A new law prohibiting employers from inquiring about a candidate’s salary will shake up Wall Street recruitment


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IMDB

  • On Halloween this year a new law takes effect in New
    York City prohibiting employers from inquiring about a
    candidate’s salary history during the hiring process.

  • It will move the spotlight away from a
    too-basic metric—compensation—and shine it on the most profound
    elements of long-term value for an organization: motivation,
    cultural fit, aspiration, understanding of the business and
    strategic intelligence.


A few years ago Richard D. Fairbank founder, chairman and chief
executive officer of Capital
One Financial Corporation,
told Stanford
Insights,
 “I tell people I’m stalking
them, and you’re on my short list.” 

Companies that spend 2 percent of their time recruiting, he
argued, spend 75 percent of their time managing recruiting
mistakes.  His implied criticism was that executives spend a
lot of time managing their balance sheet even though it doesn’t
represent their company’s scarcest
resource: great talent.

Great CEOs are held in high regard for clever management of
financial metrics.  But great CEOs should be equally
regarded for their management of human capital.  Measured
by time,
talent and workforce energy it is a scarce
resource.  Scarcest of all is difference-making talent.

The average company considers only
about 15 percent of its employees to be difference
makers.  Based on my own firm’s research, inspired
employees are three times more productive than dissatisfied
employees.  An organization’s energy is a function of its
number of inspired employees.  But they are rare. 
Finding, developing and retaining difference-makers is tough; no
wonder the business press refers to a “war” for talent.  For
most organizations, only one out of eight employees is described
as “inspired”.

The cost of selecting the wrong person can run into
hundreds of thousands, even millions of dollars, not to mention
the potential negative impact to a company’s morale and
productivity.

The cost of selecting the wrong person can run into hundreds of
thousands, even millions of dollars, not to mention the potential
negative impact to a company’s morale and productivity.

  Competitive compensation policies are only the most
obvious example of what it takes to win a competitive edge in the
talent market.  Understanding the alteration of traditional
talent pools is another.

That is precisely why disruptions like New York’s equal-pay law
are, perhaps ironically, a gift to those of us working in talent
strategy.  On Halloween this year a new law takes effect in
New York City prohibiting employers from inquiring
about a candidate’s salary history during the hiring
process.
  The law is explicitly intended to untrack
lifelong pay inequalities for women by uncoupling them from their
salary histories.  From now on any such inquires will be
treated as unlawful and discriminatory.

They move the spotlight away from a too-basic
metric—compensation—and shine it on the most profound elements of
long-term value for an organization: motivation, cultural fit,
aspiration, understanding of the business and strategic
intelligence.

Companies in our industry that take command of their evolution
are strategic advisors, not resume dealers.  They are
seizing an opportunity to become guides in an operational
environment where the old borders and landmarks have been blown
away. 

The leading search firms today are technology-centered and
data-driven in support of a simple strategic insight. 
Clients want to know which candidates will thrive in their
individual organizations—they want to know fit, in other words,
and potential.  They want to hire efficiently and
accurately.  Measured by the time and money saved on
unsuccessful hires this is profoundly valuable intelligence for
CEOs and HR executives.

Consider the case of financial-services firms.  The talent
they want may now be more readily found in other industries,
especially Silicon Valley. 

Consider the case of financial-services firms.  The talent
they want may now be more readily found in other industries,
especially Silicon Valley. 

Other firms, intent on grafting the technical innovation of
Silicon Valley to their businesses, have learned the hard way
that recruiting such talent is often not an issue of compensation
but of competing with the creativity, lifestyle, intellectual
stimulation and stability found in the Valley.  Clients need
guidance in understanding the ways in which quants are an
entirely different breed from financial modelers.  That’s
one of the things a good search firm can provide.

Disruptions like the New York law will play to their strengths.

The authors of the legislation may not have intended that
consequence.  But we should thank them just the same.

Richard Stein is chief growth officer at Options Group
in New York. 

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