A Harvard Business Review article in December 2015 including research by Payscale highlighted a study around the perception people had of their pay against how their income truly compared to the rest of the market.
This research took into account individuals who are paid above the market rate; at the market rate and below the market. It demonstrated that most people felt they were underpaid or at best, paid fairly, no matter how well paid they were compared to their market peers. In fact, 35% of those paid above market still felt they were underpaid and only 20% agreed they were “overpaid”.
Interestingly, 64% of the 71,000 surveyed who were paid at the market rate felt they were underpaid. Here lies a huge career management issue. When you look for another role, how can a distorted view of your pay level impact your ability to move forward in your career?
The answer is reasonably simple. Judging an opportunity without the context of what is “fair” in the market and a comparison of how well you are paid is dangerous, and usually leads to disappointment. It leads to ruling out opportunities that could potentially be perfect, and ultimately result in stronger remuneration for positions in the future.
Imagine you are currently paid $150,000 as a base package, plus a bonus of 25% paid annually. Now consider that the equivalent role in another similar organisation pays on average $130,000-$150,000, but with a lower bonus (say 10-15%). In fact, roles that offer you the experiences that you need to progress are also paying less. These roles could include people management, leading through change or transformation, broader responsibilities and other experiences that support your development. They could also make your happier.
Without truly appreciating the context of the market and your higher level of remuneration, you are essentially taking away opportunities that could have massive benefits on your career in the longer term. Not only does this confusion impact on the time involved to find a “suitable” role, but it also increases the level of risk an organisation will need to take on you - given you will need more experience to achieve a similar income level in the actual market).
Assuming you are talented and ambitious, your potential could be reached much more quickly by working in an environment that creates opportunities from increased experience and possibilities for promotions and career growth. In the case noted, taking $140,000 and a lower bonus with the right company/role and surrounding yourself with challenges to help you grow, in the medium term, will more likely result in a much higher salary. This could also result in other factors that could impact your performance positively such as:
- The enjoyment and level of engagement you have at work.
- Your ability to outperform.
- Your ability to stretch and step up in your career.
The long-term salary results could be so much higher for you than negotiating an extra $10,000 now, which would seem ludicrous in hindsight. Finding the right experience is also likely to increase your employability, as well as the ability to sustain higher incomes over the long term.
How do you manage this?
Salary awareness is not a case of “glass half full or half empty”. The emotions or feelings you have about how well you are paid does not matter. What matters isfact. Your glass may be filled with 100ml of water in a big glass, or 100ml of water in a small glass. No matter how you look at it, in any glass, it is the same amount of water and everyone around you will measure it the same. Here are some concepts to consider when building salary awareness:
- Capture facts through real examples
Avoid the tendency to bluff yourself into believing your own hype. Find real examples of pay information from real people. Understand the nature of the challenges in their role as much as the basic content of the job. This will help you get a clearer indication of what is “fair”. A great place to start is with recruiters who see this information every day. Not only do they get exposure to salary information, but the people in the role, their experience and track record.
- Avoid taking a “salary survey” as gospel
There are many organisations that produce salary surveys with very general information. Typically these are used as a marketing exercise, and while not incorrect, there is a lot of room for error in the data. For example, the term Financial Controller in one company can mean something very different in another. The differences can involve the size of team, the level of influence in decision making and level of “commercialism” in the role. These are all factors that influence the salary.
- Manage your personal financial position
This has more to do with your state of mind. It’s your choice to spend as much as you earn or to lead a lifestyle where your salary needs to be stretched every year. If your only cash flow is your income, it is worth considering how you spend your salary, especially if you are paid above market? This gives you room to make decisions that are not solely focused around remuneration, but that take into account your success and career satisfaction. Of course, your financial situation is your own business, but if it puts pressure on your ability to make career decisions, you should address it.
- Research if you are in demand
In most cases, salary is driven by supply and demand. Some companies are more rigid on their ability to pay for sourcing the right skills, but if a skill you have is in high demand, or niche, you could move to a position where you are paid more relative to other roles in your business. Appreciate your value proposition in the market and realise how that could impact your income.
- Understand when you’ve been bought
In some instances, your salary can reflect an organization simply wanting to secure your IP. Their impression is that the risk of losing you is great, and therefore attempt to buy you and avoid a better offer from arising. When this occurs over a long period of time, it can impact the perspective you have about yourself against your peers in the market. Take an honest look at the motivations behind your pay rises and bonuses, which may be clearly well deserved, but may impact your ability to price match in the market.
Receiving an above market salary is an excellent position to hold. Congratulations if you are in this position, but tread carefully when planning your career to ensure that remuneration doesn't hold you back from achieving what you want to achieve.
What's been your experience? I would love to hear your thoughts.