| Taylor currently works in Washington DC. She loves her life in DC, and has just purchased a nice condo near Dupont Circle for $800,000 a year ago. She was lucky to have saved enough for her down payment in time for the purchase when the interest rates were still low, so her mortgage and property tax payments are only $3,000 per month. She is very happy with her current job with Nationals Consulting, with the exception that her current compensation ($100,000 per year after tax) is relatively low for her level of expertise. Last month, one of Taylor’s former colleagues reached out and asked if she’s interested in a job opportunity with Giants Consulting, located in the San Francisco Bay Area. Out of curiosity, Taylor went along with the interviews and quickly received a job offer. While she has not lived in California before, she’s open the idea of moving there. The nature of the job sounds similar to her current one, but the compensation is significantly higher ($160,000 per year after tax) and requires her to relocate to the Bay Area. While Taylor loves DC, she also has some interest in living in California, and the higher pay sounds very enticing. She has decided to talk with her current supervisor, Ed, about her job offer before deciding whether to accept it or stay, and the conversation went like this: _____________________________________________ Ed: Taylor, you know everyone in our company loves you and you have made valuable contributions over the years. If there’s anything we can do to help you decide to stay here, I will try to make it happen. Taylor: Thanks, Ed. I appreciate it. I love working here as well. I’m very comfortable with Nationals and have made great friends here. But the difference in pay is hard to overlook. Ed: I totally understand. We are unfortunately in a tricky situation right now, because, as you know, our company has just announced to merge with our local competitor Wizards Consulting, and our CFO is reluctant to make any financial commitments since she is stepping down and the Wizards’ CFO will take the role for the merged company in a few months’ time. I was able to lobby for a 20% raise for you right away if you decide to stay with us. Obviously I think the company should value you more than that, but that will have to go through the new CFO after the merger. Taylor: That’s promising to hear. Thanks for lobbying for me. But how likely do you think the new CFO would be able to match the other offer? Ed: My understanding is that the company plans to prepare for IPO after the merger, and the Wizards CFO has made comments about staying frugal during that process. I think there is a 50-50 chance that we will eventually be able to match your other offer financially, if you decide to stay with us, but we won’t know for sure until maybe 6 months from now. _____________________________________________ After the chat, Taylor thinks she’s got the information she needs to do calculations on the income side. On the cost side, it is slightly more expensive to live in the Bay Area than in DC. She estimates that her living costs (excluding housing) would go up by about $10,000 per year. Housing-wise, she does not plan to sell her condo in DC. A possible arrangement, if she does move, is to rent out her DC apartment (for $3,500 per month) while renting one in the Bay Area (paying $4,000 per month). Besides financial considerations, Taylor is asking herself, what if she doesn’t like the new job at Giants Consulting? Every company has a different culture, despite similar requirements on paper, and the new colleagues may or may not be as likeable as her current ones. She thinks, if she takes the Giants job, she should give herself six months to evaluate whether she’s happy there, and then re-evaluate her options. If she’s happy, of course there is no need for further changes; but if she finds herself unhappy, she could consider returning to Capitals. If she chooses to return then, Ed would still make sure she gets the 20% raise to come back to her previous position. In six months’ time, the merger would also be complete, and she could figure out whether the new CFO is willing match her salary at Giants before committing to return (though she doesn’t think the chances of the CFO matching the offer would change in that scenario). On the other hand, if she ends up being unhappy about her life in California but still chooses to remain there, she thinks the mental toll would be equivalent to a monetary cost of $30,000 per year. *Taylor estimates that there’s a 1/5 chance she finds herself unhappy in the new place.* Taylor finds that all the cost and income calculations are complicated by issues such as moving costs, the potential costs of only renting a new place for half a year, etc. To keep things simple, she has decided to only consider the long-term annual incomes and costs in each scenario (e.g., if she tries the Giants job for six months and ends up coming back, she would only consider her long-term income and costs in DC but ignore those extra income and costs incurred during those six months). |
