Right now, 88% of companies factor location into what they pay, and only about a quarter use one flat national number instead.

Most of them build the number the same way they have for twenty years. Look up the city, apply the multiplier, land on a band, send the offer. It is fast, it is easy to defend in a board meeting, and at the VP-and-above level it is quietly losing companies the candidates they wanted most, usually over a gap of $20,000 or less.

If you are doing $25 million or more in revenue and you are hiring a VP or C-suite leader, the question is not whether you can afford the person. It is whether your number is built on anything that predicts how they will perform.

The old model is dated

Location-based pay made sense when it started. Cost of living really did swing hard from city to city, and companies needed a simple way to adjust for it. So they built bands around geography and moved on.

Easy is not the same as accurate, though, and at this level the difference gets expensive. Picture two candidates who live in the same suburb, hold the same title and have the same fifteen years on the resume. One of them rebuilt a broken supply chain and took eleven points out of cost of goods. The other held the title at a company that was already growing and never had to fix anything. A zip-code band prices those two people identically. Your business will not experience them identically.

The mistake runs in both directions. Either you overpay for someone who has not proven much, or you lowball the one person who could genuinely move your P&L and watch them take an offer from a company that priced them correctly.

One growing coaching company learned how costly the wrong C-level hire could be. A previous hire who didn’t align with the company’s values ultimately cost the company $6 million. Y Scouts then helped define the right COO role, leading to a successful placement.

What a zip code was ever supposed to measure

This is the part most comp conversations skip, and it matters.

Geographic pay differentials were never really about the price of a house. They were about the local labor market. If you needed twelve accountants in Des Moines, you paid the Des Moines rate, because that was what it took to compete for accountants who lived in Des Moines and were going to keep living in Des Moines. Local supply set the price.

That logic holds up for roles you hire in volume from a local pool. It falls apart for the person running your operations.

When you hire a VP or a C-suite leader, you are not shopping in a local market. You are shopping in a national one, sometimes a global one, for a very small group of people who have done a specific hard thing before. There may be forty people in the country who have turned around a plant like yours. Where they happen to live is an accident of biography, not a measure of supply.

So when you apply a Cleveland multiplier to a national search, you are using a tool built for one situation in a completely different one. That is the actual error. Not that location is irrelevant, but that you are pricing scarce national talent with a formula designed for abundant local talent.

Run the math on your own bands

Here is the part that should end the argument.

Geographic adjustments are small. Most companies run two to five location tiers, and the spread from the top tier to the bottom is usually somewhere between 5% and 20%. San Francisco down to Nashville is about 16%. A fully remote national rate typically lands at 85% to 90% of a company’s highest-cost market.

Now put that next to the spread in capability. Two candidates in the exact same city, same title, same years of experience, can be $100,000 or more apart in what they are actually worth to your company, based on what they have delivered and what they can prove they will deliver again.

Play it out with real numbers. Say your band for a VP of Operations is $240,000 to $290,000, built off your headquarters market.

Candidate A lives twenty minutes from your plant. Fifteen years in operations, three companies, solid reviews, never led a turnaround. Your band says $265,000. That is probably about right.

Candidate B lives in a market your tier system discounts by 12%. She has taken two underperforming plants and fixed both, one of them in your industry, and she can name the numbers and the people who watched her do it. Your band says $233,000, because of where she sleeps.

She is worth more than Candidate A to you, and your system just quoted her 12% less. She will not counter. She will simply take the other offer, and you will never learn what she would have said yes to.

That is the whole problem in one example. Your band is doing careful, tiered, well-documented math on the variable that matters least, and guessing on the one that matters most. If you are willing to move a number 12% for a zip code, you should be willing to move it further than that for a verified turnaround.

What it costs to be wrong

The $20,000 you protect on the offer is not the number to compare against. Compare it to what happens when the search goes sideways.

Roughly 46% of newly hired executives are out inside eighteen months, most often over fit rather than skill. Estimates of what a failed senior hire costs run to ten times salary or more once you add severance, lost momentum, the team that got restless, and the customers who noticed.

Then there is the quieter cost. A restarted executive search at this level typically means another three to six months with the seat empty or half-filled, during which the problem you were hiring someone to fix keeps compounding. If you were bringing in a VP of Operations because your margins were slipping, every month of vacancy is margin you do not get back.

Set that against the $20,000. It is not a close call, and it never was.

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Your band is not private anymore

Something changed in the last few years that a lot of comp policies have not caught up to.

Eighteen states plus Washington, D.C. now require salary ranges in job postings, and most of them extend to remote roles or roles reporting into the state. Senior candidates can see what companies in your industry are posting, across markets, in an afternoon.

So the zip-code discount is no longer invisible. A candidate who gets an offer 12% under what she can see the same role paying two states over does not read that as a cost-of-living adjustment. She reads it as a signal about how much you value the role, and about how the next five years of raises are going to go.

You are not just quoting a number. You are showing your work.

Four questions to run before you build the number

Start from your market rate, then adjust against these four. If your final number comes out identical to the survey number, you probably skipped the work.

1. Does their experience match the problem you are hiring them to fix?

Ten years in a title means very little if none of it applies. A leader who has solved your specific problem, in your industry, at your stage, is worth a real premium over someone who has only held the job. Ask what the situation looked like on day one and what it looked like when they left.

2. Can you verify the track record?

Revenue they grew, a team they built from nothing, a turnaround that actually held. Ask for the number, the timeframe, and two people who watched it happen. You are paying for proof, not potential, and proof should cost more.

3. What can they do in the first 90 days?

You are usually solving an expensive, specific problem. Someone who can walk in and start solving it is worth more than someone who needs two quarters to learn your business. Ask them to walk you through their first 90 days, then price the time you get back.

4. How many other people could actually do this job?

If five other leaders could step in, the leverage is yours. If almost nobody could, the leverage is theirs. Be honest about which one you are in before you anchor low, because the candidate already knows.

None of those four things live on a map.

Two objections worth answering

“Our bands came from a survey.”

Fair, and survey data is genuinely useful. It tells you what the market paid last year for a title in a city. It does not tell you what this person will do for your company next year.

Survey bands also lag by design, because they are built from offers that already closed, in a market where strong senior operators are rarely available for long. Use the band as your floor, then adjust for the four questions above and write down the reasoning. That written reasoning is what makes the number defensible to a board, not the fact that it came from a spreadsheet.

“If we break the band for one person, we break it for everyone.”

This is the real fear, and it is a legitimate one. The answer is not to hold the band. It is to write down what earns an exception, before you are sitting across from a candidate you want.

Pick two or three criteria, something like verified turnaround experience in your industry, or scarcity of qualified candidates documented during the search. Then any exception has a paper trail and a precedent, and the next one gets easier rather than messier.

You can also use structure instead of base salary. Location bias almost always lives in the base number, but at VP-and-above the base is only part of the package. A signing bonus, a larger performance component, or an equity or long-term incentive grant lets you close a gap without resetting a band that fifty other people are sitting in. That is often the cleanest path when the band is real and the candidate is worth more than it says.

Where location still fits in

Geography has not disappeared, and this is not an argument for ignoring it.

A leader based in New York or San Francisco can still command a real premium over the same role in a smaller market, and depending on your industry that gap can run $20,000 or more. Location also still matters in three practical ways. It shapes relocation cost if you need them on site. It shapes what you can ask for in office presence. And it shapes what the team they are about to hire will cost you, because those roles usually are filled from a local pool.

Keep all of that. Just keep it in proportion. Location is one line item on the offer. It should never be the headline.

What this means for your next offer

Before you build a number, ask what this person has actually delivered, and what that is worth to a company at your stage. Then build the offer around that answer, and put the location adjustment where it belongs, near the bottom of the list.

If your only benchmark is a market rate tied to a city, you are negotiating from the wrong starting point, and the candidates who matter most can tell.

The companies winning senior leaders right now are the ones paying for capability, not coordinates. If you want a second set of eyes on what your next executive hire should actually cost, let’s talk.