How do you respond when an employee walks into your office and asks you for an unscheduled raise?
I have overheard employees and associates say, “It never hurts to ask,” but such a request could be risky. There can be two potential negative results: the manager could feel resentful or even threatened. The employee’s morale could be negatively impacted because the manager doesn’t see the value in their contributions.
These types of negotiations can play out as a “zero sum” game or even result in a “lose-lose” scenario for both parties. These requests usually occur when the manager or supervisors are not prepared with a response that has been sufficiently thought through.
Peter Stark of www.everyonenegotiates.com suggests nine strategies for successfully countering or negotiating with an employee over a requested raise. I agree with most of these strategies, but in some cases I have some concerns.
- Ask good questions: “What makes you feel that you are not compensated appropriately?” “Do you have supporting data that confirms you have taken on additional responsibilities or that you are not compensated adequately based on your experience or compared to people in your similar position?”
- Don’t reward poor performance: The worst thing a manager can do is give a raise of any amount to someone who falls short in meeting performance expectations. Keep in mind that a raise is a reward, not a given. If you say “no,” the employee will not be happy. That means that you need to be proactive in dealing with performance related issues, and if the employee doesn’t significantly change their behavior, share them with a competitor.
- Provide a conditional no, but build them a bridge to the future: I like this strategy the most because it makes the raise dependent on conditions. A great way to phrase this response would be, “I can’t give you a raise at this time, but if you successfully complete these additional assignments on time, then I feel a raise would be warranted.”
- Give them a reward in heaven: Another option is to tell the employee that you feel they’re doing a great job, but since additional money is not in the budget for raises, you’re unable to provide them with a raise at this time. But, next year, you’ll make sure that he or she is taken care of financially.
- Kill them with facts and statistics: Pull out the market data and comparable ratios that tell the employee they are adequately compensated for the job they currently do. If you find data illustrating that they are over compensated, let them know you’re hesitant to bring up their request with human resources for fear that someone in HR will redline or red circle their position, making them ineligible for even a cost-of-living raise.
- Make sure the employee considers the entire paycheck: In today’s world, benefits are quickly becoming a significant expense to organizations. When you show an employee the value of their health care plan, retirement benefits as well as the flexibility you provide in leadership and their schedule, an employee needs to determine the value of those items that are not included in the paycheck. If an employee threatens to leave over a five percent raise (the average raise that employees leave companies for) when they have health and retirement benefits that contribute to 10 percent of their salary or more, the decision regarding the full pay package needs to be revisited.
- Tell the employee that you’ll think about their request and get back to them later: If you feel you’re unprepared to provide an objective response or to make a good decision, you’re much better off buying yourself some time rather than providing a half-thought out answer on the spot.
- Give them a raise before they ask: My goal is to think about my employees and the value they bring to the organization, and give them an appropriate raise before they ask. No manager wants their best employees to leave.
- When in doubt, ask yourself this question: How easy would it be for me to replace this person if they left because they were not happy about me saying “no” to a raise? How much would it cost me in the search for a new employee or in loss of business? Some positions are much easier to replace than others.
Here are my concerns and comments: Always ask “open-ended” questions. You need to gather as much information as possible regarding the request for an increase. Granting any increase in salary to one employee out of sequence can cause a decrease in morale among his/her peers as well as setting a precedent for the future. Yes, there are situations where you need to retain a strong performer or meet a competitive offer, but a threat to leave should not be rewarded. Unless the employee is critical to the success of the firm, a ransom should not be paid.
Peter’s point four could be problematic. Committing to future consideration can backfire. What happens if the company has a bad year or the employee’s performance slips? Point six is very important. Many employees don’t realize what their total compensation package is worth. Give yourself time to evaluate the request and discuss it with HR and your superiors as indicated in point seven. When considering a counter offer, one should also take into account point nine, what it would cost to replace this employee in lost production/sales. Your response should be influenced by the total cost including recruiting and associated relocation expenses.
Over the years my philosophy can be summarized in one question: What would happen if that person did not show up to work the next day? In most cases the answer is, the business would continue.
Cary Silverstein, MBA, is the president and CEO of SMA LLC and The Negotiating Edge. He leads a group of consultants that provide services in the areas of strategic planning, negotiations and conflict resolution with offices in Fox Point. He can be reached at (414) 352-5140 or at Csilve1013@aol.com.