For the exclusive use of Y. Zhang, 2020. W05014 MBA JOB OFFER NEGOTIATION: RECRUITER Ryan Quirt and Alan Richardson prepared this case under the supervision of Professor Fernando Olivera solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2004, Richard Ivey School of Business Foundation Version: 2016-11-17 You are a partner at a multinational consulting firm. During the recent financial crisis, the demand for strategy consulting services decreased significantly and a hiring freeze swept your firm, paired with isolated lay-offs. However, the past three years have been favorable to the industry. Your firm has performed particularly well during this period, and the resulting promotions and firm retention has left your firm in need of human capital. You are looking to hire another consultant to alleviate some of the overwhelming workload. THE CANDIDATE A clear front-runner has emerged from the recruiting process. This person, an MBA student on the brink of graduation, has demonstrated exceptional analytic and interpersonal skills, and you are convinced that this candidate would be a very good fit with your team. The candidate was first interviewed on campus by two senior consultants and was subsequently invited to a site visit to meet you and other partners and consultants. The consensus was that, of the three candidates invited for site visits, this was clearly the best. An offer was sent to the candidate two weeks ago and, because you are under time pressure to fill this position, the firm requested a decision by today. The candidate has requested a meeting with you to clarify the offer and, you anticipate, negotiate some aspects of it. If you are unable to reach an agreement today, you must unfortunately abandon the deal and pursue your second choice, who is an acceptable but inferior candidate. DETAILS OF CURRENT OFFER The offer you put together, in consultation with head office, consists of several points: 1. Compensation of $99,500 1 per annum. 1 All amounts in US$ unless otherwise specified. This document is authorized for use only by Yunzi Zhang in Strategic Recruiting, Retention and Succession - Final Project-1-1 taught by ROGER ACHILLE, Johnson & Wales University from Aug 2020 to Feb 2021. For the exclusive use of Y. Zhang, 2020. Page 2 9B05C011 2. Signing bonus of $10,000. 3. A performance bonus of up to 25 per cent of salary (paid at the end of each calendar year). 4. The company will place an additional 10 per cent (of base salary only) into a Retirement Savings Plan 5. 6. 7. 8. designated by the candidate. The company covers approximately 85 per cent of health costs. Ten days of paid vacation time per year. The company will pay for relocation up to $5,000. Start date of May 1. Company policy is to increase salary by zero per cent to three per cent per annum, based on performance. Head office has given you the basic offer and has left it up to you to negotiate the details in order to get the candidate to sign on with the firm. There are set ranges within which to negotiate the offer (see Exhibit 1). ISSUES TO CONSIDER You are aware of other consulting firms that offer higher starting salaries than yours. Many of these firms use compensation as a key incentive to attract talent. In your view this approach has resulted in escalation in salaries (with some offering $135,000 or more), unrealistic performance expectations for new hires, and reduced firm loyalty with consultants regularly moving to jobs with even higher compensation. Your firm’s approach has been to attract top talent by providing challenging and exciting assignments, reasonable work hours, fair compensation, and a team environment that promotes personal growth. Over time, the firm also rewards loyalty with competitive compensation for senior consultants and partners. The salary range for new hires provided by head office is thus meant to be fair, but not to attract candidates looking for the top salaries in the industry. You can negotiate salary, performance bonus, and contribution to pension plan up to the maximum provided by head office, but not beyond. You have more flexibility, however, with one-time expenses, such as signing bonus and relocation, using your discretionary budget. That is, should you choose to increase the signing bonus or relocation beyond the maximum, the balance is subtracted from your discretionary budget. Your discretionary budget has been set at $120,000 for the year, and is meant to cover meals with potential clients, research on proposals, and other business expenses (travel, etc.). One of the consultants who was hired in the previous year graduated from the same MBA program as the candidate. You are cognizant of the potential tensions that may exist if this candidate is able negotiate a deal that far exceeds the offer of last year’s recruits. You have access to the terms of the offer that was extended last year (see Exhibit 2). You know that, should the offer be accepted, arrangements will be made to relocate the candidate from their current residence. You recently received notification that your team needs to be in Paris, France, for a 10-day training session, starting the second Monday of May. This training is essential for projects that will begin in June so you need the entire team to be there. In conversations you have had with the candidate prior to sending the offer, you had talked about a start date in June, but you don’t anticipate any legitimate reason why a May 1 start date would be a problem. This document is authorized for use only by Yunzi Zhang in Strategic Recruiting, Retention and Succession - Final Project-1-1 taught by ROGER ACHILLE, Johnson & Wales University from Aug 2020 to Feb 2021. For the exclusive use of Y. Zhang, 2020. Page 3 9B05C011 EXHIBIT 1: ALLOWABLE NEGOTIATION RANGES Aspect Base Salary Signing Bonus Performance Bonus Pension Contribution Health Coverage* Paid Vacation Moving Expenses** Offer $99,500 $10,000 Up to 25% Up to 10% 85% 10 Days $5,000 Minimum $88,500 $0,000 0% 0% 85% 10 Days $0 Maximum $109,000 $20,000 25% 15% 85% Within Reason $8,000 * Health Coverage is a company-wide plan and cannot be negotiated ** The firm will reimburse expenditures for relocation and travel within a 1,000-kilometre range. EXHIBIT 2: INITIAL CONTRACT FOR FRIEND OF CANDIDATE Base Salary Signing Bonus Performance Bonus Pension Health Coverage Paid Vacation Moving Expenses Start Date $104,000 $14,250 Up to 25% 10% of Salary 85% 13 Days $5,000 Flexible (several options were given) This document is authorized for use only by Yunzi Zhang in Strategic Recruiting, Retention and Succession - Final Project-1-1 taught by ROGER ACHILLE, Johnson & Wales University from Aug 2020 to Feb 2021.
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