Being asked to keep someone at the same salary when they are taking a promotion can feel unfair.
It makes it hard for you to get a productive team…
It makes you feel scared that you’ll lose your team’s trust…
… and you know that if you don’t find a solution, even people who enjoy working with you may start looking for greener pastures.
The bad news is dealing with this type of issue comes with the territory, especially in small companies.
The good news is that you don’t have to go to your team in defeat… yet. There’s something you have to try first.
You have to go back to your bosses, with data.
Go to the root of this problem: the executives who asked you to do this. This is the time to be an advocate for your team. All that political capital you’ve been building up? Now is the time to use it.
First, let’s gather some data.
FYI: for simplicity, I’ll call your direct report Jane.
Create a new document that details
- Jane’s current role and salary
- Jane’s next role (post-promotion)
- Industry rates (local) for both her current role and the one she’s being promoted to. If you find the data online, make sure you save the links for all your sources. For the USA levels.fyi, payscale.com and glassdoor.com can be a huge help to get a rough idea. In many industries and locations, you will need to do a lot more legwork to get it done. Talk to peers in other companies, check out job listings that may hint at ranges.
- Try to figure out how much value *you* and your bosses really put in this position. Write down
- The critical projects Jane is working on.
- The problems you will face if Jane decides to leave.
- The critical accounts/external facing people she interacts with
- The people she is mentoring, coaching, or managing within your org.
- Jane’s performance review and promotion package should be linked in the document and easily readable. If you have them, also add links to your team’s performance reviews and salaries, just in case you need to use them.
Remember: the point of this data is to start a conversation. You don’t want to set all the numbers in stone before you step into the room.
Make a separate private document to brainstorm on your own
- Based on the information you have, get a good idea of what the ideal scenario looks like and write it down. Be prepared to negotiate.
- If there are non-salary perks that you can throw into Jane’s new total compensation package, like more vacation or education assistance or stock options/rev share that she could be interested in, note them down too. Again, write it all down.
- Write down a few alternative scenarios for total compensation.
- If you have access to data such as your team’s profit margins, revenue they bring, key deliverables that are impacted by your team, etc, note them down here as well to have them handy.
- Estimate how long it’ll take to hire a replacement if Jane leaves, and what will be impacted.
Schedule a meeting with the people who can make a final decision.
Make sure you have all the data you gathered and that you can share it with the people in the meeting.
Make sure your meeting has a short agenda explaining what will be discussed and that the key people accept the meeting.
Important – Don’t:
- Approach this as a “fight”.
- Place blame.
- Assume they are evil/don’t care/will say no. It may be that they didn’t fully realize how important this person is to your team.
15 minutes before your meeting, take a break and relax
You want to appear confident and calm. Drink water, have a coffee, whatever helps you feel ready. The point of your meeting is to get both the company and your direct report a win. By ensuring your direct report feels valued and respected, you are helping the company retain their employees. You are not going into this to get a “win” for yourself, but to get a result that makes all parties as happy as possible.
During the meeting
Present the problem – 5 minutes.
Here’s a script you can adapt with your own words.
As you all know, we are planning to promote Jane. She has performed above her level for the past year, and we think she is ready for a new challenge. Unfortunately, if we don’t offer her a salary that matches the new position, this could backfire. I’d like to understand more about this decision and figure out a path forward together.
The data to support why this is a problem
I took the liberty of gathering data for companies of our size in the same industry and locality. While each company is unique, I discovered that if we keep Jane at her current salary in her next role, we would be underpaying Jane by at least 15%.
Empathize, appeal to risk of failure.
I understand the company is not in a position to do a big salary increase this quarter and that we would all prefer to wait until the next pay raise period to adjust it. However, the risk of not increasing her salary at all is losing an important employee that we have invested a lot into. Replacing Jane would take us at least 4 months, based on historical data from our recruiting system. In addition to this, If Jane leaves over this, we would have a hard time replacing her by offering the same salary she has now to a new hire with the same experience, and we’d also lose time by having to train a new employee.
Hit them with your proposed solution
I’d like to offer Jane a provisional 10% raise above her current salary, starting the day she accepts the promotion. This leaves her 5% under the lowest estimated market rate, which is still a concern, but becomes a lot more manageable. Because we were planning to give raises in 6 months, I propose we also commit right here to an extra 10% raise after 6 months in her role. This would bring Jane’s total compensation to an acceptable level that would significantly lower the risk of her looking for a higher paying job.
From there, it’ll come down to questions, answers, and trying very hard to avoid a HARD NO.
- The ideal outcome is to get a (win) decision made during a single meeting. Even a small win is better than a No.
- If you fail to make a decision in that meeting, make sure there’s a clear follow-up date & time in all your calendars, and that you forward all relevant information to the people in the meeting. This is preferable to a hard No, which you should work hard to avoid. Ask “What can I do to help make this happen?” and follow up.
- If it’s not looking good, and you feel a firm No is coming, try to get a second meeting instead of getting to No. This gives you time to regroup and do some homework. That’s a whole different article, I’m afraid, but the TLDR is that if a NO is coming on something this critical, you should try to instead keep the door open, and find ways to re-open the decision if you do get to that No.
Getting results for your team is a key component of good management.
I’ve used a version of this script in almost every negotiation for salaries I’ve had as a manager in small organizations.
Sure, it always leads to questions. Sometimes it doesn’t work out perfectly, and you need to continue working things out over time.
Having a system when trying to negotiate an employee’s raise helps you get better at it over time, and being prepared gives the message that you take this issue seriously.
The point is to get the best deal you can by using the information you have of the market, your peers, your bosses, and your team.
You may need to adapt the risks presented above to your own situation. It really helps if Jane is part of a critical project that won’t finish for the next 6 months, because then you get to use that as well to confirm how critical it is to make sure she feels good about her compensation.
Other times, you are not sure of salary ranges, or there’s no big lever to pull, and you may need to do some legwork and figure out the correct ranges and motivations to use.
For small companies, this is action plan gets results.
I’ve gotten big raises for direct reports using almost this exact same script and plan of action, without even the benefit of sites like PayScale and Glassdoor (because they simply did not have data I could use)…. relying on peers and my knowledge of the market, and even using information I had from my own direct reports when they got competing offers.
I’ve managed to raise direct reports’ salaries outside the usual salary raise periods when I’ve discovered discrepancies, using a similar script.
When I’ve failed, I’ve lost trust as a manager, and I’ve been in the seat across the table as key employees quit due to bad pay. You learn very quickly that if you don’t act, your reports will take action in their own hands. While counter offers getting expensive is certainly a useful lever in some cases, it’s a terrible situation to be in… while you do nothing, your team is looking for the next thing. They are more distracted, less committed, and likely to get tempted by a competing offer….
As a manager, you really want to prevent that from happening.
TLDR, in bullet points
- Gather data.
- Present the problem.
- Explain the risks in the current plan.
- Offer a better plan that takes into account the company’s current situation.
- Take the negotiation forward from there.
- The ideal outcome is to get a (win-win) decision made during a single meeting.
- If you fail to make a decision in that meeting, make sure there’s a clear follow-up date & time in all your calendars, and that you forward all relevant information to the people in the meeting. Avoid a hard no.
- If you don’t reach an agreement, ask “What can I do to help make this decision?” and follow up.
- Remember that getting results for your team is a key component of good management.
Even if you have only been a manager for a month, you can do this.