Responding to Pay    Raise Requests

Q. I’ve had three employees ask for raises in the last 10 days. We’re just not in the financial position to increase wages. But these are good people and I’m afraid I’ll lose them to better-paying jobs. What might we do?

A. Many employers ARE in your position. Employees rarely, if ever, believe they are making enough money. (Do you?) So there is always some tension between the reality of pay and the expectations of pay. So you’re not alone.

Here’s an approach to consider:

Know the numbers. Know all your employee-related costs (such as wages, taxes, insurance, benefits, overhead, training, support). Know if each employee is generating a profit or costing you money, and exactly how much profit or loss.

 Share the numbers with employees. Does this sound scary? It might. But consider: Employees generally exaggerate how valuable they are to the employer, they generally exaggerate how much money they are making the employer. And they generally exaggerate the profits the firm or organization is making. Thus they generally exaggerate how easily the employer could give them a raise. So sharing the real numbers with employees is almost always an eye-opener for them, a reality check.

 Discuss with employees the connection between their efforts and the availability of more money to allow for higher incomes. Find ways to connect improvements in productivity with increases in revenue. Show employees how reductions in costs can directly result in increased revenue that can justify higher incomes. What you’re doing in this step is focusing your employee’s attention on how they make an impact on the organization’s bottom line...and how that connects to improving personal income.

 Help your employees increase their profitable productivity. Explore with them what new goals they can set. Determine what they need to do, and what you need to do in helping them, so they can reach the goals. (If they’re currently paid to get X orders a day or produce X widgets an hour, what will they need to do to get X+1 orders a day or produce X+1 widgets an hour?)

 Get all employees involved in using their brains, their mental talents, to generate new money-making and cost-cutting ideas. Involve your employees in a formal, on-going suggestion program.

 If you’re not already doing it, tie at least some of your employees’ pay to increases in their productivity or increases in profits that they help generate. This is where sharing the numbers with your employees really pays off by motivating your employees to improve.

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