I once heard Warren Buffett state that a doctor or accountant or any type of professional will always command a portion of society’s income because of her skills. Even if there is inflation and prices go up, our skills allow us to command the same portion of society’s income. The implications of that quote are profound. We are not paid random amounts, instead there is a rhyme and reason to our compensation structures. Furthermore, we have some control over the pay we receive. The most important and impactful message I learned from this quote was to continue to develop and build my own skills strategically and to the best of my ability. The wider and deeper your skillset, the more opportunities there are for you. Instead of focusing on the money, focus on developing your skills and doing well at your job or business. As a result, the money will come in response to those skills.
How the Job Market Works
The job market works similarly to the market for any other good or service, except we are selling our time and labor and not just any widget. In addition, each person in the market is an individual and offers different experiences and skills. However, similar dynamics exist. When there is a lack of workers in a certain area, the buyers (employers) will pay more. When there is an oversupply of workers in a certain area, the buyers (employers) will pay less. Obviously external factors such as unions, strikes, and discrimination may affect wages, but let’s ignore those factors for now to keep it simple and to help you better understand the basic market principles.
Therefore, if you have a certain set of skills, employers will generally pay within a certain range for your services. If you increase your skills or years of experience, then you may command more pay. The pay may vary due to the size of the company, the nature of the industry, the urgency of the position, your negotiating ability, the amount of competing offers you have received, and many other factors. Companies may hire compensation consultants or purchase benchmarking reports to compare the salaries they are offering to what other companies are offering. These studies allow them to make sure their salaries are competitive with the market.
There is also another factor at play. If you stay at a company for too many years, you’ll see diminishing returns to your accumulating skills and years of experience. In the business world, there’s a huge difference between practicing a certain skill for 6 months and practicing it for two years. That additional year and a half can be the difference between a novice and an expert. However, the difference between four years and ten years is not nearly as great. In fact, the person who has performed the same task for ten years may even experience negative returns since he may be disgruntled or flat out bored. Therefore, it may be beneficial to jump around and move to a new company to learn new skills and refresh your salary. You’ll even meet new people and grow your professional network. Generally, moving to a new company for a similar position will allow you to get a nice pay bump since the new company understands that it takes a little extra sugar to convince you to jump over.
How to Build Our Skills
My key message is to place more focus on increasing the breadth and depth of your skills. However, it is important to do so strategically. You must understand where your interests, passions, and talents lie. Once you understand that, you can work to build skills that intersect with your interests, passions, and talents. Otherwise, you are building skills that will not be fulfilling for you and may not lead you to the type of work that you want.
I think the easiest way to learn new skills is to do so on the job. Any given job will ask you to perform a certain set of tasks. Go above and beyond with those tasks and try to “creep” your way into other tasks. Volunteer to take on more projects, especially projects that push you to learn more skills. If you don’t understand how to do something, ask someone to teach you or look it up yourself.
You can also take additional courses and receive certifications. There are certifications for project management, human resources, accounting, IT and almost any other area you can think of. I have compiled a list of educational resources that you can utilize here. Although certifications don’t replace real world experience, they may help you develop a better understanding of what you are doing in the real world. In addition, they may open up doors when you are looking to move to a new position.
Another way to pick up new skills is to build your own side business. Building your own business requires that you exercise a huge variety of skills, including skills that you have never learned before. Therefore, you are forced to learn them whether through trial and error, looking up resources online, or asking other people.
Regardless of how you acquire these new skills, it is important to understand and be able to spell out and communicate the new skills that you learned. It is important to be able to put them on paper and speak to them intelligently. That will be your way of signalling to the market that you have increased your skillset, and therefore command a higher salary.
How to Receive a Fair Compensation
Once you have built up more skills and experience, how exactly do you go about finding a job that will pay you fairly for those new skills and for what you are able to contribute? Generally, applying online to jobs is an extremely low percentage game. At the entry level, that may be your only option. However, once you get in a few years of experience, it becomes much easier to find jobs. Blindly applying to jobs is tough for several reasons. You are competing against hundreds if not thousands of other people. It is difficult to get your resume through all the screens and into an actual hiring manager’s hands. If you are applying to other positions within your company, it may be easy to find a new role, but it may be difficult to get a substantial pay bump. Your company already knows how much you are making. On the other hand, a competing company does not know your true salary and knows that they have to offer you a pay bump to convince you to jump over.
Instead, it is much easier to either tap your professional network, reach out to an independent recruiter, or reach out to a recruiter at a company you are interested in directly. People in your professional network may already be aware of open positions and people who are hiring. This will almost guarantee that your resume gets seen. Independent recruiters are experts on the job market. They know the skills that companies are looking for and the skills that you are offering. As a result, they can better set you up for interviews with companies that will pay a premium for your skillset. They help both you and potential employers by saving time and finding the right person for the job.
As someone who has worked in consulting, I like to be explicit about my recommendations. All the information above is great, but if you don’t use it to take action or don’t know what action to take, you won’t reap the full benefits of the given advice.
Figure out where your passions, interests, and talents lie.
Take some time to think about yourself. Once you have figured out where your passions, interests, and talents lie, you can better evaluate what skills to pick up and where to focus your energy. It will ensure that your next steps take you on the right path. Otherwise, you are acting blindly while wasting energy and focus.
Reach out to the right people
Reach out to the right people at work who can help you build your skills first. Once you have the skills reach out to the right people in your network who can help you find jobs that are a better fit for your skills. Reach out to recruiters for their opinion, advice, and help.
Learn to embrace change
Learning to embrace change is the hardest part. People generally don’t like changes since it makes them uncomfortable. For some people, change is down right scary. However, learning to expect change and make the most of it is perhaps one of the most powerful and transformative experience you can have. Without change, you will never improve.
“When you're finished changing, you're finished” Benjamin Franklin
Have you had to grow your skills over time and move over to a different employer that was willing to offer you a massive pay bump? Have you ever worked with a recruiter?
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