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The New Dictionary of Hiring

Compensation Substitution

/KOM-PUHN-SAY-SHUHN SUB-STI-TOO-SHUHN/
  NOUN

Compensation Substitution is paying extra to offset weak nonfinancial reasons for someone to choose your opportunity.

MEANING

Sometimes you pay a premium because the expertise is genuinely rare. Sometimes you pay it because the other employer offers a more appealing job.

‍

Those are different problems. If you keep winning candidates only by adding money to an otherwise forgettable opportunity, you're practicing Compensation Substitution. You may fill the role. You'll also have to write the same bigger check next time.

Defined by:
James Ellis,
Employer Brand Labs
Category:
Economics
The New Dictionary of Hiring card: Compensation Substitution, noun. Paying extra to offset weak nonfinancial reasons for someone to choose your opportunity. Abstract iridescent glass shape on a white background.

MAKE THE CHANGE

Instead of:
Compensation problem. Assuming compensation is always the root cause of hiring difficulty.
Ask:
Are we paying for scarcity, or paying because people don't prefer the opportunity?

EXAMPLE

Two employers want the same people. One can show unusual responsibility and clear advancement. The other offers the same vague promises as everybody else and has to keep increasing the salary.

HOW TO USE IT

Review lost candidates and compensation exceptions. Separate genuine market scarcity from cases where people want more money because the rest of the opportunity feels weaker.

SAY IT TO LEADERSHIP

Before we raise the offer again, I'd like to know what we're paying for. Is the skill scarce, or are we paying extra because the job gives people too few other reasons to choose us?

NOT TO BE CONFUSED WITH

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James Ellis
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