I have been working for 11 years in the sales recruiting business having spent 15 years before that in sales and sales management roles. I have had comp conversations with thousands of candidates in that time. Up to a few years ago, it was ok to ask people what they were currently making. There is no doubt that this allowed hiring firms to default to a practice of cost-plus comp negotiations – the offers generally came in at the current base plus some incentive to move. Now, to protect those people earning less staying in a not-so-virtuous circle, we ask candidates “ What are your comp expectations?”. This has put more power and creative license in the hands of candidates and has definitely heavily contributed to an inflationary period over the past 3 years in VC-backed sales compensation. The goal of governments blocking the current-comp question is more equitable comp – for lower earners and diverse hires – but I would argue that this has partially backfired and even potentially contributed to wider income gaps especially for diverse hires. Here I dive into why I think this is the case and what we can do about it to make comp more equitable – especially for diverse sellers.

When you, as a sales candidate, answer that question, “What are your comp expectations?” there are 3 possible Goldilocks-like outcomes….

  • You price yourself too high relative to the market rate
  • You price yourself below the market rate
  • You price yourself just right at the market rate

So a key question then is what determines the market rate for sellers? 

The market rate for a given sales candidate is really a function of current trends and quota, deal size, deal cadence for the prospective role AND the candidate’s performance in past roles in the context of prior quotas, deal size and cadence for those roles, plus some weighting to the confidence of the hiring manager that you can deliver. The candidate’s location is also a small factor but one I won’t focus on here.

So how do you get to know your market rate as a sales candidate?

There are 4 ways you get a feel for it and where you should price yourself

  1. You talk to peers
  2. You get guidance from mentors
  3. You hear it from hiring managers/internal recruiters when they are proactive about giving comp details for given roles, and 
  4. You talk to external recruiters.

You basically do your research, when you are looking but also, ideally, when you are not looking too, so you are prepared when you are asked that question. 

My contention, admittedly anecdotal, but based on thousands of my comp conversations with candidates, is that racially diverse candidates on balance are less aware of their market-rate and this hurts them in comp negotiations as they often price themselves below market, wanting to, and I quote, “not price myself out of the market”. That is an expression I hear disproportionally from racially diverse candidates – especially with 3-10 years sales experience (it is less a factor with more experienced reps). Why this happens is not totally clear to me.

Comp is obviously a sensitive, and often secretive subject and, with many sellers at different base comp rates, companies have a good reason not to encourage sales employees to share comp with each other or between internal mentors and mentees. There are probably differences between access to comp statistics from peers and mentors across different ethnic groups in sales but, rather than speculate whether that exists here, instead I wanted to focus on #3 and #4 and what we can potentially do about those hiring manager/recruiter interactions. 

I know from direct experience that when hiring managers or recruiters hear comp expectations below market rate, our collective default response is to stay silent and, consider it a cost-savings “win” for the hiring firm and potentially money in the bank in case the money is needed to give higher offers for other sales candidates later on. I think we can do better here. Rather than accept at face value, weaker, below-market answers to that question especially from diverse candidates, and chalking it up as a “win”, I think it is our collective responsibility as hiring managers and recruiters to proactively inform these candidates of their market-rate and our reasoning behind it. I do this whenever I get the chance. 

Another key factor is the confidence in which sales candidates deliver the answer to that question. Confidence in delivery can be the difference between leaving the perception that a candidate is overpriced and at the market rate. My contention here is that female candidates (and, to a certain degree, older male candidates*) often undermine their answers with how they answer the question or don’t answer the question directly and say instead “I’m flexible”. My evidence again here is purely anecdotal but this happens so often that I actually have a stock answer/advice-based response to this answer that I draw from. I tell them “You are not flexible – You have a value and you should assert that value”. I then help them understand what their value is in market-rate terms.

This latter issue of confident replies should be an easy fix- with recruiters and hiring managers giving simple direct feedback, and, for the sales candidates in question, a simple tweak in language going forward plus an understanding of how confidence in your delivery of the comp answer breeds confidence in the perception of your abilities.

The interesting thing here is that the antithesis of these two situations is the generally younger, confident white male who asks above market and often gets it- partially due to the confidence of their assertion of their value – but also partially due to hiring managers not drilling down on the details of their past performance to assess their true market rate. This happens particularly in years 3-10 of a younger seller’s career where we often see large jumps in base comp without the justification based on w2 or quota performance. If more hiring managers did a detailed drill-down and avoided overpaying for less experienced sales talent – especially that up-and-coming sales talent, it would go a long way to making up any money “lost” by hiring firms by marking up candidates who have an ask below market rate. 

So what happens to these overpaid candidates over time?

Some of them grow into their new comp, quotas, and deal size. Some don’t- in those cases, sales has a habit of making sure some equilibrium is found eventually through PIPs, firings and, ultimately, a short tenure.

In conclusion

Until that equilibrium is found, however, there is a time period where the comp gap is exaggerated and sometimes, never fully gets bridged. It is high time and on all of us to sort this out. In summary, we can help alleviate this issue in a few ways.

  • Sales leaders mentoring more junior sellers and discussing comp in a transparent manner
  • Recruiters and hiring managers alike helping bridge income gaps by proactively offering the advice above around market rate and confidence in answering the comp question.

We can also pay for any cost impact of addressing that imbalance at the lower end of the comp scale, by properly vetting the performance of those who ask for above-market comp at the opposite end of the scale.

Long term, we might get to the point where full sales comp transparency bridges the income gap. I still see that as a long way off but these tweaks can help us get there faster.

Besides, full Comp transparency really needs a standalone post! I will get on that at some stage.

* This is generally more due to a concern about age-ism in individual contributors in particular 

Leave a Comment

Copyright © 2023 Glenborn

Stay connected