Negotiating Salaries

Factors to consider when determining the right price for the right people.

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Figuring out what to pay someone for the work they do is an age-old question, and it never seems to get any easier despite all the metrics, data, and real-life anecdotes we acquire along the way. Practically every industry, corporation, and small business—in other words, practically all of us around the globe—will struggle with the issue of pay at some point, whether we’re on the giving or receiving end. And even in industries or particular jobs where it would seem more cut and dried, there are many factors to consider.

In a particular lab, for example, where 50 people might do the exact same job, how many salaries do you think are going to be exactly the same as well? In fact, most of them probably are not, and it can confound a hiring manager who no doubt only wants to get it right for both parties involved.

So how, exactly, are we supposed to approach the issue of pay? That’s a good question—but it’s not necessarily the right question. First and foremost, as the world has morphed into a truly global, connected economy, we’ve seen that salaries do not exist in vacuums anymore. They involve real people, demonstrated skills, supply and demand, and a whole host of other highly nuanced factors. And while isolated salary “data” may indeed help a hiring manager make an informed decision in one instance, there are some pretty big examples lately in the science world of what can happen when the larger picture of a fully integrated workforce plan is not considered.

Take, for instance, the assumption that a particular place has exactly the right type of talent that you need. Recently, a large pharmaceutical company decided to build a huge research and development facility overseas. This decision was based largely on the belief that the particular global city they had chosen already had a wealth of highly trained talent that the company would be able to eventually tap to make their operation successful. Research and data, after all, had shown that within this city, there was plenty of talent to fill all the jobs.

Unfortunately, it hasn’t turned out that way. The data the company initially used to analyze talent supply no doubt might have been relevant at one time. But in the last couple of years, market forces had driven some of the country’s best talent to other locations. Surprisingly, many of them had chosen the U.S. to pursue their careers. And yet, these were the exact kind of employees that the U.S.-based company would need to work in its new facility in the workers’ home country.

All of a sudden, the pharmaceutical company had a major dilemma on its hands that it had never thought it would have to consider. How was the company going to lure these workers back? How was it going to get this R&D facility fully functioning without the right supply of talent? With the help of a workforce solutions company, the organization is in the process of doing just that. But a major consequence of not having an initial workforce plan is that these workers now might be in a position to command much higher salaries. Clearly, there are hidden costs—such as a higher price tag for talent—when companies forget that workforce planning is just as important as finding a seemingly good location for a new operation.

In another high-profile example, a different pharmaceutical company decided to move its drug development operation to Europe in order to take advantage of a production facility that had gone unused because of prior cutbacks. It seemed like a good idea—why let a perfectly good infrastructure go to waste? But here again, there was a major problem. In the city where the production facility was located, there was a complete shortage of key talent that the company needed for its drug development. The company, in fact, never even looked at whether there was talent to support the major move to this particular facility. And because they never looked at the people component of their operation, this company is dealing with the same ramifications as in the first example—they’ll have to deal with those hidden costs of finding the right talent because of a lack of proper planning beforehand.

Luckily, not every situation has to turn out this way—and even small labs can benefit from the kind of workforce planning that will help ensure that an organization is using all its resources effectively to set the right salaries. In fact, the tide is just now turning, and we are starting to see companies that are coming to understand how much workforce planning can affect the types of salaries involved in hiring new talent. And as human resources become perhaps the single most important component of an organization’s competitive strategy in a highly competitive global market, we will see workforce planning become increasingly more critical.

But what if a company is ahead of the game and already has a good workforce plan in place? Often, with the help of workforce solutions companies, organizations are starting to really be on top of the latest data and statistics when it comes to setting salaries. Unlike in the example above where a company was misinformed about the talent supply in a particular location, knowing and truly understanding the workforce market of a particular place is often the most important key to setting a level playing field when it comes to salaries.

Once a company understands that critical workforce market terrain, it will often truly come down to supply and demand. And unfortunately, we’ve seen in STEM professions that demand across the board is still outstripping supply. This is why people with highly coveted skills are often in a better position to negotiate for more pay. This is something that we may not always be able to control—that’s economics 101, after all, and if your organization badly needs certain skills, you’ll probably have to pay more for them.

But there are certain things that a company can control. For instance, in the world of laboratory science, the talent supply and the talent demand has actually remained pretty steady over the past year, according to several outlets like CareerBuilder that compile and report such statistics. This means that there’s a nice balance for both job seekers and hiring managers for a variety of positions in the lab. Hiring managers aren’t calling all the shots. But neither are the job seekers. Both parties, therefore, are likely to be satisfied with the outcome of salary negotiations. But, of course, hiring managers need to be aware of these current conditions to make the situation work for them— they need to know that they are in as good a position to negotiate as are the job seekers.

Another interesting and current dynamic that hiring managers may not be aware of is that they are currently in a position to control the level of education and experience with regard to lab technicians. This is because data shows that there is not a huge differential in salaries between people with a little experience and those with a lot. For example, technicians with two years of experience are now commanding close to what those with, say, 10 to 15 years of experience are commanding. This bodes well for hiring managers if they are looking for someone to hit the ground running. They’ve got the leeway they need to hire someone with more experience, without sacrificing a majorly higher amount of funds to get that level of talent.

Ultimately, it’s a combination of all these things—data and real knowledge—that is going to make the most of salary negotiations for your organization. Whatever you do, however, don’t make the mistake of thinking that workforce planning and salaries are not linked. They are, and the sooner an organization develops a workforce plan, the sooner that organization will be negotiating the right salaries and benefits for all involved.

Categories: Business Management

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Calculating Workplace Tragedy Magazine Issue Cover
Calculating Workplace Tragedy

Published: June 1, 2013

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