In this economy, whether you operate a large or small company, trepidation of higher payroll expenses can turn your hands cold with perspiration. That’s especially true when talented employees suddenly ask for a raise. Talented workers are an asset – your human capital.
Many companies don’t have a compensation policy. And your company might be like the majority of small businesses or nonprofits in this uncertain economy – having difficulty funding even merit raises.
So what’s the right thing to do with a valued employee who asks for a raise, whether or not you’re the final decision-maker?
The first point to remember: Don’t pass the buck. You’ll either appear to be evasive or you’ll give away your power. You don’t want the reputation of being an irrelevant manager. (Further, there are 20 Tell-Tale Signs – If You’re Under-Performing as a Manager.)
Hopefully, you can establish a compensation policy, but don’t rush into it.
Meantime, in requesting a raise, employees usually mention one of a myriad of reasons:
- Their personal expenses have increased.
- They’re proud of their accomplishments, and they deserve more money.
- They think they’re underpaid compared to their peers either in your company or at other employers.
- Their newly added responsibilities warrant an increase.
Strategies to implement
You’re probably aware that an employee who asks for a raise has already launched a job search or is at least doing a cursory look for other opportunities. Don’t panic, but be aware that compensation issues are taken very personally by workers.
Thank the employee for approaching you, and offer the person a time for when you’ll have another chat. Then, roll up your sleeves and make this a priority.
Mention the issue to your boss and/or other managers in your company. Get some feedback, and monetarily analyze the circumstances.
Philosophically, know this: Each position in your company has a certain value, as determined by the marketplace. An employee’s personal finances aren’t germane in this situation. Nor is the employee’s performance, if the ceiling-value of the person’s job responsibilities has been maxed out.
If the budget is too constrained, be candid. But offer hope and Power Your Brand with Employee Empowerment.
Either way, if you determine the person is underpaid and/or you don’t want to risk losing the employee, indicate a raise is possible with some provisos.
Remember, if other employees perceive from water cooler gossip that you automatically grant raises whenever asked, you’d be in danger of setting a dangerous example. Any morale issues will be exacerbated. Other employees – valued or not – will soon be in your office lobbying for raises.
Set an appointment for another chat and plan so that it results in the employee taking more ownership. But don’t give a false promise. It the budget won’t allow for an increase and continue to discuss how to make it happen.
Clarify how raises are determined – the worth of a job’s role to the organization’s bottom-line, and the employee’s performance. Ask the employee to evaluate how the position can be increased in value to the firm, and how her/his responsibilities can be expanded to generate more value.
Once these matters reach a successful conclusion, award the pay raise.
Poor performance – if a raise is out of the question
Here’s a three-step process:
1. Empathize – acknowledge the person’s feelings.
2. Ask the employee to restate the concern in her/his own words. Why? The employee feels empathy from you and feels you’re listening; and you fully understand the concerns of the person before proceeding in the discussion.
3. Overcome the employee’s concerns with facts and relevant information. Then, ask for the employee to commit to working for improvement in the value of the job’s role to the organization, and for improved personal performance. If the employee is obstinate, you’re suddenly been warned about more problems.
From the Coach’s Corner, here other HR resource links:
- Many Big Companies Ripe for EEOC Complaints
- 21 Quick Tips to Avoid the Dark Side of Management
- Human Resources – Slow Motion Gets You There Faster
- Human Resources: 12 Errors to Avoid in Evaluations
If I agreed with you we’d both be wrong.
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.