Signing bonuses can be seen as the cost of doing business for organizations recruiting passive competitive talent. But they are also a classic source of cost leakage with minimal guidelines and broad discretion.
Now, especially as belts tighten, we should be asking — do signing bonuses work?
We recently partnered with some customers to study signing bonus effectiveness, comparing bonus usage and value to win rate for competitive roles over approximately an 18-month period. (Note: Identifying information is masked for privacy.)
Here’s what we learned:
Signing bonuses clearly worked. Any signing bonus vs none showed an 8-point bump in accept rate.
Smaller signing bonuses were most effective. Amounts less than $25k showed a whopping 16-point bump, or a 29% improvement in offer accept rate
Signing bonuses had diminishing returns. Accept rate gains declined as signing bonus amounts went up. This could be due to more competitive or senior roles, i.e., it’s not necessarily causal. But this would seem like a surprising result if you expect that paying more improves your chances of winning.
If you are keeping a closer eye on compensation costs in this market, signing bonuses may be a smart place to look — I suspect you can rein in spend without deteriorating accept rate, or consider using smaller amounts more broadly and even improve it.
It’s worth noting that signing bonuses have downsides related to pay parity and pay transparency, too, which I wrote about recently here:
Have you studied signing bonus effectiveness? I’m curious if you saw similar results. Shoot me a note or comment below.
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