compensation analysis for job candidates

Compensation Analysis
Both candidates are asking for a competitive salary, but there are differences in some of the other compensation pieces that they are seeking. Cassandra is an extra week of vacation, while Malcolm is seeking a new phone every year and paid Internet service at home. The cost of Malcolm’s request is fairly easy to establish in dollar terms. Cassandra’s request for extra vacation time does not come with additional dollar costs, but does come with a cost in terms of opportunity cost representing Cassandra’s lost work time – and the time of anybody who might have to cover her work during this extra week. So while Malcolm has a slightly higher ask for direct compensation because of the technology, it might end up being the lower request given Cassandra’s ask for additional vacation time, which is indirect compensation.
As with the salary ask, there is no difference in terms of the requests to be included in the company’s annual bonus plan. Each would likely receive the same offer, therefore, in terms of direct compensation for salary and bonus. Taras (2012) notes that it is important to strike a balance between direct and indirect compensation, and in this case where the direct compensation requests are equivalent, the indirect compensation requirements form a key point of differentiation between the two clients.
It is worth considering that there might be some additional impacts of these deals. For example, granting Cassandra’s vacation time request might encourage others in the company to seek equivalent time. Granting Malcolm’s request might have the same impact, but for phones and Internet service.
In terms of indirect compensation, Malcolm is also asking to work remotely, which is generally viewed as a benefit. Cassandra, on the other hand, is offering to be quite flexible. In this respect, it is reasonable to assume that Malcolm will also be flexible, but there are no guarantees of that.
The Decision
The first thing to be considered is that there are a lot of unknowns in this situation. Normally, a hiring manager would know a lot about the role, and have interviewed each candidate, possibly more than once. A set of structured interview questions would help to distinguish between these candidates (Dattner, 2016) but we must assume that both candidates performed equally well during that stage of the process.
The indirect compensation can be used to distinguish between the two candidates. There are two things to consider – the cost and the value. The cost of indirect compensation is probably higher for Cassandra, if an extra week of vacation for her will create more work for others in the department. However, she is willing to work flexible hours, including on evenings and weekends. This means that she might balance out that week of vacation with a week of extra work over the course of the year, and do so at times that the company would fine convenient. By contrast, Malcolm is asking for an extra perk for working at home, and may not wish to come into the office. Thus, even if his total cost is lower, he is also likely going to work less as well. All told, if the hirng manager does not have a sense of what the productivity of these two workers is, the reasonable assumption is that the company will get more out of Cassandra.
Thus, Cassandra should be offered the role. There are two factors here. One is that she is the more experienced of the two. If all other things are equal – and we don’t really know so therefore we can assume this to be the case, then the company should hire the more qualified person, which in this case is Cassandra. In fact, if the two candidates are equal and Cassandra’s 20 years of experience are held against her as a bad thing, that opens up the possibility of an age discrimination suit, as it would contravene the Age Discrimination in Employment Act – or would have until a recent ruling (Umoh, 2019).
The other thing to consider is that while both are willing to do work from home, Cassandra is framing this as flexibility, at the company’s discretion, rather than a request for an additional perk. Malcolm’s request sounds like a perk, in the sense that if the company lets him work from home, others will want the same. If the company wants Cassandra to put in work on evenings and weekends, that is not something that other employees will be clamoring for. As such, Malcolm’s indirect compensation request is higher than Cassandra’s.
The company is now faced with a candidate who is more qualified and asking for less in Cassandra, and that should be enough to give her the edge over Malcolm, if all other things are equal. The company should therefore extend an offer to Cassandra.
References
Dattner, B. (2016) A scorecard for making better hiring decisions. Harvard Business Review Ascend. Retrieved April 15, 2019 from https://hbrascend.org/topics/a-scorecard-for-making-better-hiring-decisions/
Taras, V. (2012) Direct versus indirect compensation: balancing value and cost in total compensation. Compensation and Benefits Review. Vol. 44 (1) 24-28.
Umoh, R. (2019) Old job applicants not protected by age bias law, says US Appeals Court. Forbes. Retrieved April 15, 2019 from https://www.forbes.com/sites/ruthumoh/2019/01/27/older-job-applicants-not-protected-by-age-bias-law-says-us-appeals-court/#5984482514d9