The candidate and the bubble company: The fragility of information insulation

If we talk about compensation and benefits, it is always important to be updated, both from the role of the company and that of the candidate. Tailored compensation studies and salary surveys are tools through which objective information from a sample of market data can be accessed. To attract and retain talent in changing and competitive environments, it is likely that one of the organizational strategies is to offer attractive remuneration schemes, fixed and variable benefits. Having reliable information when designing compensation systems is essential to avoid the risk of resorting to informal sources. The same is true for the candidate in search of a job when defining his salary expectations for a change or reinsertion into the labor market.

In a context in which the term bubble took on a new meaning in the face of the COVID-19 health emergency, it is functional to incorporate it into the world of work. How? To make analogies. For example, situations in which companies in the analysis of their salary structure or candidates in a job search find themselves in a reality isolated from the environment and lacking information to ensure accurate decisions.

We will call bubble candidates those who in their job search -whether they have a job or not- are positioned in their salary expectations outside the market remunerations. The lack of information on labor market salaries positions them with low or high expectations in relation to their experience and training, which is one of the difficulties they may encounter in the selection process. If high expectations are combined, in addition, with little flexibility in the negotiation of the job offer, this may be the reason why you are not able to access an offer according to your expectations. It is this mismatch that will often leave you out of the selection process and not your professional over- or undervaluation.

On the other hand, we will call bubble companies those with salaries well above the 80th percentile or well below the 20th percentile, with little prospect of questioning their salary policies. These companies may even justify their unrealistic positioning when they come across information from salary studies or surveys.

Companies seek access to reliable salary information, not only to attract and retain talent, but in many cases to negotiate salary improvements. Bubble companies with salaries above the 80th percentile, by receiving information from the market, learn how much they benefit from their current situation with respect to the market. A priori, we would not see major difficulties in a company with salaries above the 80th percentile. There is no doubt that compensatory policies with high fixed remuneration, attractive variable remuneration and benefits packages are a magnet for candidates. But let's not forget that the salary is something new for the first few months, then it becomes naturalized, the lifestyle adjusts to it and what we already know happens: people want and "need" more. What happens to these bubble companies when reality tells them that they are already paying above the average or even the 80th percentile? It is a question that invites reflection on the challenges for HR management that this implies. The company is faced with the difficulty of not being able to retain talent for salary improvement, but it is a talent that will not leave either, given that the market offers less pay. What a dead end. All of the above can also be a turning point for candidates and bubble companies, since it confronts them with the reality that they are better off than they thought and above what they would be paid elsewhere.

Possibly in these situations, both for those companies below the 20th percentile and those above the 80th percentile, the concept of emotional pay, policies and practices not linked to salary, but which contribute to quality of life and well-being within the company, such as flexibility, recognition and development opportunities, come into play. In the percentile where companies compete for the same candidates, emotional pay is sometimes the factor that makes candidates lean towards one company or another.

The bubble is a term that speaks of isolation and protection, but also of fragility. The bubble exists until the company is compared to the competition or when the candidate goes out into the market to look for a job or is called for a new job opportunity. Those situations burst the bubble and move the compass. Both internal salary equity and external competitiveness are major challenges for companies in a changing and competitive environment. It is crucial to have access to remuneration studies when, immersed in a bubble, one never looks outside for fear of breaking a supposed internal equilibrium. Companies are open systems of constant interaction with the environment and must, therefore, update their remuneration practices in order to attract and retain the talents that make the difference in the segment in which they compete.