One of the fastest growing companies in Houston had courted an operations executive from a Fortune 10 company for months. This entrepreneurial company had stretched to meet the candidate's compensation requirements which was not an easy thing to do given the richer retirement plan of this energy behemoth. Despite the executive having a much greater upside with the smaller company, he ultimately turned down the offer. Why? Because his new employer was not willing to give the executive the same six weeks of vacation he had with his current company—in part because it was more than their Chief Executive Officer received. Surprised? Don't be. It happens more than you think.
The United States is the only industrialized nation without mandatory paid time off. France has 30 days, and other countries including Australia and the UK have 20 or more days of mandatory vacation. While 91 percent of America's full-time workforce has paid time off (36 percent do not use all of their allotted days), vacation is a major component of the compensation package for an incoming executive. Many executives may enjoy significantly more vacation time with their current employer than their new company is prepared to offer.
Vacation benefits are often relegated to the back burner since asking about vacation policy during an interview could be perceived as focusing on the wrong thing. Many times, the employer and the candidate will negotiate vacation after the offer, and frequently find themselves far from aligned.
We have seen a candidate and employer get to the proverbial finish line, only to have the deal almost derail because of the vacation benefit. Recently, the selected candidate for a Chief Financial Officer search initially declined the offer because he would lose two weeks of vacation. The Chief Executive Officer believed that granting the incoming Chief Financial Officer five weeks of vacation would be inequitable to the other members of the long-tenured management team. They eventually struck a deal which required some give on both sides.
How can the hiring company avoid this potential problem?
1. Ask before you extend an offer
Vacation policies vary significantly among industries and corporations. It is important to know details of the executive's current vacation benefits and the accrual schedule for additional weeks. Vacation, like compensation, should be discussed well before an offer is made. If a company is using a search firm, vacation benefits should be part of the search firm's written work product assessing the candidate and providing compensation data.
2. Ask for the candidate's preplanned vacation schedule
Like many of us, candidates have planned and paid for vacations that will take place during their first year with a new employer. Routinely, companies will honor these dates in a good faith effort to bring the executive on board. However, it is important to know these dates ahead of time and cross check to avoid scheduling conflicts with organizational requirements. We recruited a general counsel whose pre-planned and prepaid vacation coincided with his new employer's Board meeting. The company reimbursed the executive for the amount he would be out of pocket for having to reschedule the vacation.
3. Be creative
Vacation policies tend to be grouped with under the benefits "umbrella" and vacation may vary for different levels of the organization. A client recently told me that all of his EVPs start with three weeks of vacation and, after five years of service, earn four weeks. Despite a richer compensation package and better position, it sometimes will be a deal breaker for an executive to lose two to three weeks of his or her vacation. It is not always a requirement to make the candidate whole, but it is important to be flexible to find a middle ground. One HR executive we know got creative and offered a candidate credit based on her time in the industry rather than with a company to justify the maximum vacation benefit. Another company would not give an executive the time he requested but allowed him to work from his mountain cabin for several weeks during the summer.
4. Consider making policy exceptions
Factor the contribution and impact the executive will make to determine whether or not it is feasible to make an exception. We have had a few clients write in an exception without affecting the company policies for making such exceptions. If not, is this a high enough level executive to push the envelope? Consider your internal politics.
5. Re-evaluate your vacation policy on an ongoing basis
Vacation policies are continually evolving. In 2007, IBM did away with vacation days. The company does not keep track of who takes how much time or when does not dole out choice vacation times by seniority and does not let people carry days off from year to year. While other companies such as Netflix have followed, it is not for every company. Nonetheless, you should be open to adjusting your policies to assure your competitiveness in the market.
While vacation is often an insignificant issue until the final stages of the hiring process and is never a reason a candidate will accept an offer, it could become a reason the candidate declines an offer.