There’s a battle for top talent in technology and other industries, and it’s being fought at the pinnacle of the wage scale. But must you bankrupt your firm or lowball the rest of your staff to attract the most in-demand workers? Not necessarily, say two MIT Sloan experts.
Make no mistake, hiring managers face an uphill battle competing for highly skilled talent in a hot market. When a particular skill — such as developing artificial intelligence, programming, or robotics — becomes crucial to the development of an entire industry, demand for workers who possess that talent rises, said MIT Sloan economist John Van Reenen. In a negotiation, these prospective employees have the higher ground.
That’s the situation many firms face today, particularly those hiring for AI, data analytics, user experience, and other growing fields. While the supply of highly educated workers is not particularly low at the moment, the demand for those workers is still outpacing that supply, Van Reenen said.
“Most evidence suggests that the main driving force of that is technology,” he said. “Technology increases the demand for more skilled people. That’s what’s pushing up the price of [superstar workers].”
As businesses in every market segment move toward digitization, highly skilled knowledge workers become the differentiating factor that helps companies make their products and services more competitive.
“It’s clearly a big advantage,” Van Reenen said.
In negotiating with prospective hires, companies that hold too hard a line out of frugality could telegraph that they do not fully respect the candidate’s skill set, potentially causing the candidate to dig in and demand an even loftier salary.
“Ironically, you would think that by taking [a tough] position, that you’d be saving money. But you might have to pay more because of that stance,” said MIT Sloan associate professor of organization studies Jared Curhan, whose research focuses on the psychology of negotiation.
So how can you go about attracting those workers without blowing your entire compensation budget? Here are three ideas.
If candidates are extraordinary, treat them that way
You’re trying to hire a superstar. That person probably knows they are a superstar. If you treat them like one, said Curhan, you could end up acquiring the best talent on better terms than you expected.
“It’s often costless to you to talk to them in a respectful way, to honor their abilities, and say things like ‘ … given your expertise in this area … we’re so happy you’re here … we really appreciate you,’” he said.
Curhan said doing this could increase the subjective value of the candidate. You could end up ahead financially, and with a highly talented employee on board.
“Both parties can walk out feeling good, end of story,” Curhan said.
A friendly recruitment and negotiation process can lead to mutual feelings of respect, and a better working relationship down the road, too. A 2016 study by IBM’s Smarter Workforce Institute, the Employee Experience Index, linked an employee's sense of belonging, purpose, achievement, happiness and vigor, to better retention, employee effort, and job performance.
Keep in mind that money isn’t the only lever
The word “compensation” tends to immediately bring money to mind, and while offering a solid, competitive pay package is certainly an important part of convincing someone to work for you, it might not be the most important item, Curhan said.
Prospective employees might be seeking more variety in what they do, or the opportunity to work with different people, or in a different location, or on a different problem they’re not used to working on. It’s the same force driving companies to offer more generous perks like unlimited paid time off, expanded parental leave, gym memberships, and the seemingly ubiquitous startup perk, the Ping-Pong table.
“Try to figure out what that superstar’s real interests are, and why they’re talking with you in the first place,” Curhan said. “Then, you may be able to use those levers rather than having to pull the money lever, which may be harder.”
Often when negotiating with someone who represents a scarce talent resource, it can feel like they are in the more powerful position. But they wouldn’t be negotiating with you if they didn’t believe your organization had something valuable to offer, said Curhan. Find out what that value is, and make the most of it.
Foster and promote a creative culture that encourages an appropriate level of failure
For many superstar employees, especially in technology, the desire to create and experiment is more of a driver in their desire to work than simply making large sums of money. To attract that talent, create the space they need to flourish, Van Reenen said.
“Being told, ‘No, you have to deliver this product on time,’ is a bit of a downer," Van Reenen said. "A lot of firms try and create space for people to pursue their own interests and passions and creativity; to be pushing the frontiers that they’re interested in.”
Many high-tech firms, he noted, have attempted to create a more university-like atmosphere in their offices, rebranded as “campuses.” Google pioneered the policy of offering a day each week where employees can work on their own passion projects, he said, which spawned some of its most well-known products.
To build that sort of culture, business leaders need to become more tolerant of failure — which is the flip side to innovation — and move away from micromanaging employees’ work inputs toward letting their outputs speak to their success, Van Reenen said.
When you allow top employees to experiment, “90%-plus of things are going to fail," Van Reenen said. "You have to accept that. In a lot of traditional corporations, failure is punished, and people become very risk-averse. You almost have to flip that around.