Millions of people left their jobs last year, and the elephant in every office right now is: how do we talk about money?
In today’s episode, co-hosts Richard Lindner and Jeff Mask tackle the difficult topic of salaries and raises head-on. 2021 was the Big Quit, the Great Resignation, the Year the Employee Leaves. Everyone has felt it. When 38+ million employees in the U.S. quit their jobs in a single calendar year, everyone feels it. That’s a lot of people walking out. That’s a lot of investment in training and onboarding and growth. That’s a really big hit. So, what are we going to do about it?
If you’re a leader freaking out a little (or a lot) about this right now, know that you’re not alone. Listen in as Jeff and Richard calmly and wisely walk us through next steps.
Let’s Be Honest: No One Really Knows
What Richard is hearing from people he leads and in his communities, masterminds, and from other CEOs, executives, and mid-level managers is this: My employees are asking for raises, and I don’t know what to do. I don’t know how much to pay them. I don’t know if I should pay over market. I don’t even know what the hell market is right now.
Richard doesn’t know either. He says it feels like we’re sitting here bidding on a house in the hottest real estate market out there. How much over market do we have to go? There are times when the answer is whatever it takes. Sometimes it’s none. How do you know?
The next big question is: How do you have these conversations with team members? If they haven’t asked, they’re thinking about it, building up the courage to ask. The longer they’ve waited, the bigger issue it’s become in their minds.
When they do ask, how do we have that conversation from power, not fear? From humility and vulnerability? How do we model leadership practices and principles within that conversation? How do we stop waiting for them to ask and just initiate, so it’s not this big elephant in the room?
Avoid Panic and Emotionally-Driven Decisions
Richard passes the puck to Jeff who doesn’t have solid answers either, but he does have some really good ideas. His first tip is to avoid extremes. Don’t panic. Don’t rush into decisions that are driven by emotion. This time may seem unprecedented, but he and Richard have seen a lot of ebbs and flows over the past 20+ years. They’ve been through up markets and down markets. There are some tried and true principles that can give you peace, clarity, confidence, and unity as a leadership team.
You need to be unemotional. This doesn’t mean you don’t care about your people. It means your decisions aren’t rash and made in the moment based on feelings. (Like panicking and thinking, “I can’t lose this person!”) You need to be united as a leadership team. You need responsibility and alignment. You have to do what’s best for both the person and the company as a whole.
Looking at a situation unemotionally means that the question isn’t “What are we going to pay Jeff?” But: “How do we pay here?” You need an agreed-upon compensation strategy upfront from the beginning. When this is missing, there will be friction and tension. You need to know what your principal stance on compensation is at your company. What’s your compensation methodology? If you’re not in charge of this at your company, ask your leader that question.
Clarify and Communicate Your Compensation Strategy
Conversations around money are much easier when everyone understands the company’s compensation methodology. And when that methodology has been clearly communicated to all employees. The whole team needs to be aligned. You’re overtaxing everyone when you don’t have a methodology or documented compensation guide that everyone agrees to.
What are your company’s guiding principles around compensation? Some companies strategically pay just under market, some just over, some right at market. In the fast food industry, two chains—In-N-Out Burger and Chick-Fil-A—purposely pay 20% to 40% above market to attract and retain the top talent. They believe that best customer experience enables the most repeat business. Instead of cutting corners on comp with employees, when they generously overpay, they’re ultimately creating customer loyalty.
Figure Out the Formula
Some companies come up with a formula. Maybe something like results + time + scope + embodying core values = your salary. A formula is a great way to say this is how we determine compensation. We take into consideration this + this + this. You avoid exceptions. When you don’t have clarity, everything is an exception.
You’ve also got to determine what the salary bands or ranges are by role. Then you’ve got to look at timing. How long before someone is eligible for a raise? Then get clear on general amounts for raises. 2% to 5% is typical for an annual raise. A raise is not a promotion. A raise is more money for the same role. A promotion is a new, higher role which often comes with a pay increase.
What we do consistently becomes expected. If you give a big raise to right a wrong, make that clear, so they’re not expecting that percentage increase every time for a raise. Don’t give a 15% raise to right a wrong, then go back to 2% increases without explaining why.
After you get clear on the amount, then you double down on training with leaders. Anyone who will ever have a conversation about raises or promotions needs to be trained on how to broach the topic and how to field questions. Be clear upfront. Be the one to proactively communicate it. Be transparent. Share the same information across teams in the company. Some teams (like sales teams) might have it set up a bit differently (commission-based), so make that clear.
Take some time to look at the people who report to you. Look at their compensation. Start with salaries, then any variable compensation. Look at the benefits your company provides. Go to salary.com where you can plug in some location information, number of direct reports, their career experience, and other things. It will tell you the general salary bands and a career path. Start to do this research.
Richard wants everyone on his team to understand that he will never be able to pay them what they’re worth. Not because he’s not willing to pay market or above market but because no one will ever be paid what they’re worth. Period. Your self-worth and what this company can afford to pay you must be bifurcated. Worth and compensation, when put together, is dangerous.
Proactively Talk to Your Team About Money
Why are people leaving their jobs? What do we need to do? Is it just money? Is it something else? Are we paying competitively? Do we need to change our bands? What other ways are we providing benefits? Mental health benefits, self-care? What are we providing over and above direct monetary compensation and is it valued? Do they know it exists? Are they taking advantage of it? How are we aligning their compensation with the company’s growth? Is it time to look at profit-sharing? Do we have incentives so people will want to reach goals?
In your next one-on-one with your employees, bring up the stat of 38 million people leaving their jobs in 2021. Ask: Have you thought about leaving the company lately? What caused you to look? Were you just curious, or is there something here that could be better? Let’s talk. What are some goals you have that you don’t think can be met here? Here’s how I could help you achieve these goals.
We’ve got to have these conversations. They’re already having them one-sided in their heads. Or with their co-workers or friends or partners. We’re all scared. They’re just as scared as you are, thinking: Is the grass just greener over there? If I leave, will I regret it? You have to help them definitively know how they can meet their goals here.
We fight for relationships we care about. Are you fighting for your team members to stay? Do they think you would care if they left? Don’t wait for them to bring it up. Take it to them. Yes, it’s uncomfortable. Having this conversation is hard. Having a valuable employee leave is hard. Choose your hard.
Elevate Your Leadership
Elevating leadership is why Jeff and Richard launched this podcast. The leadership game is evolving, changing, elevating. When we create environments for our people where they feel safe, rewarded, valuable, and appreciated, they’ll feel connected and part of something bigger than themselves and they’ll want to stay. When you invest in your people and their professional development paths, the ROI is significant.
Compensation isn’t the only thing, but it is important. So create guiding compensation principles or ask your company to do it. Be clear. Go proactively talk to your team about money. Have those hard conversations. Be the leader that inspires people to be the best version of themselves.
Richard and Jeff want to hear from YOU. Did something in today’s episode resonate with you? What insights or actionable items are you going to run with today? They’d love to hear your feedback on this episode. Email them here with your thoughts/questions: feedback@readytolead.com
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