There’s Another Type Of Inflation To Be Concerned About: Corporate Title Inflation

Businesses are now in cost-cutting mode. Corporate title inflation has crept into the workplace and is rising precipitously. Layoffs, hiring freezes, and concerns about a recession are spooking C-suite executives. They are worried about the Federal Reserve Bank raising interest rates, making it harder for companies to gain access to cheap capital as they did back in 2021.

The paradox is that with all our problems, including a stock market in the bear market territory and cryptocurrencies crushed, the U.S. reported a solid monthly jobs report last week. There are about two jobs available for every individual seeking work.

To balance this unique economic environment, Human Resources and executives have figured out a way to appease employees and job applicants without spending more money. They are offering lofty-sounding titles to stroke egos and soften the blow of not providing a raise to internal employees or lush compensation to job candidates.

The Financial Times reported that EY, the large global accounting and consulting firm, promoted thousands of its employees to “partner.” With title inflation, the honor bestowed upon the recipients was diluted. The accounting and consulting professionals may not 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 recruiting 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 uber-competitive, and a person’s title signifies prestige and status. A senior-level title such as Managing Director signals to others that the person is earning a substantial compensation package and is highly valued at the financial institution. The dirty little secret is that some companies hand out Vice President titles like candy.

The general public is unaware of the ubiquity of puffed-up corporate designations. When you meet with your financial adviser, who has a ‘Director’ or ‘Senior Vice President’ title, it offers comfort that they are in good hands. It also makes customers feel confident that they are dealing with a high-level experienced professional.

You may recall, several years ago, all the rage for tech companies and startups was to have funky corporate titles such as Rockstar, Guru, Innovation Evangelist, Software Ninjaneer, and Brand Warrior.

Lofty Titles Can Backfire

Traditionally, businesses have set titles ranging from ‘Associate’ to ‘CEO.” The compensation rate is commensurate with the title. It could be flattering to receive a bump-up in the title, even though there isn’t an associated increase in pay.

An employee’s title is their identity. It gives them credibility in the office. A high-level title makes a person feel more powerful. Outside the office, they’ll drop their title when speaking with people socially to gain clout. The downside is that if you don’t really deserve the new moniker, it could come back and haunt you.

Recruiters will view your LinkedIn profile. They’ll happily notice that your skills, background, prior experience, expertise and education make you a perfect fit for a significant, well-paying role. A stumbling block arises when the recruiter notices the title is higher than the client offers. Since a recruiter wants to make a placement and earn a fee, they won’t waste time and seek out other candidates who are a better fit.

Another recruiter may decide to contact the same person. The headhunter politely points out that the job seeker’s current title is several levels above what his client is willing to offer. The position will pay more money than the prospective job seeker currently earns. The applicant’s ego gets in the way. Although the new job would offer higher compensation, the job hunter doesn’t want to take a step backward regarding the corporate title.

Most people aren’t aware that their corporate title was inflated and believe it was awarded due to merit. Understandably, they would be offended to accept a lower-level designation. The result is that the person misses out on good opportunities.

Now that you are at a certain level, you don’t want to go backward. You’ll use the current title to leverage an increase for the next job. If your title is too high, it raises red flags. When searching for a new job, your title is ‘Director,’ but the new role is under that level, it could cause an issue. The interviewer will curiously inquire, “Why do you want to go down in title?”

There will be a presumption from the hiring manager that something isn’t right. They may feel that the job seeker is leaving before being fired and willing to downgrade. The applicant may respond that it’s only a ceremonial title, not a big deal, and the job is of the utmost importance. Nevertheless, the disconnect between the title and compensation becomes a deal-breaker. Rather than trying to figure out the motivations of the candidate, they’ll move on to others who have a cleaner story without any baggage.

There will be awkward and uncomfortable interviews. The hiring manager or human resource person was excited to meet you. They held high expectations about your abilities due to your title. During the interview, it becomes clear that you don’t possess the requisite skills to succeed in the role. This occurs as the title misleads prospective hiring managers. The additional challenge is that when you say, “I don’t care about the title; it’s more about the job, company, people and adding value,” it will be met with skepticism.

Too Intimidated To Apply

It’s often been said that men are more apt to submit their resumes regardless if they meet all the requirements. Meanwhile, women hold off until they see a role with nearly all the criteria that could be met.

As more companies post senior-level roles, it will deter people from applying. Not knowing that the title was inflated, people, especially women, will miss out on appropriate and suitable opportunities.

The company will experience frustration too. They won’t receive resumes from applicants who are the right fit but feel intimidated to apply. Those with the skills for an inflated title will be upset when interviewing as they learn their background is too senior for the position and feel their time was wasted.

Internal Conflicts Due To Title Inflation

When you see a colleague promoted and awarded with a title a few levels up from you, it’s frustrating. You wonder what is happening without knowing whether a significant raise was involved or not.

As you believe that you are as good or better than the person who achieved the promotion, you go to your boss. In the tight job market, your manager doesn’t want to lose you, so they acquiesce to your demands and increase your title. This scenario will keep playing out, reaching levels of obscene excess.

Past generations were patient in waiting for promotions. Now younger generations want to quickly get higher titles with the not-so-subtle threat that they’d quit if they can advance within a year or so. Since Gen-Z workers are becoming a significant presence in the workplace and are known to switch jobs freely, companies will feel pressured to raise their title levels to appease them continually. This will cause tension with long-term employees who feel that they are the ones who deserve the promotions due to their years of service. Resentment will build, making things uncomfortable for everyone.

What Should Be Done About This Trend

Best practices dictate that businesses should not game the system. Inflated titles may be a temporary band-aid solution for tumultuous times. However, it’s unreasonable for companies to continue this practice indefinitely. Eventually, everyone will catch on. The reputation of the companies will be tarnished. In the interim, leadership should ensure that this type of policy should be open and transparent as it misleads internal employees and job seekers.

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