Wildstar,
The only way the companies could justify that degree of effort is that they truly believe that no two candidates are "equal" in any sense. They might have the same duties, but their overall value to the company includes many subjective factors such as how well the candidate works with others, how effective a communicator he his, what kind of first impression he makes to others, how pleasant he is to be around, whether he has that certain je ne sais quoi, etc.
So the diamond ring maker bids up the salary for the secretary to outcompete other bidders for the services of the same secretary because even though she would have the same duties as the secretary for the copper ring maker, they believe that she offers the highest subjective value to them. They can afford to do this because they have higher revenues and higher margins.
I believe that you've got the basic idea right, but that there are additional factors as well.
Here is my still evolving theory as to why some companies are often willing and able to pay sharply higher wages for the same and similar employees. --
When a company interviews 9 candidates for a job, 4 might be judged unqualified, but the other 5 might well all be acceptable. It is almost certainly true that the interviewer, at the end of the interviews, will have ranked all the candidates from 1 to 9. The question of the level of wages is how much is required to assure that the number 1 ranked candidate will accept your offer in preference to other offers from other companies in a similar position. It is just a detail as to whether the premium wage offer is made specifically to the highest ranked candidate after the interviews or whether a premium wage is expected to be paid from the time of the job opening. Probably it is a combination of both.
The reason that you are willing to pay a premium wage for a top ranked candidate is that your subjective judgement is that his hire will result in increased profits over time, in spite of the higher wage. This is NOT a subjective value, but an expectation of objective gains in the presence of large amounts of uncertainty.
Since the purpose of the theory is NOT to explain why people with higher skills receive higher wages, the premium must be justified in terms of intangibles, not in terms of skill variations themselves. These intangibles include what you mentioned, but I don't believe that issues relating specifically to present job performance are sufficient to justify the premiums actually paid.
Rather, I look at the premium as being largely composed of an investment component, dealing with potential future jobs in the company. Hiring while paying attention to the upside of the candidates is a way to both simplify future job searches by promoting from within and effectively amortizing current wage premiums as on the job training for future promotions. An in house promotion entails far less risk and learning curve than an outside hire, as well as being much cheaper. In addition, the wage premium investment is inherently a tax deductible investment, as it cannot be distinguished from normal wages.
As a general policy, the company that is able to afford to pay premium wages is simultaneously able to assemble a high quality workforce whose payoff over time would seem to be undeniable, especially if compared to companies that only hire marginal workers, even if quantifying it is probably impossible.
Regards, Don |
