Reaching Prospective Applicants

By Jim Fox and Bruce Lawson, Fox Lawson & Associates, A Division of Gallagher Benefit Services, Inc.

Question: We are a medium sized city and need to recruit a new city manager. Are there any tools that we might use to incent prospective applicants to apply for our opening? The last time we recruited, we had very few applicants in relation to the number of applicants we have historically gotten for other openings within our city and we are concerned that we are not getting the best possible applicants in our pool.

CompDoctorTM: Your question is both timely and challenging. We have written numerous articles over the past several years about the changing demographics in the workforce. As you probably know already, the number of people with the skills needed to perform jobs that require high-level skills is diminishing relative to the overall population. The Census Bureau has previously reported that by 2012, approximately 80 million workers will be eligible to exit the workforce and there are only 50 million workers coming up behind them. Given that more jobs in this country are knowledge based, and the next generation of workers lack the technical skills needed, the result will simply be greater competition for those few individuals with the requisite skills, knowledge and motivation to step into leadership roles.

Fast forward to today. Unless you have been living in a bubble, management compensation in the public sector has become a political hot potato. We do know that, over the past 10–15 years, public sector employers have increased compensation levels for lower level jobs at a more rapid rate than they have for upper level jobs. At one time, a pay ratio of 10 to 1 (the highest paid employee made about 10 times more than the lowest paying employee in the organization) was common. Today, we find the ratio being closer to 5 to 1. One of the reasons that this pay compression has evolved is a lack of willingness on the part of policy makers to raise upper level salaries for one or more reasons including concern about political reaction to raising compensation of individuals that are perceived as well paid to begin with.

In recent months, the media has made note of specific instances where the following techniques were used to incent individuals to accept city manager and other senior leadership positions. In each case, these techniques were added to what the media described as overly generous base compensation (generally salaries that were in excess of $250,000 per year but in some cases the base compensation was in excess of $400,000 per year. Following are specific examples of compensation techniques that the media has highlighted, even though most of these techniques are used by many organizations:

“Double-dipping.” Under this approach, an employee retires and draws full retirement pay for a position and then is hired back into another position that is not subject to the old retirement system (e.g. police chiefs who retire from the public safety system and then return in a civilian capacity under the general retirement system).

Lump sum retirement payouts due to banked sick time, vacation and other benefits. By allowing an employee to accumulate unused time and paying if off at the highest rate upon retirement or resignation, the employee is often able to increase their pensionable earnings.

Car allowances on top of what are cited as well paid salaries

One agency was cited for granting 14 weeks of paid time off every year, along with a $9,000 auto allowance, a $1,000 computer stipend, a full $15,000 contribution to the city manager’s 401(k), and a life insurance policy. As another perk, he’s allowed to bring his spouse on up to three conference trips every year, all expenses paid. His contract also has a clause that is somewhat like the “franchise player” status in the NFL. His salary can never drop below the third-highest city manager in a defined geographic area.

A “Stipend for Waiving Health” worth $600, an auto allowance worth $7,200 and $1,508 in life insurance premiums.

Separate payment for performing two separate rolls (e.g. city manager and utilities director).

Automatic annual increase (e.g. 10 percent per year) with no cap.

Signing bonuses.

All of these techniques have been used in the past to entice applicants or as incentives for particular individuals to accept a position. Unfortunately, the downturn in the economy has put executive level compensation under the microscope (you can also blame the city of Bell, Calif., if you would like as their practices clearly went above and beyond the call of duty). As a result, determining an appropriate level of compensation is not just a mathematical decision but also a politically decision.

Consequently, the cost of hiring someone without the requisite skills will often exceed the higher compensation you will need to pay to get someone appropriately qualified to begin with.

Hopefully, our comments will provide you with information that will be useful to you and your city council as they determine what an appropriate level of compensation for your new city manager is. Whether anyone qualified is willing to accept the job for that level of compensation is a whole other question.