When you can’t give raises: 6 thoughts on what to do and how to deliver the message
Money is funny. Everyone has different experiences and philosophies about money. Some people can’t get enough. Some tie their personal worth to their earnings. Some people feel making too much money is a bad thing. Some people think, like politics, money should not be discussed among others. Some people have gotten divorced over money issues. Money can be the source of great glee and great sorrow.
In these times, some companies are doing incredibly well while others are doing okay and others are struggling or even closing their physical or figurative doors. I am sure we have all been with an organization in high times and low times. I, personally, have been laid off twice due to struggling times, bankruptcy and acquisition. I have also been told, in the past, that I did a tremendous job, but due to external circumstances, I cannot receive a raise.
This can be extremely disheartening to be told you are fabulous but we can’t give you any more money. It is equally difficult to deliver this message as a manager. You want to fight for your people. You want them supported, engaged and rewarded. When there are bigger-than-you factors that limit your ability to reward your employees financially, you feel helpless. And, the burden of delivering this news is also squarely on your shoulders.
So, when this is the case, which, unfortunately, I think many managers are in this boat in 2021, what do you do? How do you communicate this to your employees? What should you not do?
I have read many business books, management articles and the like, and this topic is not covered out in the open all that much because we are funny about money.
Not giving raises can be a very real scenario for many of us in the past, now and, possibly, in the future. Below are my main tips for what to do and how to deliver this type of message.
Give praise. First of all, don’t downplay the person’s performance. I always want to acknowledge going above and beyond, having a positive attitude, helping/mentoring others, taking on additional work, getting involved outside of their job, whatever deserves noting out loud. Definitely, spend time noting these achievements in writing and verbally during a review or conversation. Even if you can’t financially reward them, reward them with praise. This is the easiest way to ensure someone is appreciated. Words matter and don’t cost anything. It feels good to hear someone praising your work.
Don’t sugarcoat. When you have to share that due to company performance, we are unable to give raises or major raises, keep it short and simple. I have had managers in the past get very nervous delivering this type of message so they invented some huge story behind why we can’t give raises. Don’t do that; it is not necessary. I would say most people understand the landscape and financial performance of the company if they are paying attention. If it helps, I have written down bullets or even what I will say exactly to be clear and stay on point. There is no shame in that. Be authentic but be brief. Remember, your team are all adults and should be treated as such.
Listen. I have had employees tell me that they are disappointed but understand. I have had one employee respond in a rage. No matter what their response, take time to listen. Don’t cut them off. It may not be productive but this is a time where it is okay to let your team member vent. I can also empathize with them. Be careful not to commiserate. There is a huge difference between empathy and commiseration. Don’t fall into the trap of complaining together about how terrible this is or how unfair this is. But, you can demonstrate empathy through simply acknowledging how they feel. It actually isn’t unfair if everyone is being treated equally — equally harsh but no one gets singled out in tough times.
Explore other financial options. If there is someone who is under-paid, sometimes, there is something you can do to get a little money for them. Unless the company is severely going down, there could be a little money somewhere for a star performer who is underpaid and a risk for leaving. When a case is made, I have found I can be successful. This is not something that can be done for everyone but I tend to focus on people you really don’t want to lose and have lots of room to grow in their compensation band. There can be ways to give additional money without increasing the salary. I find that companies are being very creative these days to figure out how to reward without breaking the budget. Giving a one-time special bonus can be easier to absorb vs. an ongoing salary increase, for example.
Explore non-financial options. Something I am not sure a lot of companies do is to seek other ways to reward. For example, providing an additional personal day or summer hours (half days on Fridays or every other Friday from Memorial Day to Labor Day) is a nice way to reward without increasing salaries. Time certainly equals money but this is more of an implicit way of giving people a break. Give time to volunteer or give time to study if they are in school. Some companies give sabbaticals, which is a huge perk. I think just having flexibility to manage life and work can be a nice way to say thank you. Like words, job titles are also cheap. If someone wants a “Senior”designation next to their title or wants to be a “Project Manager” and not “Project Specialist”, look into it. Not every company can informally grant title changes but if you have flexibility, a newer sounding title may help motivate someone when the money isn’t there.
Find out how they want to be rewarded. And, just to say it, people value different types of rewards. I have found that while everyone likes more money, some don’t value money as much as time, flexibility, autonomy, benefits, culture or the work they do and opportunity. Some feel they make “enough” to live the life they want and appreciate some other factor more than money. Have open conversations with your people about what the value and how they like to be rewarded. It can be eye-opening!
This is never an easy situation because it is, more than likely, out of your control. Unless you work for a smaller organization, you may have very little influence about compensation and salary increases. If you work for a larger organization, there is generally a pool of money where you can decide, as a manager, who can get what.
When that pool is small or non-existent, this is tough. This is the time to get creative, find out what your team wants and consider other ways to reward good performance.