As a budget conscious business professional, I love to get a good deal for my company. If I can save $20/month by changing vendors--I’ll do it. No amount is too small. There is, however, one place I will never skimp—people. Trust me. You don’t get a deal on people.

While money isn't everything, compensation relative to the market is a pretty good indicator of how much a company values an employee. Paying someone less simply because I can will not be a winning strategy for any company in the long run. We may save capital in compensation but will also decrease engagement, kill productivity, and drastically increase turnover by telegraphing on the 1st and 15th every month that we don't value our team. You get what you pay for.

I specifically mentioned candidates in the previous paragraph because interviews are the most likely place employers look for a bargain. Asking a candidate what they made in their last position has become part and parcel of most interviews and compensation offers are usually anchored to that number. I think this is wrong. Would you ask how much a previous company appreciated a candidate and then set your appreciation based on that figure?

Imagine this conversation in an interview:

"On a scale of 1 to 10 how much did your previous employer appreciate you?"

"I’d say 1 or 2."

"I’m prepared to set your base appreciation level at 3 with a bump to 3.5 in six months and a 0.5 bonus at the end of the year based on performance."

Anchoring appreciation levels to that of a previous employer is not a recommended leadership strategy. Basing salaries on previous pay should be just as taboo. Considering previous compensation when determining a candidate's qualification or salary level is akin to allowing their last manager to determine who is right for our team and what they are worth. Previous pay is not proof positive of a candidate's qualification nor is it an adequate indication of their value in our organization.

Don't let another manager at another firm decide who you should hire and what you should pay. Take control of your own hiring process and compensation plan. Do the legwork. Vigorously interview applicants. Seriously check their references. Then, after you have decided the candidate is qualified based not on what the last guy paid them but rather on what they can do, offer the applicant what you have budgeted for the position. There are some things for which you should pay full price and a qualified candidate is one of those things.

You don’t get a deal on people.

Best Regards,

Len Musielak is an operations professional with over 10 years of experience managing operations in finance, recreation, and special events. In addition, he provides freelance operations and management consulting services. He also volunteers as a Community Teaching Assistant for the Wharton School of Business Introduction to Operations Management offerings on Coursera and as a member of the board for the Leukemia Research Foundation's ABC7 Jim Gibbons 5k.