencies about a role from interviewers can be red flags for candidates. And it could be a sign that there’s more internal work to be done.

“There's nothing worse than getting to the offer stage and everybody's got their own idea around what that compensation should be, and with zero context of what the department actually needs,” says Gleaton.

To prevent that situation, all interviewers and approvers must agree on:

  • The job level and pay range
  • The equity component of the offer, including the type of equity and vesting schedule
  • Your compensation philosophy
  • The criteria and budget for exceptions

Outside of finances, the team also needs agreement on:

  • The order of the interview process
  • How you will assess the candidate’s skills
  • Interviewers
  • Approvers
  • The candidate’s main contact

Internal alignment sets expectations, enables fast decisions, and paves the way for a smooth candidate experience. Confirming alignment will also help you spot whether the stakeholders’ expectations match the current market. If not, use your pay data and compensation philosophy to steer your team in the right direction.

Give hiring managers the tools they need

Interviewing requires practice and training to get right. That’s why it’s important to provide interviewers with training on:

  • How to talk about compensation
  • Diversity and unintentional bias
  • A preset list of consistent questions to ask all candidates

Gleaton also recommends taking advantage of everyday interactions with hiring and department managers to learn about their perspectives and needs.

Talk about compensation early and often

Aim to spot a mismatch of compensation expectations as early as possible.

During your first conversation with a candidate, explain the salary band and your compensation philosophy – even if you posted the salary band with the job listing. And then ask if they’re comfortable with that range.

“Transparency and clarity out of the gate are the most important features with a candidate,” says Bullis.

If the candidate expects a salary beyond your budget, or the market, ask where they got their pay data. Most candidates only have access to inaccurate employee-reported pay data available for free online. If that’s the case, explain the difference between that pay data and your recent and employer-verified data.

“Everybody thinks they’re a compensation expert in some capacity,” says Gleaton. “From the beginning, I lean very heavily into educating candidates around how we build comp.”

A candidate’s circumstances can change during the process, so check in periodically to ask how their search is going. Listen for information or cues about things that may influence their motivations. Maybe they just had a baby or bought a new home.

If you’ve learned about a change, Gleaton suggests following up with questions such as,“Do you feel comfortable talking about what your expectations are for this role? I want to make sure that things are aligned for you and your family.”

Don’t forget to talk about the job

Leave plenty of time to talk about the expectations for performance, metrics for success, and the team the candidate would work with. Ask the candidate if what they’ve learned matches what they’re looking for. What part of the job is most interesting to them? Is anything a surprise?

“We don’t want to be in the business of making offers, we want to be in the business of filling positions,” says Bullis.

On to the next step

By the end of the interview stage, you’ve established rapport with the candidate, assessed their skills and fit for the role, discussed compensation, and understand their expectations and goals.

If the candidate moves on to the next stage, the offer letter, there should be no big surprises for either party.