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Who knew that:

• Dartmouth College graduates have the highest median salary in the country with a Total Cash Compensation of $134,000;
• Colorado School of Mines has the highest median salary of all schools west of the Mississippi, excluding California, with a median Total Cash Compensation of $106,000;
• The University of California Berkeley is the state school with the highest Median Total Cash Compensation of $112,000.

These are just a few of the tidbits from the 2008 Education and Salary Report sponsored by Payscale (profile; site).

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Saying to myself “duh,” I read Monday’s Wall Street Journal’s article on employee pay with amusement. The article outlines how some companies are actually paying their best performers significantly more than other employees in an effort to retain them. How silly we have become as a nation. In the pursuit of “fairness,” we have somehow lost our ability to measure performance or to be willing to let people know how they are performing. Rather, we have chosen to give everyone a similar pay raise — perhaps only a 1 to 3 percent difference between a top performer and a real laggard — not much to inspire the best and not much to motivate the worst. This practice is common in small and large businesses and extends all the way to the top. Many compensation schemes give executives large bonuses when the company performs well — but not when they themselves do. All this is finally becoming an issue. CEOs, whose average annual compensation in 2004 was around $9.8 million, are being challenged to justify that compensation to shareholders at annual meetings. Regular employees, who lack the status and clout of executives, are choosing to move on.

I agree that salary is not the main determinant of turnover. Throwing money at people to keep them never works for long. And I’m not talking about how much money, per se. What I am talking about is creating an atmosphere where performance is respected and where excellence is not just a buzzword. I would find a system that gave everyone huge raises as bad as one that gave them all small ones. It is not the amount of raise; it is the differential that a firm places on performance. By making pay ranges small, organizations create an atmosphere of disrespect and perpetuate a culture of mediocrity. When there are no clear benefits of performing exceptionally well, many people find they are less motivated, less challenged, and much more likely to leave for some other opportunity. Take the case of a person I know who was working for a large, national organization with offices and physical locations in most U.S. cities. This person started at the firm with a charter to develop a world-class recruiting function. He had top-level support and had been sought after because of his previous accomplishments. He was challenged to bring disparate parts of the organization together, create common goals, improve candidate awareness of the organization, raise candidate quality, and lower costs.

Over a three-year period, he and his team met all of these goals. They received recognition both internally and externally. But each year, he received only a small raise, a few shares of stock, and a pat on the back. He soon learned that almost all his peers had received similar raises — even peers who had not met their goals or who were openly acknowledged as not performing at a high level. Stock was given by title and seniority, not performance. Salary raises were more or less determined by length of service, as well, with only a tiny percentage allotted for performance. At the end of the third year, after many conversations with his boss and even higher-up bosses about this situation, he opted to leave for a smaller organization where pay was based on achieving goals. Recruiters need to understand that how candidates perceive the reward system has an impact on recruiters’ ability to recruit and on the firms’ ability to keep good people. Here are a few specific things recruiters should lobby for internally and use as a yardstick of corporate integrity. (Interestingly, integrity was the most frequently looked up word in Merriam-Webster’s online dictionary last year. As a nation, we are more and more concerned about ethics and integrity. Candidates and employees are asking what the organization stands for and what values will win out in the event of a crisis. Too often employees are discovering that they are not valued as much as they might hope, and choose to move on.) Every organization should have:

1. A clear statement of how employee performance is measured. Does your organization provide guidelines to employees about how they will be assessed? Does your organization have a goal-based compensation scheme? Who decides how an employee performed? These need to be spelled out early in the hiring process. The best measures of performance are quantitative and reflect the work of the employee (or the employee’s entire project team) rather than the collective effort of a department.

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“Recruiters should get paid for what they produce!” These are the words of a trailblazer in the corporate recruiting world, Michael Homula.

For those of you who are unaware of Michael, he first came to prominence as the director of recruiting for a small banking firm, FirstMerit (he’s now director of talent acquisition at Quicken Loans). His aggressive, business-focused approach to recruiting caused a stir in the recruiting community as he firmly placed his team’s emphasis on personal relationships and passive candidate sourcing. Today, less than five percent of corporations give recruiters incentives beyond the standard employee bonuses that others in HR receive. This is not surprising, as the majority of recruiting departments reside in HR. Obviously, the expectations for recruiters aren’t aligned with the compensation plans paid. Recruiting is akin to sales, as we are expected to source, build relationships, and get results — usually under heavy pressure. Agencies understand this, and skew their compensation heavily toward the number of hires a recruiter makes (often to the detriment of relationships).

Michael Homula strikes the balance between both worlds. At Quicken, Michael has found leadership that understands the importance of quality hiring to the bottom line. He sits on the executive committee and meets on a regular basis with the CEO. “Our leadership believes in making the recruiting culture like the mortgage banking culture,” he says. “Mortgage bankers are rewarded for productivity, effort, and quality. I believe in the same for the talent acquisition team.” Let’s start with productivity and effort: All recruiters receive a base salary. However, that’s where the similarities between Quicken Loans and most corporate recruiting teams ends. At Quicken, recruiters receive a cash payout for every candidate they hire. The payouts vary based on the how the candidate was sourced:

1. The first tier is for “company sourced” hires. These candidates come from the company applicant tracking system, referrals, company recruiting events, online job postings, and advertisements.

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Sometimes you just don’t have enough money in the budget to attract a top person. The following compensation negotiation techniques will allow you stretch your budget 10% to 15% without paying extra. But be careful using them. They’re for professionals only. Without practice, you might wind up paying more or losing a good person for dumb reasons.

Long Term vs. Short Term

This technique is about reframing the decision so that it is about job growth rather than compensation. When a candidate says the offer isn’t big enough, start with this:

Are you making a long-term decision using short-term information? Compensation shouldn’t be evaluated by itself. When we put offers together, we try to shoot for an overall increase of 30% to meet a person’s short- and long-term career growth targets. The bulk of this increase, however, is not in compensation; it’s in job stretch and long-term growth. As we discussed during the interviewing process, this job offers at least a 15% stretch in the job, plus long-term growth of 5% to 8%. Coupled with our cash comp increase of 8%, this is a very attractive offer. Let’s review the job stretch piece just so you feel comfortable with this.

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