The Wrong Title Costs Big $$$

A few years ago, we came across a company that had gotten itself into a real pickle. They were in a serious cash crunch and couldn’t afford to pay their staff market rates. Instead of raises, they had given out titles. They thought the appeal to their employees’ egos would buy them some time until the finances were sorted.

But the finances never did get sorted and five years later they called us. The person that did financial data entry had the title CFO. The person who wrote proposals and posted to their Instagram account was the Creative Director. One by one the staff would be thrilled to get “promoted”, but eventually would leave when the compensation remained flat. Small business is rife with inflated titles. This company was only one example. Let’s explore five common causes, why it’s a problem, and how to fix it.

What Causes Title Inflation

1. Lack of Knowledge

Often, small business leaders know what they need done but not necessarily the position title the industry typically uses for that role. These are the entrepreneurs that start out doing all the things and eventually break some of them off into roles with titles that make sense internally in their company but not necessarily to the outside world. What’s the difference between a Business Development Manager and an Account Manager, for instance? They aren’t the same and if they don’t know, they may select the incorrect title for the role.

2. Lack of Clarity

Sometimes the leader doesn’t even really know what they need to hire. This frequently arises in small business and Frankenstein roles get created. A Frankenstein role is when there are disparate tasks that need to get done, but none are enough for a fulltime position. For example, we need an Estimator that can drum up new clients and manage projects. Or a proposal writer that can help with marketing and other administrative tasks like bookkeeping.

3. Avoidance of Conflict

Scenario one – someone asks for a promotion that they don’t have the skills for. Think of a great salesperson that wants to show career progression and become a sales manager. The company is fearful of losing their best salesperson, so they give them the new title. If they also give them the new management duties, it’s likely that salesperson is on their way out anyway as they don’t know how to do the job or aren’t suited for it. If they don’t give them the new duties who will manage the sales department?

Scenario two is even worse. The manager thinks the person is looking for a promotion and instead of setting appropriate expectations as to what that role entails, they pre-emptively offer the promotion.

4. Inattention to Results

Far too many managers have wasted far too many performance management opportunities by using just one metric to measure performance. That measure? Hours worked. There are very few jobs where time served is an appropriate metric. Even in professional services the metric should be value delivered, not hours. If the only way you can assess whether your people are doing a good job is by measuring the amount of time that they’re physically present in the office, that’s ridiculous. What does this have to do with title management? It’s tough to define why you will or won’t promote an individual when they (and you) have no clarity on what it will take to get that promotion.

5. No Money

When unemployment rates are low and the labour market is hot companies will use title inflation to keep the people they have and / or attract candidates away from their competitors. They may not be able to pay more (the position may not be creating enough value to allow for a higher wage) but an inflated title is “free”, right? I can’t afford to pay you cash, so I’ll give you some prestige instead.

So What? Who Cares?

If the employee values the inflated title, then they don’t know it is inflated. They think they genuinely earned the title and no wonder – that’s why the company gave it to them. Inevitably they expect their compensation to match the title. But if the work of that inflated title is not actually being performed, it is unlikely the company can afford these inflated rates. Certainly not across the entire organization.

Moreover, if the company tries to change the title back while the person remains in the position, they will have an unhappy and possibly litigious employee on their hands. Or what if there is more than one person in that role? Imagine the $1m company that called their bookkeeper “controller” and then grew to $20m. The existing “controller” does not have the skills or experience to fulfill a traditional controller job description, but the company does not need two controllers. This can lead to the problem compounding. Now they must hire a “CFO” that is really a controller, so the bookkeeper can remain “controller”. What a mess.

Change the focus to a family business and (like everything in family business) the complexity compounds. Family members sometimes want / demand titles for all sorts of reasons, some justified, some not. In a family business, an inflated title granted due to an entitled family member leads to lack of respect from the non-family staff. Exactly the opposite effect from what the family member expected. 

Sometimes compensation is not the problem, it’s recruiting. Think, for example, of a small residential contractor that calls the people who supervise the sites “project managers” because they didn’t know the job is more traditionally titled site supervisor. When they need to hire another, they post for a project manager and keep getting resumes that just don’t fit the bill. But if they post for a “site supervisor” they have a lot of explaining to do with their existing staff.

In any case, the companies are allocating resources (time, mental stress, money) to a problem that could have been avoided. The inflated titles have delayed and magnified whatever the problem was they were trying to solve and rectifying it is easier said than done.

How to Fix It

The ideal solution is to not cause the problem in the first place. Use the standard titles in your industry to have clean, crisp communication inside and outside your organization.

If you’ve come to realize you need to unwind some title inflation, you may want to bring in some outside advisors for a couple of reasons. First off, they’ve solved this problem before and know where the landmines are. Also, it deflects some of the anger / blame from management over to the consultants. If Bellrock was helping, our approach would be to:

1. Develop the ideal organizational structure the company can grow into over time.
2. Identify and document the five to seven key processes that make the organization successful.
3. Assign the steps of the process to the roles in the structure.
4. Confirm the titles.

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