Author: Lou Adler
“John, you’re making a strategic decision using tactical information.”
I first presented this advice to a candidate about 30 years ago who was overvaluing the short-term aspects of an offer when comparing two new jobs. Both were comparable in terms of responsibility, but one was closer to home, paid a bit more, and had a better title. The candidate was planning on accepting this one, which was unfortunate for me, since it wasn’t my search assignment. As a result, I’d lose a fee if he accepted that job and rejected mine. My client’s opening had one clear advantage over the other that the candidate was ignoring: it was in a up-and-coming industry with some exciting technical manufacturing challenges to overcome. The one he was planning on accepting was in a slow growth industry with an emphasis on extracting cost savings.
Of course, making strategic vs. tactical tradeoffs isn’t new, but most people tend to overvalue the short-term benefits, rationalizing, ignoring or minimizing the long-term impact. The first time I remember learning about this was in some finance course where the prof gave the admonition about not borrowing short for long-term business needs. I heard it again a year later at a board meeting where I was a rookie analyst flipping the slides. The CEO angrily pointed his finger at a division president and said, “Your short-term tactics are determining your long-term strategy. You have it backwards. Your strategy needs to drive your tactics.”
It doesn’t take much effort to see other examples of how getting this strategy vs. tactics balancing act negatively impacts all types of decision-making. The design problem with the GM switch is a pretty obvious one where short term cost pressures overrode the long-term consequences of a bad design. Think about Iraq. In 2009, many argued for some type of residual force, but pulling out completely won the day. We’re now starting to see the cost of this bad decision. What about Sterling vs. the NBA? We’ll soon see how this war of tactics plays out. Short-term politics and short-term thinking always impacts the long-term in some negative way.
Of course, bad strategy can’t be ruled out either, and none of us are immune from this. For jobs, too often the choice is the one that offers the most immediate relief from some short-term pain, not the one that provides the best long-term opportunity.
In a post last week, I suggested using “The 30% Solution” when switching or comparing job opportunities. The idea is that for a new job to represent a true career opportunity it must provide at least a 30% increase over the one now held. However, only a small part of the 30% increase should be compensation. Most of the increase should be in the form of job stretch and job growth. Job stretch is the difference in the scope, size and impact of the new job in comparison to the others the person is considering or the one now held. On this basis, the job John was rejecting had much more stretch than the one he was accepting, and far better than the one he was holding at the time.
Job growth relates to how fast the company and industry are growing and the likelihood the job will offer more long-term upside opportunity as a result. There was no comparison between the two new opportunities on this basis. The one John was thinking of accepting was in a declining industry, and the company I was representing was for a senior manufacturing opportunity with a leading provider for a new, faster growing technology.
“… compensation will increase faster in the long-term when stretch and growth are maximized in the short-term.”
My advice to John then, and to all candidates since, is to combine job stretch, job growth and compensation to reach the 30% threshold figure. More important, I suggest emphasizing the stretch and growth factors over compensation. The reason is that compensation will increase faster in the long-term when stretch and growth are maximized in the short term. (Here’s a link to a complete discussion on this important career strategy.)
I went through these ideas with John, and it was instantly obvious to him that the offer he was planning on accepting offered a roughly 20% overall increase in comparison to the job he was leaving, but most of this was in the form of a 12% increase in compensation. The rest was a better title, better work/life balance since he was closer to home, and a slightly bigger job. The job I was representing offered far more than a 30% increase, however, in this case compensation was only 5% of the total. The rest was in a far bigger job, although it had a less imposing title; instant visibility to the executive team; handling a far bigger manufacturing challenge; and if successful, significant more near-term upside opportunity. I told John to think about these differences.
He called me the next day and accepted my client’s offer. More important, he excitedly called me a year later to say he was just promoted to a VP Operations role over a bigger manufacturing group. On top of this was a 20% increase in compensation and a bigger bonus opportunity. He thanked me profusely for the earlier advice.
Moral for everyone: don’t make long-term decisions using short-term data, don’t let tactics determine your strategy, don’t borrow short for long-term investments, and compensation will increase faster in the long-term when stretch and growth are maximized in the short-term.