As we see the competition for talent continuing to heat up, we are observing an epidemic of growth-minded firms sacrificing too much in order to catch the Big Fish. These firms have a well-founded desire to hire experienced professionals. Though it's a logical and frequently appropriate approach, if the implementation gets off track, the hiring of experienced professionals can have ill-fated results. Two results we've witnessed are of particular concern: 1) Some firms throw their compensation structure out of whack to bring in a new hire; and 2) Some firms merge/admit new partners without sufficient vetting and experience working together.

Compensation Mismatch
    The scenario: An advisory firm is searching for (or sometimes not searching for but still comes across) a great professional who they want to hire for an advisory, business development or technical position. This is usually someone with related experience, though frequently he or she has been working in a somewhat different environment-say, working in a bank or trust environment, or performing one role in the advisory industry and looking to try a new one, or looking to leave a wirehouse and join an independent firm. If he's been paid well in his previous position, the advisory firm owners feel they need to match that level of pay to bring the candidate on, usually at the candidate's insistence. Even though the firm's advisor base pay might typically be in the range of $120,000 to $150,000, if the candidate is coming from a position where he was paid significantly more, the firm is tempted to take the risk to match his previous pay. For example, if the candidate earned $250,000 in his previous position-even if part of that was incentive, but was pretty "guaranteed"-the candidate won't want to take a step back in pay to take a new position, and the firm owners feel they need to respond. Unfortunately, most firms are so starstruck by the strong candidate that instead of negotiating on the pay amount or structure, they take on the entire financial risk to bring the candidate on board.
    Now I understand that the theoretical approach of not making offers outside of your established pay structure is a difficult one. And because it means firms would have to pass on a lot of potentially exciting hires, it's unlikely to be applied with great discipline by most firms. However, if you are making accommodations in order to bring on someone outside your existing pay structure, do so in a thoughtful way. Should you find your firm in this situation, take a step back and ask the following questions:
    Does the variance in what you offer and what they want indicate that your existing pay schedule is not market-competitive, or does the disconnect exist because this candidate was previously making more money in a different role?
    What level of performance would an individual need to demonstrate to earn the amount of compensation the candidate is asking for?
    How long do you expect it to take for this candidate to reach that level of performance?
    If he won't immediately be at the necessary level of contribution to justify the pay he is requesting, who should bear the burden/risk of the gap? Note: If you match his requested salary level, you are taking on the burden. If you don't, he is taking on the burden, having to demonstrate what he is sure he can do before he can earn the pay he is sure he deserves.
    If you do bring him on at the pay level he requests, what will happen in the coming years? Will he expect his compensation to grow from there-through annual raises, for instance-while you will expect him to remain at that level forever (or at least for a while), eventually earning the compensation you are already paying him? Does he consider it a starting point, whereas you consider it an advance or investment?
We rarely see good results when a firm pays a candidate more than they initially think that candidate is worth. The firm owners feel taken advantage of, and the candidate feels indebted and unappreciated (even if he gets the amount of pay he is asking for). It almost always takes a candidate longer to get up to speed than either party expects, and the firm's owners are less patient in this process than they would otherwise be because they feel the money running out of their pockets.
    So, what to do? First of all, make sure the package you are offering really is competitive for the position you are hiring for. If you haven't examined the market competitiveness of your pay plan lately, take a look. If you find it's appropriate to make an adjustment to the pay plan for the position, the changes you make should apply to all incumbents, not just the candidate in question.
    If you find that the package you are offering is appropriate and competitive for the position you are filling, you then have two options. One is to stick with your existing pay schedule no matter what the quality of the Big Fish who swim in your direction. If your pay schedule is market competitive and the amount and structure is working well for the firm and for incumbents, don't mess it up by adding a new person who is outside the established pay range. Doing so will create internal equity problems, as well as mismatched expectations.
    Option two is to hire the person, but make the achievement of his desired compensation contingent upon his achieving specific goals or metrics that would make you feel good about paying him at that level and won't create internal equity problems. The theory here is that if other employees in the same job hit those goals and metrics, they too could earn this much money. Option two would entail designing an incentive structure that sets the candidate's guaranteed portion of pay within your existing pay range, and makes the additional compensation they desire available based on their achievement of specific revenue targets, investment returns, new client acquisitions or other metrics that would justify the level of compensation. If there is no level of performance that would justify the level of compensation the candidate is seeking, don't make the hire. A lot of people do go forward with the hire in this scenario, and the results are always somewhere between disappointing and disastrous. Sometimes firms have to let good candidates go to preserve the culture, structure and equity within the organization. It is fair to ask a candidate to share in some of the financial risk of the hire, and to allow him to share in the upside if the hire goes as well as you both hope.

Partner Too Soon
    The second misstep we see firms make is bringing  experienced hires in immediately as owners/partners, either in response to a demand from a candidate or as a concession because they can't get the compensation as high as the candidate wants.
    The most important thing to remember when adding a partner to the firm at any point is that every candidate-internal or external-must meet the criteria the firm has put in place for admitting new partners. If you have no such criteria, develop the criteria before you are faced with a potential partner candidate. In any case, it's rare to be able to evaluate whether a candidate meets your partner criteria before you have worked with the individual. You cannot assess someone's fit as a partner based on his resume, past job experience or even glowing recommendations from past partners he may have had. Particularly in small organizations-where you don't have hundreds of partners to absorb the potential misfits or underperformers-the impact a single partner can make is profound, whether positive or negative. Candidates need time to demonstrate they are a good fit for partner, and to evaluate if your firm is one in which they want to make an investment to become an owner.
    Just as you would in considering any other candidate for partner, think about:
    When can you afford to add another owner without diluting the income and value of existing owners?
    Does this candidate have the personal characteristics that you require from owners?
    Is the candidate qualified to assume a leadership role similar to that of other owners?
    Do you know these things with enough certainty to bring this person in as a partner from day one, or will it take some time for him to demonstrate and for you to assess?
    It is important that you weigh each of these elements in a way that reflects your business vision and the culture you are trying to create. For example, you may value high performers, but at what cost? Will the individual's position be so disruptive as to turn the rest of your team into low performers?
    If you see the candidate as a potential partner in the future, and that potential is one of the selling points of the job for him, outline what the expectations will be in terms of the contribution he will need to make, over what period of time, to demonstrate that he is qualified to be an owner. It does not have to be a checklist that he must complete before he becomes a partner, but it needs to be a clear description of what he (or any candidate) would need to demonstrate in terms of:
    Financial contribution, if that is a requirement
    Community and professional reputation
    New business development ability
    His proven ability to develop people
    Professional achievement, credentials and skills
    Leadership and managerial contribution
    Character, personality and contribution to your organizational culture
    If you know that any of these things are a clear misfit right off the bat, the hire is probably ill-advised. If any of these qualities are not yet proved, describe what will need to be demonstrated in each area for the candidate to be considered as a potential owner. The criteria would be the same as those you would apply to an internal candidate. If you have not yet developed those, this is your chance. As with your compensation plan, you want to ensure you are applying the same criteria to both internal and external owner candidates.
    Bringing on experienced hires is certainly a way for firms to catapult their growth. Unfortunately, it can also be destructive to your internal structure and culture if not done carefully and deliberately. We have never seen a firm regret not making a hire that would have so drastically contradicted their existing structures that they just couldn't figure out how to get the person in the door. On the other hand, we have seen many firms kick themselves for years for making exceptions to their compensation philosophy and plan, or their criteria of what it means to be an owner, in order to get someone in the door that looked like too good an opportunity to pass up. As firms strive to grow, there will be some fish that get away. Maintaining discipline about how you want to run your business in the face of these opportunities will allow you to grow in a way that is true to your strategy and objectives instead of losing momentum (and money) chasing the Big Fish.

Rebecca Pomering is a principal at Moss Adams LLP and consults with financial advisory practices on matters related to strategy, compensation, organizational design and financial management. She is co-author with Mark Tibergien of Practice Made Perfect.