You are currently viewing There is another type of inflation to worry about: corporate stock inflation.

There is another type of inflation to worry about: corporate stock inflation.

Businesses are now in cost-cutting mode. Corporate stock inflation has crept into the labor market and is rising precipitously. Layoffs, hiring freezes and worries about a recession scare senior executives. They fear the Federal Reserve Bank will raise interest rates, making it harder for businesses to access cheap capital like they did in 2021.

The paradox is that with all of our troubles, including a stock market in bearish territory and crushed cryptocurrencies, the US released a strong monthly jobs report last week. There are approximately two jobs available for each person seeking employment.

To balance this unique economic environment, HR and executives found a way to appease employees and job seekers without spending more money. They offer lofty-sounding titles to stroke egos and soften the blow of not providing raises to insiders or lush compensation to job applicants.

The Financial Times reported that EY, the leading global accounting and consulting firm, has promoted thousands of its employees to “partner” status. With the inflation of titles, the honor given to recipients has been diluted. Accounting and consulting professionals cannot receive a share of the firm’s profits, which was standard procedure for being offered this prestigious opportunity. The policy is a savvy way to help with employee retention and the recruitment of top candidates with the allure of a fancy-sounding corporate designation.

Highfalutin titles have been around for a long time

Wall Street has long offered lofty titles to its investment bankers, brokers and traders. The financial industry is ultra-competitive and a person’s title is synonymous with prestige and status. A higher level title such as CEO signals to others that the person earns substantial compensation and is highly valued within the financial institution. The dirty little secret is that some companies are handing out VP titles like candy.

The general public is unaware of the ubiquity of inflated corporate names. When you meet with your financial advisor, who goes by the title of ‘Director’ or ‘Senior Vice President’, you can be assured that he is in good hands. It also gives clients the assurance that they are dealing with a top-notch, experienced professional.

You may remember that many years ago, the whole rage of tech companies and startups was to have funky corporate titles like Rockstar, Guru, Innovation Evangelist, Software Ninjaneer, and Brand Warrior.

Noble Titles Can Backfire

Traditionally, companies have defined titles ranging from “Partner” to “CEO”. The compensation rate is proportional to the title. It might be flattering to receive a title raise, even if there is no associated salary increase.

An employee’s title is their identity. This gives them credibility in the office. A high level title makes a person feel more powerful. Outside of the office, they will drop their title when talking socially with people to gain influence. The downside is that if you don’t really deserve the new nickname, it might come back and haunt you.

Recruiters will see your LinkedIn profile. They will happily note that your skills, background, previous experience, expertise, and education make you an ideal candidate for an important, high-paying role. A stumbling block occurs when the recruiter notices that the title is superior to the client’s offers. Since a recruiter wants to make a placement and earn a fee, he won’t waste time and look for other candidates who are better suited to him.

Another recruiter may decide to contact the same person. The headhunter politely points out that the job seeker’s current title is several levels higher than what his client is willing to offer. The position will bring in more money than the potential job seeker currently earns. The applicant’s ego stands in the way. Although the new job would offer higher pay, the job seeker does not want to back down when it comes to the company title.

Most people are unaware that their social title has been inflated and believe it was awarded on the basis of merit. Naturally, they would be offended to accept a lower level designation. The result is that the person misses good opportunities.

Now that you’re at a certain level, you don’t want to go back. You will use the current title to take advantage of a raise for the next job. If your headline is too high, it triggers red flags. When you search for a new job, your title is “Director”, but the new role is below that level, this could cause a problem. The interviewer will curiously ask, “Why do you want to go down in the title?”

There will be a presumption from the hiring manager that something is wrong. They may feel like the job seeker is leaving before they are fired and ready to demote. The candidate may reply that it is only a ceremonial title, not a big deal, and that the job is of the utmost importance. Nevertheless, the disconnect between the title and the remuneration becomes a deciding factor. Rather than trying to understand the motivations of the candidate, he will move on to others who have a cleaner story without any baggage.

There will be awkward and uncomfortable interviews. The hiring manager or human resources person was happy to meet you. They had high expectations of your abilities because of your title. During the interview, it becomes clear that you lack the skills required to succeed in the role. This happens when the headline misleads potential hiring managers. The added challenge is that when you say, “I don’t care about the title; it’s more about the work, the business, the people and adding value,” he will be met with skepticism.

Too intimidated to apply

It is often said that men are more likely to submit resumes whether or not they meet all the requirements. Meanwhile, women wait until they see a role with almost every criteria that could be met.

As more and more companies advertise high-level positions, this will deter people from applying. Not knowing that the title has been inflated, people, especially women, will miss appropriate and appropriate opportunities.

The business will also experience frustration. They won’t receive resumes from candidates who match the right person but feel intimidated to apply. Those with the skills for an inflated title will be upset in interviews as they learn that their experience is too high for the position and feel that their time has been wasted.

Internal conflicts due to securities inflation

When you see a co-worker promoted and awarded a title a few levels above you, it’s frustrating. You wonder what is happening without knowing whether or not it is a significant increase.

As you think you are as good or better than the person who got the promotion, you go to your boss. In the tight job market, your manager doesn’t want to lose you, so he acquiesces to your demands and raises your title. This scenario will continue to play out, reaching obscene levels of excess.

Past generations have waited patiently for promotions. Now, younger generations want to achieve higher titles quickly with the not-so-subtle threat that they’ll drop out if they can progress within a year or so. As Gen Z workers become a significant presence in the workplace and are known to freely change jobs, companies will feel compelled to increase their title levels to continually appease them. This will cause tension with long-serving employees who feel they are the ones deserving of promotions based on their years of service. Resentment will build, making things uncomfortable for everyone.

What to do about this trend

Best practices tell companies not to manipulate the system. Bloated titles can be a temporary band-aid solution for tumultuous times. However, it is unreasonable for companies to continue this practice indefinitely. Eventually everyone will understand. Business reputations will be tarnished. In the meantime, management must ensure that this type of policy is open and transparent as it misleads internal employees and job seekers.

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