We live in unprecedented times.
The great resignation is now a full-blown avalanche of departures, leaving companies scrambling to secure their talent base. In today’s knowledge-driven economy, their very survival depends on it.
Let me give you a couple of examples, all hot off the press.
A friend of mine left his asset management job in September, having negotiated a 30% pay rise with a direct competitor. Two weeks later, his former boss also resigned to join yet another competitor.
As a result, my friend is now in talks to go back and take his old manager’s job. In addition to a major promotion (say hello to the ExCo!), there will be another 20-30% pay rise involved – on top of the raise he had already secured.
Another friend runs a reasonably large (think 600+ people) division at a large commercial bank. They currently have 100 vacancies and are struggling to find more than a couple of candidates. Resignations continue outpacing hiring and everyone is working overtime to make up for the staff shortfall.
Investment banking is no different. With deal activity at historic highs, the mass resignations could not have come at a worse time.
Every single team is looking for junior (read: analyst to VP level) bankers. Every other team is looking to add directors and possibly even MDs. A headhunter’s wet dream, playing out in real life.
Candidates who wouldn’t even get a second look a couple of years ago are now getting multiple competing offers from top shops. Even the HR teams are bending over backwards to accelerate the hiring process.
Whether it’s professional services, blue-chip corporates, or even front office hospitality staff, the labour shortage is real – and really painful. Here in the UK, it’s been further exacerbated by Brexit.
Which is precisely why you should act – and quickly.
A Case Of Self Interest
Long-time readers of this blog know that I’ve got a very cynical pragmatic view on the relationship between capital (i.e. your employer) and labour (i.e. you).
No, loyalty doesn’t pay.
No, working harder isn’t the way to make more money at work.
And nothing pisses me off upsets me more than hearing people like Indra Nooyi (former CEO of PepsiCo) tell people they should never ask for a raise.
If you believe her, then make sure to ping me an email – I’ve got some swampland in Florida to sell you. People who (allegedly) don’t ask for raises don’t end up making $30m a year. Trust me on this one.
In fact, people who don’t ask for raises don’t even get paid anywhere close to the market rate.
Instead, your employer will wax lyrical about the virtues of loyalty and the bright future ahead before finally coughing up a 3% annual raise.
Except that in today’s environment, a 3% raise is actually a pay cut. US inflation now stands at 5.4%. The UK isn’t far off. And experienced inflation is far, far higher.
From housing to used cars, prices are rising at double-digit rates. Good luck keeping up.
It’s not just the cost of living either. There’s yet another, much more prosaic reason to be aggressive in salary negotiations.
At some point, the labour market environment will normalize. Those who have negotiated higher salaries and promotions will be starting off a much higher base. Everyone else will be answering awkward questions.
Did you really fail to get a raise or a promotion in the hottest environment in history? What is wrong with you?
Moving The Needle
In personal finance, we like to talk about the importance of low fees, savings rates, and the importance of compounding.
No doubt, all three are important levers that will help you reach financial independence. But the most important lever by far is the absolute amount of money you make.
Going from $50k to $100k doubles your savings even if you keep your savings rate unchanged. And there’s something really magical about increasing your income – all while keeping your spending the same.
That’s how people accelerate their journey to FI by years and decades – but it all starts with getting that damn raise.
The blindingly obvious way to go about it is to find a new job. Vacancies abound, and once you do have an offer in hand, your current employer will most likely counter.
It’s amazing how generous companies get once you actually have an alternative option. Budgets appear, approvals are secured within days, and promotions no longer take years to get.
In an environment like today, your boss has the choice of either paying up or doing your job until he can find a replacement (and it won’t be soon). Guess which one he will prefer?
And if you don’t get a counter, the worst that will happen is you’ll just take the new job you’ve been offered. I moved companies four times in the course of a relatively short career. Not every move was straightforward – but every single move has paid off in spades.
The other opportunity at stake here is to make a functional switch. You can move from corporate development to consulting, from consulting to investment banking, or from investment banking to PE / VC. All lead to step changes in compensation.
There are ways to play this game even if you want to stay with your current employer.
You could ask for more holiday, better working conditions, paid professional education, a sabbatical, a two-year break to get your MBA, and anything else that you think would improve your lot.
Looking for a new job hardly tops the agenda for most people. It’s uncomfortable, it requires putting yourself out there, and there’s always the risk of being rejected.
But in today’s market environment, it’s the most powerful money move you could make.
As always, thank you for reading – and good luck!
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
Find out more about me and this blog here.
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