What Is An Engineer Worth?
In a society where husbands and wives notoriously fail to discuss money issues with each other, how can third party income surveys possibly be accurate?
As the Jobs Markets continue to churn, I’m in frequent conversations about the value of engineers. Employers seem startled by pay rates that appear to be creeping higher.
Some reach for income surveys to get more guidance. (I’ll explain why those aren’t even close.)
Other Managers are simply surprised that there aren’t enough engineers.
Well, there aren’t enough engineers, and that’s just for now, while business is tentative. Stop back on November 7, we may get our first glimpse of what a real shortage looks like.
Then, there’s the concern of over-paying. I totally get that. But I ask you to consider this…
The best engineers leave first. Anybody who thinks inflation isn’t taking over hasn’t bought any gas or food lately. And the best engineers will include in their new pay package enough added income to offset the rising cost of, well, gas and food.
And so it goes.
For my part, I don’t believe overpaying is a significant danger. Hear me out…
Money is not moving through our economic system. It is blocked between the Fed and the banks. When money flows again, I’ll say right here and now that the inflation race will be on. Your overpaid employees will suddenly have trouble making ends meet.
To say it differently, any error to the high side of a pay plan is likely to be a very temporary issue.
Not securing new employees could be insurmountable.
Perceptions Control Values
Here are some broad guarantees about individual transactions in the United States:
Everyone claims they paid less for their car than they actually did.
Everyone claims they paid more for their house than they actually did.
And everyone says their income is sufficient for whatever it is that they’re buying.
These instincts are so reliable that the dreaded car dealers incorporate similar “rules” into their training programs.
Some training goes even further: “Everyone, including a nun, feels authorized to lie to a car dealer.”
Interestingly, a car salesman did tell me about the nun who came in to buy a car from him.
All Values Are Controlled By Emotions
Casinos and racetracks know that.
You should, too.
Candidates – and Employers – say and do things that leave me speechless.
Rules and guidelines go out the window during emotional events – like job offers.
Any recruiter capable of earning a living understands that nobody gets hired if nobody cares. (Appropriate) excitement is critical to making a placement.
Offer and acceptance e-mails almost always include some emotionally charged statement of enthusiasm.
These are also the times when people go brain dead.
I have seen candidates decline high offers because they massively forgot their own incomes.
I have seen employers massively understate their own pay plans, because, well, they forgot.
There’s nothing mischievous, here. Human brains just aren’t wired to get these things right – regardless of the importance of the outcome.
Pride, a seemingly noble virtue, is famous for its rigidity. That’s not always a good thing.
Granted, nobody wants to feel like an idiot.
If you review shortcomings with a candidate, you can expect resistance.
Tell an employer the company is coming up short, and you could find yourself sitting alone.
High emotions make it worse.
Pride causes inflexible positions.
And Status adds power to enforce those positions.
I once had a president contact me to evaluate his upper management, looking to reposition or replace some members of his team.
I made a low level placement, so I could interact with the managers.
We then looked at the “problem managers.”
We agreed completely on our evaluations, but by then, the president was too invested. He used the term “dysfunctional” to describe his own team. But it was easier for him to ask the world to adapt to his managers than it was for him to change out his managers to achieve his requirements.
It was an example of an employee’s value – from the employer’s point of view – collapsing from six figures to zero and then springing back again, based on little more than pride.
I hate surveys.
Just thought I’d share that.
Do you know anyone who really enjoys taking a survey?
It’s not hard to find people who want to read surveys. Well, they might read survey conclusions.
I have to tell you, When I publish an analysis of financial reports, I don’t notice many people clicking through to get into the weeds on these things.
But who doesn’t appreciate a report that says, “This is what an engineer is worth.”
Bang. Just like that.
Now you know.
There are a few teeny discrepancies to consider when you’re studying the results of income surveys.
Certainly, it’s easy to find sophisticated studies that detail survey errors. They’ll explain “failure to respond,” “under reporting,” industry and geographical bias, and imputed income.
These are my personal questions…
Who do you think takes the surveys on the job boards? Unemployed people, perhaps?
And who doesn’t take those surveys? Busy employed people, maybe? Maybe even busy, employed, highly paid people?
Could that possibly tilt the numbers lower?
And what does Job Title or Skill Level or Seniority Level have to do with anything? (At a time when job responsibilities have been blended together? It’s meaningless.)
Some companies admit they don’t even have fully defined responsibilities: “We all just pitch in and get the job done.” (Ever see that in a survey’s job description?)
Income Surveys vs. Recruiterland
In all the time I’ve been recruiting, I have yet to see a published income survey that came close to describing what I see in my world. (Not that some high priced outfit might not get it right sometime. I just haven’t seen it.)
There are important reasons for that.
I gravitate to high demand / low supply industries.
My clients seriously want me to help them fill their positions.
And they’re not paying me to find Joe Average or somebody who might eventually be good enough. They need a very specific kind of person.
They’re asking for an excellent solution, and, frankly, the quicker the better.
Here’s how that affects the relative income levels for candidates I’m asked to find.
High Demand / Low Supply – Oil and Gas companies are probably out-bidding you for engineers. That creates a smaller pool of available candidates. And it increases what other employers are willing to pay.
Supply is further reduced by age. Most engineers are gray or bald. They are retiring in huge numbers, and replacements are simply not coming in fast enough.
As a test case, I posted an ad for an Automation Engineer for an employer in Texas. It was just a courtesy post. I don’t rely much on posting any more.
Not all that surprisingly, I had over a dozen international applicants before I got a response from someone in this hemisphere. It doesn’t matter to me, but so far, I don’t have any U.S. employers willing to go to the ends of the earth to fill a position.
Availability – There’s a difference between Supply and Availability. I can’t create engineers. I can sometimes make engineers available. To bring them over to your team, money isn’t enough. You’ll need something compelling about the career move. Oh, and you’ll still need the money.
Urgency – What really escalates the price is the urgency. Managers who plan ahead often start me on searches well in advance of their needs. That’s helpful. Those who get caught by surprise are sometimes forced to pay up, simply because the damage of not completing a project is far too painful to bear.
Quality – When the need to fill a position is important enough, or urgent enough, (or both) there is probably something going on that requires a better than average solution. I try to circulate among the Top Ten Percent. The High Achievers. The folks below the top twenty five percent tier probably won’t hear from me.
Last week, I submitted a list of candidates to an employer. He zoomed in on two possibilities. The other candidates, he said, weren’t worth considering. Can we safely assume, then, that the two winners he picked will earn substantially more than the remaining average and under-performing players?
Complexity – If an engineering profile has some definable price tag, we can agree that the more skill sets you add, the fewer possible candidates you’ll have. And their price tags will be higher. Add a Masters degree, and they’ll probably expect more. Do you want a certification? It’ll figure in. Maybe a Professional Engineer? They’ll charge for that. International travel? Languages? Specialties? Industry experience? Programming? Just like ordering side dishes in a restaurant, the tab keeps going up. But unlike restaurants, the more specifics you require of a candidate, the less chance you’ll have of finding anyone at all.
So far, I have talked a lot about values floating all over the place, as mere mortals try to attach a dollar value to an individual’s services.
I know this all sounds messy to the outside world, but my daily conversations with real live professionals help to resolve some of that.
It’s a little like Price Discovery. That’s the term traders use to describe the second-to-second price fluctuations of stocks, bonds, and commodities. Each transaction simply helps us “discover” the value of an item at a moment in time.
My discoveries are more like hour-to-hour, but I’ll stand by my real life survey of compensation and what’s working, any day of the week.
The easy part is anticipating all the financial and economic reports you might see in the headlines. Doing what I do, it’s no surprise that I get an advance feel for employment figures, production levels, and various benchmarks that traders absorb on their way to fame and riches.
Our hard part is accommodating the stickier problem: All engineers are not the same. Not even close.
That’s where my Price Discovery example falls apart. We still can’t go online and see what engineers are trading at.
Instead, let’s go back to my earlier example of the dreaded car dealers. They know they can’t make much money selling new cars. There’s very little difference – sometimes no difference at all – between one new (fill in your make and model) versus another, essentially identical unit. The shoppers win.
Dealers can make make a killing on Used Cars. The public conceives that used cars cost less. And Price Discovery is very difficult. There is no other car that is exactly the same as the one you’re looking at.
So, here I am, comparing engineers to used cars. Well, that’s not good, is it.
Engineers are supposed to improve with age.
OK. Engineers are like bottles of wine.
Don’t drink? Well, then, you’ll have to find your own simile. Just include the part where everybody is different and every circumstance is different.
We’ve already discussed that Pride, Status, and Emotions can be a big deal when we’re trying to establish a compensation plan for an incoming Employee.
This all gets magnified, and even counterproductive when the company’s presumed “decision maker” is isolated.
It is then that the isolated decision maker can enforce a whole new expedient: Policy.
At that point, it is difficult for employers to adapt with a market. Policies typically institutionalize a decision not to make any more decisions.
I will travel a thousand miles or more just to understand what’s going on in a company.
My work is based on collaboration.
I need to talk to the manager who is sweating bullets, because he doesn’t have the right professionals to meet his objectives. No one else in the company will have quite the clarity or the desire to get that position filled.
When it works, the results are fantastic.
Sometimes, collaboration isn’t possible. I discovered one President who had lost control of his company. He went off and got college degrees and joined management associations so he could improve his leadership abilities.
Meanwhile, his managers hijacked his company.
Sadly, that’s a situation where I can’t help. The potential for collaboration in that company broke down years ago.
HR As A Participant
Experienced and knowledgable HR professionals will often enhance the collaborative effort in searches. They understand the process, they facilitate internal communications and follow-through, and they share important resources and values.
Sharing values, agreeing on expectations, and moving quickly when opportunities arise… these are all important contributions of an engaged HR Department.
In these environments, I can get in, do my thing, and get out.
Ultimately, I’m simply an extension of the HR Department. It’s the information and communication around the manager we’re serving that creates the traction.
Obviously, not every company operates the same. Inexperienced HR Mangers are more likely to isolate themselves (like I said, nobody wants to be embarrassed) and, as a defense, they may institute a total ban on critical communications.
In those situations, we sometimes have to wait for the new HR Manager to evolve or to open up to our help. It’s the only way that incoming candidates can ever hope to align with Hiring Authorities on price and value.
Why Does All This Matter?
The complexity and speed required to successfully hire in-demand talent requires a certain level of trust in the management team.
I know I have an isolated decision maker replacing thought with policy when I hear a Department Head or an HR Manager say something like, “Yes, I know it doesn’t make sense, but those are the rules.”
Those are the times when no employment offer will be effective. We’ll either be late, wrong, or both.
When Cheap Is Too Expensive
Sooner or later, it seems every employer gets the clever idea of cutting pay, cutting employees, and working everybody harder. It’s usually introduced as a policy.
I’m working with a company right now that spent years paying a little more than market to get the really good talent. They built a powerful organization.
Then they played the belt tightening game, congratulating each other on ever higher profits, even as revenues fell.
With sales on the rebound, they now have a small problem. They can’t find people to join them.
Engineers don’t need a job. They want a career to get excited about.
Once this employer broke the faith with the market, they lost the power to attract the best and the brightest.
To me, that’s a very expensive trade off.
My Football Analogy
Here’s my last example on determining compensation for an engineer.
It’s football season. You can pretty easily look up the price of tickets.
Let’s say I’m offering tickets to an isolated decision maker.
Here’s the deal… Two tickets, $60. Take it or leave it.
That might work great for the buyer whose policy is “We only pay $30 per ticket. Nothing more.”
The rest of us might ask…
High School, College, or Pro?
Home or Away?
So it is, when it comes to determining the value of an engineer. I’ll always defer to the collaborative process and the mutual objectives.
Do you want college or pro?
Give me a knowledgeable, engaged, responsive manager. More times than not, we’ll quickly find the mutually agreeable price and terms.
The rest is supposed to be simple.