The Pros & Cons of Sending Multiple Offers
April 21, 2022
April 21, 2022
Knowing what a candidate wants is hard. No matter how many times you talk to them and how many notes you take, you won’t impress every single one of them when you extend an offer. It’s impossible to know what other offers candidates are weighing against yours, and the unique context and motivations that guide any one candidate’s decision-making process.
For these reasons, many companies have started presenting multiple offers, in an attempt to give candidates more control, and demonstrate that they’re willing to be flexible to get an acceptance. While this practice has become more popular, there are significant downsides. Having too many options can overwhelm candidates, create extra work for your HR staff, and disrupt your compensation strategy moving forward.
While we can’t help you become a mind reader, we can provide clarity on how to prepare an offer process built around both options, and outline some of the pros and cons of giving single or multiple offers. Read on to find out more.
There’s a lot of time and effort that goes into the hiring process before extending an offer. First, you need to know why a candidate is interested in the role, why they are leaving their current company, what their expectations are, and what their motivations are.
Not sure if you have all the elements of a thoughtful offer? Read about our comprehensive strategy here.
But even beyond that, you need to be crystal clear on what you can afford to offer them. For example, do you know how many stock options you can give away? How much cash flow you have coming in?
Hammering out these details means working closely with finance and the hiring manager, sometimes in a short span of time. Because whether you present one or more offers, all of them should match your compensation philosophy.
Most companies extend a single offer per candidate, and their processes are crafted around that, including contingency plans for negotiating with candidates. Under the hood, their entire backend is set up to support that, including COLA and COM frameworks, prebuilt and prediscussed compensation bands, and more. But that doesn’t mean there aren’t pitfalls to extending just one offer. Let’s explore why.
Presenting just one offer often gives the employer the upper hand in negotiations. They offer what they believe is a sensible amount of cash and equity based on the candidate’s location, responsibilities, and experience relative to the company’s budget and current compensation for other employees.
Single offers can also help women and minorities. Research shows that women and minorities tend to ask for less, so offering them one option limits the chances that they’ll take a less than equitable offer.
Single offers also make it easier to track total compensation, especially in a solution like Assemble. Once you’ve locked in a certain breakdown of cash and equity for new hire total compensation, promotions and bonuses become more straightforward because it’s easier to ensure that your workforce is more consistently compensated in cash and equity, which makes it easier to manage equity and cash adjustments over time. And if all this is stored in a single platform, reporting on and monitoring pay equity becomes easier, too.
If you really, really want a candidate to accept, extending a single offer can feel limiting. You want the candidate to know that you recognize their particular wants and needs. Multiple options allow you to put your best foot forward with a wider swath of candidates. While you can say that in a conversation, it won’t sink in for the candidate as much as seeing two different offers would.
Some companies leave room for negotiation after extending a single offer to increase the odds that the candidate will accept. But that wiggle room should only exist if you already have pre-defined compensation bands, otherwise, you risk creating pay inequities. If you don’t allow for negotiation, extending a single offer could result in a lower close rate.
First things first, decide on your why. Why do you want to present multiple offers? Perhaps you’re trying to reserve cash. Maybe you’re desperate for a candidate to accept. Regardless of your why, getting clear about your goals will help guide the structure of your offers and your compensation strategy overall.
Remember, candidates’ decisions don’t just impact how much cash or equity they receive now; they may also intentionally or unintentionally impact their compensation trajectory in the future. With this in mind, let’s review some of the advantages and disadvantages of introducing multiple offers.
Having options gives companies and candidates more flexibility while preserving overall pay equity. Giving one candidate an equity-heavy offer equivalent to another candidate’s cash-heavy offer equalizes them on a total compensation basis.
For employers, preparing multiple offers can improve cash flow. The candidates that choose a low-cash offer give employers more cash-on-hand to funnel back into the business, or to extend a higher cash offer to a candidate applying to a different role. At the same time, candidates feel like they have more control over their outcomes because they can choose a total compensation breakdown that’s right-sized to their unique needs.
In addition, presenting a few different offers can increase close rates. If you keep the total compensation consistent across the offers, candidates may feel like they are being handed a fair offer on a total compensation basis, and thus may be more likely to accept one of the options. And lastly, this methodology can be friendlier to working parents or older employees who might need more cash and less risk at this point in their career.
The biggest con to putting forth multiple offers is that it becomes more difficult to manage fairness over time.
Let’s walk through an example to illustrate what we mean. Let’s say that two software engineers start working at your company at the same time. One of them chose a high cash offer and the other chose a high equity offer. At this point in time, they’re both happy一each of them got what they wanted.
Fast-forward a year. Those employees now report to a new VP of Engineering who doesn’t know the backstory of their offers. She is doing compensation reviews for the first time, sees the difference between the two engineers’ packages, and tries to “correct it” by giving the employee with lower cash a raise. Ultimately, this scenario greatly benefits the employee who took higher equity. They have the equity upper hand, but they’ll also be trued up in the future, resulting in a much higher overall compensation package.
Now, that’s discounting the fact that employees talk to each other. If these two engineers had an honest conversation, they’d realize their cash comp was different. And without the full context or “why” behind it, the one who chose higher equity may harbor frustration. This gets even more complicated when equity bands are cohorted by start date, meaning that earlier employees are given more equity. It may be the case that an earlier employee’s “high cash offer” comes with significantly more equity than a later employee’s “high equity offer.” Clear documentation and explainability is paramount when extending multiple offers so that employees trust your compensation system and don’t feel discriminated against. This is especially crucial for women or minorities on your team. One misunderstanding could send a very grim internal and external message about your company’s compensation philosophy.
So, if you’ve settled on sending multiple offers, make sure you know ahead of time how you are going to handle the discrepancies in pay and equity long term. You could choose to keep a candidate low cash, high equity in perpetuity, make changes when people get promoted, or go a different route that’s in line with your company’s compensation philosophy.
As with everything, there are pros and cons to every decision. Whereas single offers are restrictive, multiple offers can be so limitless that they cause issues down the line. The reality is that many companies try both ways, and the key to success is being as communicative and transparent as possible.
But that requires extensive documentation regarding every offer and decision. It requires an organized, well-thought-out job architecture, explainable compensation bands, and pay equity monitoring system, which all happen to be out-of-the-box features of Assemble. Interested in learning more? Request a demo of Assemble today.