Beware of Salary Studies

A Warning about Salary Studies

This past weekend I read with great interest several published salary studies appearing in the WSJ citing industry average salaries for a variety of positions from technology to manufacturing to financial services. 

Beware.

These are average salaries for average workers.  Premium talent cost premium money. 

The question is whether or not you want to build an average organization or an organization built to compete and get ahead of  your competition.

Here is Tale of Two Clients of mine that illustrate this point. 

Client #1 is an independent insurance agency operating in the WDC region for the past 50+ years.  They have been my client since I opened up my executive search practice in 2003. 

Client #2 is also an independent insurance agency operating in the WDC region for 50+ years.  They have been my client since 2012.

Client #1 has always been a steady client and one that sticks to the industry averages rarely hiring anyone who is “above the market rate.”  Their view is not to pay anyone a premium.  Stick to the averages.  “We’re not overpaying anyone.”

In parallel to my searches, they also run ads on the online job boards seeking active candidates who are seeking to make a change. 

I can still remember the bickering with their HR department over a few thousand dollars in salary negotiations with the candidates ultimately walking away.  They hold the line…”not paying anyone a premium….”

After several years of presenting A+ candidates who came with a premium to this client without success, I learned to send them only my average candidates – people that have recently been restructured or let go in their previous positions.  Active candidates. 

These marginal candidates are mostly seeking safety, security, and a seat behind a desk.  They also fit within that band of the average salary for people in their position.

In 2003, this client had 17 employees.  In 2023, they have 18 employees.  Steady Eddie.

Client #2:  I was referred to this client in 2012 when they had less than 15 employees after being in business approximately 40 years already.  It was a well-run and well-respected organization, but there had been little organic growth up to this point. 

The new ownership in 2012 engaged me to help them take their organization to the next level.  Their goal was to be a Top 20 WDC insurance agency and one of the youngest and most innovative in the region.  They wanted me to help them build a rocket ship.  And they wanted to do it organically, not by acquisition. 

They wanted Top Talent.  And were willing to pay for it.

We collectively decided to do this by attracting, developing, and retaining the best insurance talent in the WDC region and beyond.

We did this in close collaboration and determining what skills, experience, and attributes were in direct alignment with their strategic vision and work culture.

This took time, but after a few weeks of focused efforts, we knew exactly what we were looking for. 

They didn’t give me an open check book, but they made it very clear that they wanted to establish a base of top talent in both commercial lines and employee benefits.

And off we went.  Looking back at my invoices for this client, we ended up paying an average premium of approximately 9.3% for key position hires in the early years of building this new foundation.

Today?  They have over 75 employees and growing at 25% annually.  I expect them to cross the 100 staff threshold within the next three years.

All key positions are staffed with well-paid super stars. 

Top talent will cost an organization an incremental 10% on average, but the dividends obtained in performance and leadership has been proven over and over again. 

Top talent that is empowered, enabled, and rewarded on a consistent basis remains longer in their positions as well.

Let’s compare these two organizations once again from a longevity perspective:

The candidates I placed with Client #1 had an average tenure at the firm of 3.1 years.  Client #2 is 7.3 years.  Not even close.

Talent is the ultimate arbiter in business.  Salary studies are important, but always keep in mind they represent averages.

Thank you for your reading.  We welcome your ideas, thoughts, and comments. 

Rob