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A “pennywise and pound foolish” approach to hiring ultimately will backfire — the true cost of a bad hire could be 100 times what you think you are saving.

Paul Sturgeon

February 26, 2024

2 Min Read
woman looking at resume
Shannon Fagan/The Image Bank via Getty Images

Back in the day, if you were buying a house and asked for advice on what to offer, there was always a guy — usually someone’s brother-in-law — who would tell you to make a lowball offer. The possibility of getting a bargain was too alluring to pass up. But it rarely worked.

Don't confuse the housing and labor markets

In more recent years, the tables have turned, and the advice is to offer more than the asking price, so market conditions can affect the overall offer and acceptance process. You can still make a lowball offer in real estate, and the house won’t be offended because it doesn’t know what it’s worth, but the labor market is a different story.

What is a lowball offer? It is unlike the housing market, where some might give a range or number, such as 10%, that would amount to a lowball offer. In the job market it is any offer below what the potential candidate is expecting.

A line you should not cross

If you are a hiring manager or HR professional, making a lowball offer is a line you should not cross. If you are unable to offer what the candidate needs to join your company, let them know that as early in the process as possible and move on. Why?

  • If you do not believe the candidate is the best person for the job, you will not be happy with them just because you think you realized a small cost savings. The true cost of a bad hire could be 100 times what you “save.”

  • The candidate will probably turn down the offer, resulting in a waste of everyone’s time. Even if you negotiate and come to terms, both parties will be starting the relationship on a sour note.

  • Your company’s reputation can suffer. How would you like to read on one of the many social media sites: “Be wary of this company, they will waste your time and make a lowball offer.”

Gauge expectations at the outset

Find out at the beginning of the hiring process, before an initial interview, what the candidate expects for this role. If you are using a recruiter, they should tell you that when they present a potential candidate. If you are working the opportunity yourself, you need to be aware of the applicable salary history ban laws, but that does not mean you ignore compensation and hope it works out in the end.

About the Author(s)

Paul Sturgeon

Paul Sturgeon is CEO of KLA Industries, a national search firm specializing in plastics, packaging, and polymer technology. If you have a topic you would like to see discussed, a company that is growing, or other ideas for this blog, e-mail Sturgeon at [email protected].

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