Compensation: Looking for Love in All the Wrong Places

It’s when you’re in the middle of a job change that you tend to think that the most.  Part of anyone’s due diligence is to know all you can about the compensation opportunity in that new job.  If your move involves a move to another city, this can get real tricky.

One of the first pitfalls is to base your expectations on what you’re told that others make in that market.  Remember that a little exaggeration is common in the form of rounding up.  Pay ranges have a way of creeping up in the retelling.  Unless you’ve seen a half dozen W-2s, yourself, you’re better off taking this information with a grain of salt.

Related to this pitfall is the tendency to overlook the distinctions in what you do.  While it’s true that every BV practice performs the same functions, each divides them up in different ways.  Parts of your job might not be parts of someone else who, otherwise, appears to be pretty much at the same level as you.  Also, certain engagements are billed at higher rates – and produce higher profits – than others.  Those who execute and get that kind of work out the door will have experience that is valued more highly in the marketplace.

You know (or you should if you don’t) that the compensation you earn is a direct correlate of the profits you can make for your employer.  It’s nothing more complicated than that.  That’s where your focus should be.

First, investigate your chargeable rate in the market.  No one has any motivation to fudge that, so what you’ll hear from others is usually reliable.  If you’re interviewing for a position you can ask the employer for his sense of that rate.  Where would he peg you?  What would his clients pay?

Next, examine the number of hours you could reasonably be expected to bill.  You should already know what it takes to turn out what particular level of chargeable hours.  Don’t forget to factor in your own personal choices about work/life balance.  Again, get information from the employer.  Ask about both the firm’s expectation for chargeability and the upper range you could do, assuming the work were available.

Multiply the two and divide by 3 to 3.5 and you’ll have a very rough idea of what an employer would like to be able to pay for someone doing that job.  Does that mean they won’t go above that number if they see the value?  Or below, if they could?  No.

It’s merely a way to look at the situation that doesn’t begin with hearsay.  There are ways to use that information to build your case for a better salary, and perhaps even a creative bonus structure.

We’ll address those in our next issue.