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In recruiting, hardly anyone asks about money before they get an offer: Why!?

Steve-Hind1-150x150Editor-in-Chief Steve Hind (HBS ’16) surveyed EC students last week to examine when in the recruiting process they think it’s okay to ask about compensation. The overwhelming answer was: don’t ask until you have an offer. CPD gave the same advice. Steve asks: Why!?

Don’t ask about compensation until you have an offer from a prospective employer. That’s the advice from 86% of HBS second-year MBA students. The school’s careers office agrees. Over half of the surveyed students wouldn’t even try to find out compensation ranges online or through their network.

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Taken at face value, this suggests over half of HBS students recruiting this year would go all the way to receiving an offer from a company without looking for any outside information on what they might be paid.

Asked to explain their advice, students’ cited their perceived non-negotiability of offers in some industries (like consulting), what they saw as traditional etiquette in interviews, and awkwardness asking about money.

HBS’s Careers and Professional Development (CPD) office suggest students’ don’t ask before they receive an offer, and instead use compensation resources that CPD makes available.

Kurt Piemonte from CPD told The Harbus that, “Prior to [receiving an offer], students should conduct research about salaries and additional compensation for the specific industry, function and / or location by accessing Intelligence, Opportunities & Updates (IOU) on the Career Hub dashboard, and referring to the Negotiations section of Career Hub where there are historical data.” (Publicly available compensation data is available at //www.hbs.edu/recruiting/data/Pages/default.aspx).

A prisoners’ dilemma? Who wins in the status quo?

It’s worth asking whether the situation we find ourselves in actually helps either students or employers.

Among students, it seems there is a clear prisoners’ dilemma. If we assume students are thought poorly of (at the moment) for asking about compensation before they get an offer, then a student who steps out of line and asks is relatively disadvantaged. Not knowing, or trusting, that all other students will also ask, students sensibly stay quiet. As a result, everyone operates from behind a veil of ignorance.

But the veil is the not the same for everyone. When forced to rely on generalized, anonymized data from CPD or online, or on anecdotal, unreliable data from our networks, students’ ability to properly assess compensation becomes more a function of how connected they are.

And use of (or access to) those connections is gendered, at least according to our survey. Women are more than 50% more likely to say they wouldn’t ask and wouldn’t find out online or through their networks.

Armed with accurate information on compensation ranges, there is reason to believe people could make better decisions. Maybe the public sector job you discounted out of hand as paying too little is actually pretty close to your other offer. Perhaps the startup of your dreams just can’t afford to pay you what you need to service your debt, and the months you spent networking to get the offer didn’t pay off.

But does the current setup help employers? It’s hard to say. Perhaps for every candidate who doesn’t apply because they assume the pay is too low, they get another who has fallen for the company by the time they get the lowball offer.

Maybe employers don’t really mind. Lots of students said the reason not to ask was to avoid giving the employer the impression they cared only about the money. But do we really think employers will be shocked to know that people care about their paychecks?

This situation is reminiscent of CPD’s decision this year to make all on campus recruiting events ‘classroom attire’. Companies that expected to see us in suits after class last year now seem perfectly happy to talk to us in whatever we were already wearing. Once CPD made a rule and circumvented that particular prisoners’ dilemma (if everyone might wear a suit, you need to, or risk looking shabby), the problem evaporated. Maybe a similar solution would work here.

October 14, 2015
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