Why You Should Take Joy in Being (Somewhat) Underpaid

Being slightly underpaid is the nonintuitive career management technique for more rapid growth. It could very well be Stephen Covey's eighth habit of highly successful people.

Compensation growth must follow performance, not lead it.

Being overpaid for the work you do is not good. It will stunt your career growth. Recruiters will screen you out before they even get to know you. People who do know you will call you less frequently, even for jobs you're fully capable of handling. You won't even be given the opportunity to talk or negotiate an offer. The glass ceiling for those in their early- or mid-career stage is not gender, it's compensation.

In fact, I would say those who are underpaid have more career opportunities than those who are overpaid. So rejoice. Being slightly underpaid is a great situation. It offers more options to maximize your career growth. In the long run, this is how you maximize your total compensation. Compensation growth must follow performance, not lead it. This should be Stephen's Covey's eighth habit of highly successful people.

In my 35-plus years in recruiting, I have personally negotiated more than 500 offers, and advised on about 500 others. In most cases, the company was rarely willing to pay what the candidate thought he or she wanted. Yet, I closed most of them within the budget range. Even better, the candidates never felt short-changed, and in the long run it was the right decision.

Whether you're a recruiter, hiring manager, or candidate, take heed: It's always better to be underpaid. Here's why, and how I advise candidates to think about compensation when they're negotiating an offer:

  • If you're overpaid, everyone will expect more of you. Consistent great performance will be anticipated, every mistake will be magnified, and raises will be minimal to get you back within the range.
  • There won't be a honeymoon period. In your new job, you'll be under a lot of unnecessary pressure during the learning and ramp-up period. It will be impossible to deliver, since everyone assumes you already know everything.
  • You've unnecessarily burned bridges that don't need burning. Getting a salary premium beyond the normal range always requires the hiring manager, the recruiter, and the hiring manager's boss to make a special deal with HR and compensation. They'll get lots of heat for this, and if you don't deliver right away, they won't be able to cover for you, nor will they want to.
  • Bigger jobs will be few and far between. Since it will be very difficult to achieve the unfair and inflated performance objectives, promotions are less likely, and your salary will put you out of the range of other inside opportunities. If you decide to leave, recruiters will screen you out since your compensation is above what's available.

Slower long-term growth is what happens when candidates unknowingly pursue a short-term compensation maximization strategy. Instead, I advise candidates to consider a career maximization strategy. (Here's the full manual and the videoversion.) The idea behind this is to select jobs that offer the most upside potential, rather than those that offer the most money. If you're a candidate, fight for a bigger job, an earlier review based on your performance, and a chance to be visible. When a recruiter calls, never ask first about the compensation. Instead, ask about the job, who it reports to, the challenges involved, and how these relate to a bigger project or the company strategy. When comparing offers, including a counteroffers, don't go for the bigger bucks, no matter how big; go for the job with the biggest upside potential.

Just before getting ready to negotiate the offer, I ask my candidates if they really want the job, regardless of the compensation. If the answer is no, I stop right there. You should, too. If you don't want the job and you're taking it only for the money, you'll be disappointed. In the long run, a career maximization strategy will also maximize your compensation. Compensation growth must follow performance. It must never lead it.