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This is what Ben Horowitz has to say about matching competing offers: An excellent engineer decides to leave the company because she gets a better offer. For v

by lquist 11y ago

This is what Ben Horowitz has to say about matching competing offers: An excellent engineer decides to leave the company because she gets a better offer. For various reasons, you were undercompensating her, but the offer from the other company pays more than any engineer in your company and the engineer in question is not your best engineer. Still, she is working on a critical project and you cannot afford to lose her. So you match the offer. You save the project, but you pile on the debt. Here’s how the payment will come due. You probably think that your counteroffer was confidential because you’d sworn her to secrecy. Let me explain why it was not. She has friends in the company. When she got the offer from the other company, she consulted with her friends. One of her best friends advised her to take the offer. When she decided to stay, she had to explain to him why she disregarded his advice or lose personal credibility. So she told him and swore him to secrecy. He agreed to honor the secret, but was incensed that she had to threaten to quit in order to get a proper raise. Furthermore, he was furious that you overcompensated her. So, he told the story, but kept her name confidential to preserve the secret. And now everyone in engineering knows that the best way to get a raise is to generate an offer from another company then threaten to quit. It’s going to take awhile to pay off that debt. For what it's worth, most competent managers I know agree with this idea. Edit: I should mention that I am NOT advocating paying people less than market wage, but as managers know, sometimes you end up in this position with some employees for periods of time without meaning to. http://www.bhorowitz.com/management_debt http://www.bhorowitz.com/management_debt

famousactress 11y ago
"...but the offer from the other company pays more than any engineer in your company and the engineer in question is not your best engineer. Still, she is working on a critical project and you cannot afford to lose her. So you match the offer." Jesus that all sounds so ridiculous to me. That's a funny shell game around admitting that someone was more valuable than you were paying them, and then guess what - lots of other people are. If the argument is "But she isn't always this valuable.. she's just this valuable on this project" then attach a financial incentive to the project. Sadly, I don't get the sense that Ben is suggesting that there's a problem with not compensating commensurate with value here or with depending on the employer-preferential taboo of the secret salary. He seems to just argue you should let this engineer walk and the project die.
- Retra 11y ago
  If I were the engineer, I would also walk and let the project die. Because when that project is over, you're going to be the "highest paid but not best person on the team" and there's no reason they shouldn't be looking to release you for that anyway.
  - EGreg 11y ago
    If you threaten to leave to another company and that's how you get a raise, the relationship's been poisoned and it's just a matter of time until you leave. This is just another reason why I love project based consulting more than FTE. The incentives are properly aligned. Adam Smith would smile.
    - recursive 11y ago
      Nope. I took a generous counter-offer over a year ago. I've only increased in critical responsibilities since then.
      - saiya-jin 11y ago
        This can be a double edge sword. you enjoy your new responsibilities? good for you. not everybody wants to get more and more on their shoulders until the point of realizing that there ins't much time for that little thing called life. Also, most people who get promoted/raised around me end up working much more compared to raise they've been given. Personal experience - in every single work I've done (roughly 10 customers/employers, perm+consultant) in 3 different countries, there was/is always room to grab more responsibility, more tasks etc. State of IT usually just a variation of a term MESS, with some technical debt here and there, everywhere. You work harder, solve more, take more responsibility and your career progresses along (or you go to place where it does faster). But with this might also come 9-10 hours at work instead of 8 (plus lunch), company phone which is there just to remind you of the work when you're not in, maybe more weekends screwed up and so on. Even in otherwise very work/life balance oriented employers. Want another advice? When having a formal talk with your boss, tell him you want a raise, but you don't want it for free, rather bringing added value. Define clear terms what is expected from you to get there, fulfill them and watch the magic happen :)
beaner 11y ago
So what is actually being advocated here? Pay higher salaries to everyone, or don't budge for competing offers?
- seiji 11y ago
  His entire argument is that the company must retain power in employee relationships, never the employee. If one non-manager employee is ever in a position to show other employees they are being undervalued, the employees may do something stupid like demand the company fix the situation. Can't have uppity employees. Employees exist to be subservient to the ever-changing, unanswerable will of the CEO, not set the rules themselves. The CEO gets to fail upward and become investor-class while shitting downwards on lowly employees who would dare to try and be paid what they are worth. How dare they attempt to confront such holy and monied highness as a CEO. Know your place, employee.
dragonwriter 11y ago
The problem with that theory is everyone that is capable of basic reasoning (which includes every competent engineer) already knows that getting an offer from another company at a higher pay and then quitting if it is not matched is a certain way to get increased compensation, wherever you end up working. Failing to match when there is value to the company just means that every time you are faced with that choice, you always lose. While the worst case with letting people know that that's a good way to get raises is that it puts upward pressure on wages until very few employees can get better offers that they'd be willing to threaten to quit for, and you still end up paying people not more than it is worth to retain them.
chuckcode 11y ago
Most competent managers I know realize that under paying your team is another sort of debt that piles up and comes due. Compensation certainly isn't the only thing that matters to your team, but it is almost always an important factor. I certainly always considered it part of my management responsibilities to get proper compensation for my team by making clear to people making compensation decisions the value they brought to table and how expensive in time and money it would be to replace them. I'm always surprised at how companies can be so nimble in markets for their products but be so poor at working in the market for their personnel. Often times it seems like getting some counter offers is the only way convince them that the market for engineers has changed significantly.
- Rambunctious 11y ago
  From a company's perspective, just because one person gets a market rate that is higher than the rest of the team, the entire team can't simply be given a raise. While this sort of largesse may work for Google & FB, I doubt it would for those companies that grow in single digit to low teen % per annum. Also, if the person given this raise is not amongst your top performers and now ends up out earning the rest of team, it ends up affecting overall team morale. Your star performers then start to feel short changed and think they have to leave to get a raise.
shanemhansen 11y ago
Here's what happens if you don't counter: she leaves. Critical project fails. Everyone in engineering knows that the market rate is greater than what you are paying and that you won't counter. Expect a flood of 2 week notices. Here's the thing. By the time someone is actively interviewing, you've already lost. Treat your compensation like you would any other product and try and figure out how to differentiate your product. Cash by it's very nature is interchangeable. Benefits, perks, camaraderie aren't.
- meatysnapper 11y ago
  In general, you can expect all the good ambitious people to leave. The ones who stay are those who think they can stay and play politics better, or have a "beaten wife" mentality that they think is loyalty, or are on a visa. EDIT: A previous boss of mine was unhappy I was quitting, and apologized that he couldn't give me $40k in cash to stay for another year. Me leaving meant they needed to search for a new, qualified person, and then spend the time training them, which was certainly close to $40k of time-money. Unfortunately, upper management didn't care.
  - s73v3r 11y ago
    The money comes from different pools for those, though.
    - jmorrow977 11y ago
      To me this is a sign of organizational dysfunction that the money can't be moved from one pool to another.
      - CyberDildonics 11y ago
        All money is money - 50 Cent
        Adlai 11y ago
        I'm feeling lucky: 50 Cent Talks Bitcoin: 'All Money Is Money' | | Observer observer.com/2014/12/50-cent-talks-bitcoin-all-money-is-money/ Dec 22, 2014 - 50 Cent is happy he took Bitcoin for his album Animal Instinct, because "all money is money."
sudeepj 11y ago
While undergoing an MBA, one of the HR professor told the class which I still remember. That is "Good & competent candidates choose the companies they want to work with. Companies does not choose them." Its upto the org to make it enticing and attractive for the good candidates. That is why working in Apple, Google or Microsoft is still an aspirational thing for considerable number of people. This off-course does not directly explain to what is being said above in the parent ... just want to share a thought.
bigtunacan 11y ago
I also read Ben's book. Here's the flip side of that. You don't counter and your engineer leaves. The other company needs more engineers so the one that left helps poach more.
taki1 11y ago
And in this story, the Manager expected to underpay for a prelonged periods of time and how to make it work out exactly? Let me try to understand it better. So, you are hiring someone in super-competitive niche. An engineer who can probably land another job in a matter of weeks, if not days even. And what you are doing here is underpaying her? Great Management! And what you got is your prize!
twistedpair 11y ago
You probably think that your counteroffer was confidential because you’d sworn her to secrecy. Let me explain why it was not. Actually, you're problem was forgetting that it's illegal in the US to prevent employee's from sharing compensation information. You can't require that in an employment contract and can't formally punish an employee for disclosing said information. :)

by lquist 11y ago

famousactress 11y ago

"...but the offer from the other company pays more than any engineer in your company and the engineer in question is not your best engineer. Still, she is working on a critical project and you cannot afford to lose her. So you match the offer." Jesus that all sounds so ridiculous to me. That's a funny shell game around admitting that someone was more valuable than you were paying them, and then guess what - lots of other people are. If the argument is "But she isn't always this valuable.. she's just this valuable on this project" then attach a financial incentive to the project. Sadly, I don't get the sense that Ben is suggesting that there's a problem with not compensating commensurate with value here or with depending on the employer-preferential taboo of the secret salary. He seems to just argue you should let this engineer walk and the project die.

Retra 11y ago
If I were the engineer, I would also walk and let the project die. Because when that project is over, you're going to be the "highest paid but not best person on the team" and there's no reason they shouldn't be looking to release you for that anyway.
- EGreg 11y ago
  If you threaten to leave to another company and that's how you get a raise, the relationship's been poisoned and it's just a matter of time until you leave. This is just another reason why I love project based consulting more than FTE. The incentives are properly aligned. Adam Smith would smile.
  - recursive 11y ago
    Nope. I took a generous counter-offer over a year ago. I've only increased in critical responsibilities since then.
    - saiya-jin 11y ago
      This can be a double edge sword. you enjoy your new responsibilities? good for you. not everybody wants to get more and more on their shoulders until the point of realizing that there ins't much time for that little thing called life. Also, most people who get promoted/raised around me end up working much more compared to raise they've been given. Personal experience - in every single work I've done (roughly 10 customers/employers, perm+consultant) in 3 different countries, there was/is always room to grab more responsibility, more tasks etc. State of IT usually just a variation of a term MESS, with some technical debt here and there, everywhere. You work harder, solve more, take more responsibility and your career progresses along (or you go to place where it does faster). But with this might also come 9-10 hours at work instead of 8 (plus lunch), company phone which is there just to remind you of the work when you're not in, maybe more weekends screwed up and so on. Even in otherwise very work/life balance oriented employers. Want another advice? When having a formal talk with your boss, tell him you want a raise, but you don't want it for free, rather bringing added value. Define clear terms what is expected from you to get there, fulfill them and watch the magic happen :)

beaner 11y ago

So what is actually being advocated here? Pay higher salaries to everyone, or don't budge for competing offers?

seiji 11y ago
His entire argument is that the company must retain power in employee relationships, never the employee. If one non-manager employee is ever in a position to show other employees they are being undervalued, the employees may do something stupid like demand the company fix the situation. Can't have uppity employees. Employees exist to be subservient to the ever-changing, unanswerable will of the CEO, not set the rules themselves. The CEO gets to fail upward and become investor-class while shitting downwards on lowly employees who would dare to try and be paid what they are worth. How dare they attempt to confront such holy and monied highness as a CEO. Know your place, employee.

dragonwriter 11y ago

The problem with that theory is everyone that is capable of basic reasoning (which includes every competent engineer) already knows that getting an offer from another company at a higher pay and then quitting if it is not matched is a certain way to get increased compensation, wherever you end up working. Failing to match when there is value to the company just means that every time you are faced with that choice, you always lose. While the worst case with letting people know that that's a good way to get raises is that it puts upward pressure on wages until very few employees can get better offers that they'd be willing to threaten to quit for, and you still end up paying people not more than it is worth to retain them.

chuckcode 11y ago

Most competent managers I know realize that under paying your team is another sort of debt that piles up and comes due. Compensation certainly isn't the only thing that matters to your team, but it is almost always an important factor. I certainly always considered it part of my management responsibilities to get proper compensation for my team by making clear to people making compensation decisions the value they brought to table and how expensive in time and money it would be to replace them. I'm always surprised at how companies can be so nimble in markets for their products but be so poor at working in the market for their personnel. Often times it seems like getting some counter offers is the only way convince them that the market for engineers has changed significantly.

Rambunctious 11y ago
From a company's perspective, just because one person gets a market rate that is higher than the rest of the team, the entire team can't simply be given a raise. While this sort of largesse may work for Google & FB, I doubt it would for those companies that grow in single digit to low teen % per annum. Also, if the person given this raise is not amongst your top performers and now ends up out earning the rest of team, it ends up affecting overall team morale. Your star performers then start to feel short changed and think they have to leave to get a raise.

shanemhansen 11y ago

Here's what happens if you don't counter: she leaves. Critical project fails. Everyone in engineering knows that the market rate is greater than what you are paying and that you won't counter. Expect a flood of 2 week notices. Here's the thing. By the time someone is actively interviewing, you've already lost. Treat your compensation like you would any other product and try and figure out how to differentiate your product. Cash by it's very nature is interchangeable. Benefits, perks, camaraderie aren't.

meatysnapper 11y ago
In general, you can expect all the good ambitious people to leave. The ones who stay are those who think they can stay and play politics better, or have a "beaten wife" mentality that they think is loyalty, or are on a visa. EDIT: A previous boss of mine was unhappy I was quitting, and apologized that he couldn't give me $40k in cash to stay for another year. Me leaving meant they needed to search for a new, qualified person, and then spend the time training them, which was certainly close to $40k of time-money. Unfortunately, upper management didn't care.
- s73v3r 11y ago
  The money comes from different pools for those, though.
  - jmorrow977 11y ago
    To me this is a sign of organizational dysfunction that the money can't be moved from one pool to another.
    - CyberDildonics 11y ago
      All money is money - 50 Cent
      - Adlai 11y ago
        I'm feeling lucky: 50 Cent Talks Bitcoin: 'All Money Is Money' | | Observer observer.com/2014/12/50-cent-talks-bitcoin-all-money-is-money/ Dec 22, 2014 - 50 Cent is happy he took Bitcoin for his album Animal Instinct, because "all money is money."

sudeepj 11y ago

While undergoing an MBA, one of the HR professor told the class which I still remember. That is "Good & competent candidates choose the companies they want to work with. Companies does not choose them." Its upto the org to make it enticing and attractive for the good candidates. That is why working in Apple, Google or Microsoft is still an aspirational thing for considerable number of people. This off-course does not directly explain to what is being said above in the parent ... just want to share a thought.

bigtunacan 11y ago

I also read Ben's book. Here's the flip side of that. You don't counter and your engineer leaves. The other company needs more engineers so the one that left helps poach more.

taki1 11y ago

And in this story, the Manager expected to underpay for a prelonged periods of time and how to make it work out exactly? Let me try to understand it better. So, you are hiring someone in super-competitive niche. An engineer who can probably land another job in a matter of weeks, if not days even. And what you are doing here is underpaying her? Great Management! And what you got is your prize!

twistedpair 11y ago

You probably think that your counteroffer was confidential because you’d sworn her to secrecy. Let me explain why it was not. Actually, you're problem was forgetting that it's illegal in the US to prevent employee's from sharing compensation information. You can't require that in an employment contract and can't formally punish an employee for disclosing said information. :)