Wanting a Raise and Deserving a Raise
They are different things
We want to attract and retain top talent for our teams.
And it is fair to assume our people want to be well-paid.
Start by making sure you are paying a competitive market rate for their skills, experience, and geographical location. Consider annual cost-of-living adjustments—inflation, housing, and other factors may make the previous numbers obsolete.
Then make sure you have an ongoing series of discussions with each team-member about career development. If they grow their skills, experience, competencies, etc., that should be rewarded with appropriate pay increases and promotions.
If a team-member comes to you to ask for a raise, consider if it is merited at that point in time. Have they grown in their skills or responsibilities since the last pay adjustment? If so, increase their pay to reflect that. Don’t risk losing valuable people.
Yes, payroll is a huge chunk of our gross expenses. But recruiting and training a new hire to replace a strong employee who leaves is MORE expensive than paying that good employee what they are worth. Retention of top performers is good for the bottom line. Without your people, there are no profits.
Sometimes, an employee will ask for a raise, but they will not be doing more. If they are getting competitive compensation for their current skills and experience level, consider this an opportunity to work with them to grow them to a higher level. What can they do to make their work more valuable? Training? Experience? Skill-development? Taking on a more empowered role? Map out a plan—if they develop AND CONSISTENTLY DEMONSTRATE the skill or effort you want them to develop, they will receive the raise or promotion (and make sure you write the details down to remind yourself of this agreement, along with a check-in timeline, such as “6 months” or “at their December performance review”).
The consistency component is key—don’t let them assume “I did it once; I get a raise.” Work that is worthy of increased compensation is something that adds to the work product over time, ideally in a way that increases revenue (or frees up other team members to increase revenue). Reward them for doing more work, or higher-quality work, or work that requires mastery of a new skill. And consider how to make this continual mindset for growth and improvement part of your corporate culture.
(image generated using Midjourney)