While there are certain seasons and cycles for specific elements of business, the request for a raise from one of your employees/associates/team members can happen at any time, often without warning. In fact, you’re likely to be blindsided by the question. How you respond speaks volumes about your ability to be prepared for a true leadership issue.
So, how do you respond when one of your team members asks you for a raise in pay?
If you’re like many managers and owners, you might mention some numbers that provide objective evidence that you’re not in a position to be giving pay raises at the moment. You could pull out the old standby, “Let me think about it” and hope that it doesn’t come up again. You can also simply turn down the request without giving a reason. After all, you’re in charge and you make the rules, right ?
Here’s why some of the standard approaches may not be working for you, or for that team member hoping for a pay increase:
- Your people often don’t understand the fact-based, objective numbers that help explain your company’s financial performance. This is a common condition called business illiteracy, and it causes a host of issues that adversely affect many organizations.
- That person requesting the raise will not forget about it, so your put off is simply delaying the inevitable, when you’ll have to face him or her and provide a true response. Your non-response could also get you a notice of departure, truly bad news if this is a valuable and contributing associate.
- Doing much of anything these days without putting a reason behind it simply adds to a team member’s feeling of being kept in the dark most of the time. That’s a productivity reducer rather than enhancer.
Another way to respond
Try this four-step the next time someone asks you for a raise:
- Recommend that he or she purchase and read the book Big Bucks by Ken Blanchard et al. This is a wonderfully clarifying, short read, available in most any bookstore as well as online. (Ahead of this conversation, you’ll want to purchase and read the book yourself so that you’re ready for the next step.) Incidentally, if you’re thinking you’d simply loan or give your copy of the book, think again. If this person is hungry for a raise, taking the initiative to find, purchase and read the book (or borrow it from the library) is a key element of this process. Don’t provide the book.
- Invite the person to come and talk with you once he/she has read the book. (This step of reading a book can thin the ranks considerably of those looking for greater compensation.) Suggest that he/she come prepared to discuss the key points in the story.
- Since the book clearly spells out that raises go to those who increase their value to the company as measured by increased revenues and/or profits, you’ll want to know what he/she has in mind that will increase his/her value to the company. Don’t settle for “try harder” or “show up on time,” although you may be tempted to provide a raise for what others are already doing as their own standard procedure. (This reminds me of the days when the non-smokers, noticing the company’s new policy of rewarding those who kick the habit, considered starting just long enough to stop and collect the reward.) Don’t fall for this.
- Set a process for measuring this person’s additional value to the company over a given period of time. Agree on a way that tracks the measurement and monitor how that measurement goes. Also set a target that gives a certain increase in pay based on a specified level of improvement in the company’s numbers.
What you can do in the meantime
I often recommend that clients begin sharing their business financials, i.e., the monthly profit and loss statement, also known as “the numbers” in such a way that compensation information remains confidential. You can do this in any of several ways. (Send a note to me email@example.com with biz lit in the subject and I’ll provide some details.)
As you start sharing the numbers, several things are likely to happen:
- You get eyes rolling in disbelief – “How in the world can we do all this work and you only have three percent net profit before tax?” is a probable question. At that moment, you’ve got them thinking as owners, because you’ve asked yourself the very same question many times.
- You get that “deer in the headlights” look – They’ve likely never seen these numbers before. It’s going to take repetition and explanation before they do. If you’re going to do this just once, you may be better off skipping it altogether because of the confusion that misunderstood information can cause within the ranks.
- The lights begin to brighten – Your top performers/producers will appreciate the information and begin to use it in making better decisions consistent with the company’s goals, targets and objectives. This is one key area of employee learning that can reap significant rewards.
Of course, if you’re the owner of this organization and you desire the raise, consider your request granted. (Skip the book if you like.) You can simply vote your own raise by increasing your sales and keeping your costs reasonably level so that your own personal raise comes directly from your own increased productivity. And, of course, when you earn your raise and reap the benefits, be sure to celebrate at some appropriate level to reinforce your own positively productive behavior.