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A superstar hire can command a superstar salary. The problem comes when only the salary lives up to the billing. Six months in, an employer may realize it overpaid. The paycheck, however, is unlikely to shrink, says Syndio CEO Maria Colacurcio, whose company provides pay intelligence software. Instead, employers may freeze future merit increases or ultimately part ways with the employee.
That dynamic makes the initial offer more than a simple recruiting decision. It is a long-term allocation of capital that can shape pay equity, retention, and labor costs for years.
A new analysis from Syndio, released today, puts the cost of a mismanaged pay decision for a new hire at between $5,257 and $10,454 over the employee’s lifecycle. Those costs can come from correcting underpayment, carrying an inflated starting salary through future raises, or losing employees over perceived pay inequities.
At the same time, employees are paying closer attention to how companies make and communicate those decisions. A new report by HR tech platform G-P points to another pressure on compensation strategy: the gap between employees’ expectations for pay transparency and employers’ practices.
Among 4,000 workers surveyed globally, only 34% say their organization practices pay transparency, formally or informally. And of those, 18% say they would leave the company if the policy were withdrawn.
Taken together, the findings underscore why compensation strategy cannot be a series of one-off decisions made at the point of hire. Individual offers can shape labor costs and internal pay dynamics for years, while employees increasingly expect clarity around how pay is determined. For CHROs, that makes a clear pay philosophy, including how exceptions are handled, a matter of workforce strategy and financial discipline.
Building that philosophy starts with determining who owns it. Colacurcio says that requires a candid conversation between the CHRO and CFO, whose responsibilities converge around one of a company’s largest expenses: its workforce.
The CHRO typically oversees total rewards and, by extension, one of the company’s largest expenses: headcount. The CFO, meanwhile, is focused on managing costs against revenue. That overlap can leave ownership of pay decisions unclear, Colacurcio says.
Once that ownership is clear, the next step is turning the company pay philosophy into a policy that can actually guide hiring decisions. For example, defining what specifically the company is willing to pay a premium for, instead of making those calls on a case-by-case basis.
For CHROs, the test of a pay policy is what happens when a coveted candidate asks for more. The decisions made in those moments determine whether compensation strategy remains a company-wide discipline or becomes a collection of exceptions.
Kristin Stoller
Editorial Director, Fortune Live Media
kristin.stoller@fortune.com
Fortune Office Hours
This week, Wendy Miller, partner and chief people officer for North America at McKinsey, answers your burning workplace questions. Responses have been edited for length and clarity.
Q: My company’s leadership expects everyone to use AI—it's in our goals, our all-hands decks, our performance reviews. But the tools we're allowed to use are the ones nobody wants, while the ones that could actually be useful get stuck in internal gatekeeping.
Anytime my team finds something that would speed up our work, it gets tied up in approvals for months. Security flags it, legal wants a data review, IT says it's not approved, etc. By the time anything clears, the moment has passed. But we're still measured on AI "adoption."
How do I reconcile a mandate to move fast with a system built to slow everything down?
A: The honest answer is that you may not be able to fully reconcile it, and that's okay. It feels counterintuitive to be told AI is a priority while waiting weeks, or even months, for approval to use these tools. That disconnect in what is expected of you versus what your organization enables (or, rather, doesn’t enable) is real, and you're definitely not the only one feeling it.
I know it's difficult when the barriers are outside your control. But, as with many things, the best place to focus is on what you can control:
- Don't let the waiting stop your learning. Get really good at the AI tools you already have access to. Learn how to ask better questions, think critically about AI's responses, and get creative about new AI use cases. These are skills that transfer from one platform to another.
- Find ways to make the impact of delays visible. Instead of venting, bring evidence. Show how much time your team is spending on manual work, how long approvals are taking, and what faster access could help you improve. Those are the kinds of conversations that help leaders understand which tools are really worth investing in.
- Be part of the solution. Volunteer for pilot programs, share thoughtful feedback, or help evaluate new tools. The people making these decisions really need input from those doing the work.
Progress may not mean moving as fast as you'd like. It may look more like making steady progress within today’s constraints while helping shape a better system for tomorrow.
Have a workplace situation that you're unsure how to navigate or a scenario worth unpacking? Send it our way via this form.
Watercooler
A round-up of the most important HR headlines from Fortune and beyond.
Worker revolt. As AI shrinks paychecks, nearly a third of workers admit to sabotaging their company’s AI strategy. Fortune
Tokenmaxxing trouble. Companies are cracking down on AI costs after their AI pushes resulted in serious overspending. Bloomberg
Ambition fatigue. Burned out executives are heading to this secluded New York retreat while they contemplate their next moves. Wall Street Journal
