I Need a Raise!
|Hey boss, I need a raise!
Most of us have never worked up the nerve to ask for a pay raise. It can be a tricky thing. If done successfully, it can have a big impact on your personal comfort, retirement plans, etc. However, if done poorly it can have ramifications on your employment, career, and relationship with your manager. Many people would rather just interview for a new job and leave a company for a pay increase than have this discussion with their manager.
It would seem to make more sense from both employee and company perspectives just to have a good pay discussion. In this newsletter, I will offer a few tips on how to have a successful salary discussion with your manager if the need arises. Also managers, there's some clues in here for you as well about how to successfully respond to these inquiries from your employees.
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In my career, I've had a number of people ask me for pay raises. Katy was a senior engineer who was a very good performer. She put together a polished presentation, leading with a summary of her career to date as well as some significant recent accomplishments. She showed me what her plans were for the future. Katy then showed me some internal and external data that she had found that told her that she was about 20% under the pay market. She expressed that this was a concern for her, and asked for my help to fix the problem. Since she was someone I really needed on my team and we were trying to add people to our organization, I was happy to commit to speaking to HR. My HR person helped me get her a raise (not 20%), and I committed to working with her on salary adjustments in the future.
Contrast that with Julio. Julio came to me and said that he wanted a raise. He had heard stories about people getting more money to leave the company, so he wanted more, too. Julio was an average to below average performer. When I started to discuss his latest performance review, he looked at me like I was speaking Latin. His only answer was that he wanted to move to a better apartment, and if he didn't get more he would quit. To top this off, due to an economic downturn the company had just announced an across the board freeze in pay, and upcoming layoffs. Julio did eventually quit for a 10% increase at a competitor, which at the time actually helped our headcount situation. Six months later we received a call from him that he would consider coming back to our company for a 10% increase over his current salary. No thanks.
What made these cases different? Katy had a well-timed, fact-driven, non-threatening business proposal. She planned for the meeting, and delivered the presentation in the same manner as any other business request. Julio on the other hand had terrible timing, and showed no facts to support his request. I was more than happy to try to help Katy.
With that in mind, here are four items that go into any successful salary discussion:
- Know the company environment.
You need to understand the financials, organizational dynamics, and culture of your own company. This may help you determine what to ask for, when to ask, and who to ask.
Some things to think about might be:
- Is your company making money and in good financial condition?
- Does your company have retention or turnover issues? These issues may work in your favor. On the flip side, if they are used to people leaving, you may not have much leverage.
- Is your company hiring? Companies may be more amenable to a pay raise to keep current employees and/or deal with salary differences between new and current employees.
- When is the right time to ask? Does your company have an annual cycle, and if so when are decisions made? It's obviously best to have these discussions before annual decisions are made.
- Who is the decision maker? If the decision maker is not your supervisor, you may want to have a performance discussion with your supervisor before you have a salary discussion with someone else.
In the example above, Katy asked at a time when the group was expanding. The organization needed her to help train new people. Julio couldn't have picked a worse time to ask. Even if I wanted to do something for him, I couldn't have.
- Have Data.
It is very important to have data that you can show justifying your request. You can get data in lots of places. The internet is rife with salary data, although its accuracy can be questioned. Your own company may publish data in many places that you can cobble together to create coherent data. It's amazing what you will find on the company website. Check newspaper ads, job boards, etc. to see salary ranges for positions similar to yours (but be careful that you are not implying a threat to leave). Also, you can always try to ask HR or your manager. Some companies are more open about sharing data than others.
It's generally not good form to discuss knowledge that you have about peers or others in the company. You can pretty quickly alienate the decision makers if they believe that you are stirring up trouble with others.
If the discussion turns into a dispute of the data, you can always ask to see the company data or ask where exactly you stand. By presenting the data first, you put the company in the position of having to defend and show you why you are wrong.
In the example above, Katy had some data that showed comparable pay. It wasn't perfect, but it was close enough that it would have been a waste of time to argue about it. Julio had nothing but rumors. I told Julio that he was fairly paid, and he did not have any response.
- Performance Matters Most.
From the company perspective, salary is not about market comparison or what the company can afford. It's about what YOU are worth to the company. From a company's perspective, if you are a star performer with huge future potential with a skill that is hard to find in the market, you are worth A LOT. They will look for ways to keep you happy. If you are average, you are probably worth about average. You are probably worth trying to keep around because it can be really painful to try and replace you and train someone else. If you are not performing, then you may not be worth what they are currently paying. They would be OK with the upside potential of bringing in someone new. It sounds cold, but that's the game.
Therefore, to ask for an increase, you need to have a clear view of your performance.
The focus here should be both on the past and on the future. Past performance could include successful projects, loyalty to the company, new responsibilities acquired, unique training, etc. Short term history is even better. You may want to consider timing your request after you have completed something valuable to the company, while your accomplishments are still fresh.
The future is equally important. Show the company what you plan to do for them next month, or next year. Show them how you plan to manage your career. You want them to see that you have been and will continue to be a valuable employee.
Performance should be the focus of your conversation. If the environment is good and you have good data, then the only discussion should be whether YOU are worth what you are asking for.
If you are getting the sense that the answer to this is "no", the conversation should take a different turn. Turn the conversation into "what do I have to do for the company to earn the increase that I am seeking". You will at least walk away knowing where you stand.
In my example, Katy talked about her past performance as well as how she planned to help train new team members. She knew she was valuable, and I was convinced as well. Julio had no interest in talking about performance. He never even asked what he would have to improve to justify his performance.
- Be Specific, but be Prepared to Negotiate.
I covered negotiation in previous newsletters, but if you pass the 3 hurdles above negotiation is where you will most likely end up. Tell the company specifically what you would like to see, but leave the door open for negotiation. Your manager may not be able to meet your goal exactly or all at once, but you may be able to secure commitments for non-salary items and/or future reviews.
Non-salary items may be an acceptable alternative in some cases. If you are getting the sense that you may not get the full salary increase you asked for, you may want to ask for that extra training, office, parking spot, etc. be added to the deal.
If the answer is "yes", that's awesome. More likely, the answer will be "maybe". If the answer is "I'll see what I can do", or "I can get you some but not all", schedule follow up reviews with your boss at a later date. Drive for a specific commitment.
If the answer is "no", you should aim to find out what needs to happen to make this a possibility. Is it the current environment, your data, or your performance? Come back and ask again when the condition is met.
In the example above, Katy got a 12% increase. She also was able to move from a cubicle to an office (to give her a place to work with new people). We also agreed to have a follow up discussion in 6 months before the next formal performance review cycle.
As I mentioned in my opening paragraph, there are some risks involved with asking for a raise. Here are some things to avoid:
- Be careful of ultimatums. "I want a 15% raise, period" is probably not a great statement to make. The company may not offer you a 10% raise if you made an ultimatum. Always leave room for negotiation.
- Be careful of threats to quit. I advise my clients to not even mention other opportunities unless they are prepared to take them. Mentioning other jobs may label you a short-timer, and lead the company to negate upcoming raises, change assignments, cancel training, etc. Also, if the company calls your bluff, and you stay, you have lost every bit of leverage that you have for future requests. You should approach this conversation as a loyal employee with no intention of leaving.
- Don't bring up "why" you need the money. Your need for a new car, new house, pending alimony payments, etc. really doesn't have a bearing here.
- Have this conversation rarely. This conversation should happen maybe 5 times in a career. Companies want employees who are excited to be there, not employees who are only there for the money. If you ask every year, it will hurt the perception of your loyalty, and you won't be taken seriously.
In summary, it's OK to ask for more money. Companies would prefer this over you just going out interviewing and presenting them with a competitive job offer. Handled appropriately, it can open a really healthy dialog with you and your manager about compensation issues.
By the way managers, you can also use this to help you prepare for these discussions as well. If the environment is not right, start the discussion there. If your employee has no data, try to figure out why they think they need more money. More than anything else use this as an opportunity to focus on performance, both past and future. If an employee wants more pay, help them understand what level of work output will earn it.
If you need help planning a salary review meeting with your manager, let me know. As always, I also welcome your comments on this article. Feel free to email, Twitter, find me on Facebook or LinkedIn, or post to my blog!
James Bowles and Associates