Ask HN: Why do companies not pay market when promoting from within? | Hacker News Reader

Ask HN: Why do companies not pay market when promoting from within?

8 pointsnopal4 comments

I work at a large (Fortune 100) company, and I'm interviewing for an architect position, and from what I'm hearing, the company simply does not provide raises that would take employees to the market rate for their position. Instead, the company wants to pay some percentage of an employee's current salary.

As someone who has certain entrepreneurial aspirations, I sort of understand where they're coming from. But on the other hand, I wouldn't want to run a company that ultimately forces people to leave to get what they're worth.

Is there a strategy that I'm missing? Because as I see it, this has to cause attrition of good people.

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Mostly because they can. Developers don't have a reputation for being hard negotiators. Most won't even do so much as ask for a realistic salary adjustment when switching positions. Companies are more than happy to use this to their advantage and simply give you a token raise unless you make a point of negotiating yourself something better.

As a developer, it's important to realize this and act accordingly. Don't be afraid to tell them that since you're being moved to a position that should pay $X, you'll need them to pay you $X from here on out.

Further, you've also identified the key reason that people move from job to job so frequently in this industry. That's how you get raises. You're never going to convince that Fortune 100 company to double your salary twice over the course of your first four years out of school. You'll have absolutely no problem convincing the market at large to do that though.

Unfortunately, that is just the way it is. As companies get larger they tend to favor mediocrity over greatness. It is very difficult for them to place an individual value on a developer and thus it's difficult for the developer to "capture" that value.

Also, social dynamics favor not pissing people off over rewarding high performance. For example, they would rather lose a developer X than pay him/her what they're worth because it would be "unfair" to all the other developers that they are currently paying below market.

Of course, raising everyone's salary to reflect market rates "doesn't make sense" in the short term and the short term is what concerns most individuals in the company. If manager Bob gets "good numbers" this quarter, maybe he gets a raise. If manager Bob, keeps down technical debt, attracts good devs and does stuff that in general aligns with the company's long term goals it may not look as good on this quarters numbers.

Your best bet is to go to another company. If you're very lucky, another developer will leave for a lot more money and management will wake up and give you raise. A company I left once gave the remaining developer something like a 50% raise.

1 word: leverage.

It's easier for you to take a below-market value without switching companies than it is for you to quit your job, take a risk and hope for a higher value on the open market.

The best thing to do in this situation is to have leverage. other offers, networks, or a side business that lets you call them out on their offer and start negotiating for something better.

This is an issue that I feel strongly about and have a few words to say. In 2012 working at large (Fortune 100) companies, the only way to get a significant (or market correction) raise is to quit and get another job. It is unfortunate but thats how it works.If you stay, they will give you the standard 3% raise or so.

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