Earlier in my career it always baffled me how companies would let some of their best people walk away primarily due to their lack of interest in giving substantial raises to those who deserved it. I saw people walk away with offers from other companies with a 30% raise that were not even approved for a 4% raise in a position they excelled at.
I always wondered: how does it make sense for you to design a system that is targeted at retaining average/mediocre people and that, by design, allows your best and brightest to walk away?
As I've moved into middle management and I have gotten a closer look at how these things are managed, I wanted to write out my observations in case they will help anyone make decisions about their career moves.
When a boss, especially a middle manager, wants to get one of his employees a big raise, there is an entire process that is started with HR.
In order to understand that process, the first thing you need to understand is grades and bands. See, your position, at most major companies, has a specific job description that has been approved and graded by HR. Graded means that they have done their homework to understand what other employers are paying people doing that same job. They look at averages, they also look at low/high values. Based on that distribution of salaries, HR then develops a salary band, i.e., people in this position should be making somewhere between X and Y.
So, let's say you are working in a position where you are currently making 65k a year, and the band for the position is between 55k and 70k a year.
First important concept: the effort associated with getting you a raise of 6k is an order of magnitude higher than getting you a raise of 5k a year.
As you can tell, 6k would take you outside of your salary band, which means that your boss would need to convince HR to either a) give you a promotion, thereby moving you a different band, or b) regrade your position, i.e., argue that what you actually do is so substantially different than what the job description is that there should be a re-evaluation of what your job compares to, and hopefully, the amount of money you get paid.
Second important concept: every halfway decent boss will always argue for their best people to get promoted and or re-graded and most of those people don't "deserve" it
When I say "deserve", I mean that most of those people will not get a better position or salary out in the free market of jobs. At least not easily - and HR knows that. That means that if you are a 75th percentile employee, you likely can find a better job out there, but it will take time. And effort. Time and effort after work hours that may be enough to where that person will eventually get discouraged and decide that it's not worth it, and that they probably have it "ok" where they are at.
This is a very disingenuous version of the word "deserve". The reality is that supply and demand in the job search world is not very efficient, so even though there is an employer out there who would love to hire you for the money that you truly deserve, it's not always easy for you to find each other. There may be job title issues (advertise as Junior Analyst even though the job description and salary is that of a Senior one), experience issues (must have experience in oil and gas... for an HR job), educational restrictions (must have a PhD... even though half of our people don't). The point is, just because you can't find a job right away it does not mean you are being compensated appropriately right now.
Third important concept: HR plays a numbers game - the probability of any one deserving person leaving and the cost of replacing them is almost never higher than the expected cost of giving every deserving employee the raise they deserve
Replacing a great employee is actually very expensive. Between lost productivity and the resources required to complete a full blow search, you are going to spend a lot of time, money and effort to replace that person. And you may not find a great person to replace them with, which means you will lose even more over time.
However, the rate at which great people leave an organization is almost never alarming enough to warrant a risk-averse strategy of aggressively preventing any great person from leaving. So HR just rolls the dice and says "I have 100 people that are really good that I want to retain. If I give them a higher than meagerly-average raise, it's likely that 85 of those will be happy enough to not actively start looking. Of the 15 that will actively start looking, 10 of them will not find something better within the next year. Of the 5 that do, I will likely get a change to make a counter offer, which means that I can keep maybe 3 of the 5. That means, over the next year, I am looking at losing 2 people and it's costing me 3 exceptional raises to do so.
So, how does your boss convince HR to give you a huge raise? To me (no inside knowledge), there are 3 major criteria that you need to fill:
1. You need to be critical to something important - you need to be the only person that can do something that a big, expensive something else relies on. Maybe you are the only one that can make changes to the software that a $10 million a year account is buying. Or maybe you have all the contacts for a prospective account that is critical to your company. Or maybe you are the only one with the skillset to develop a new training program that was already promised to investors. Again, you want to be mission critical, because it means that any downtime from you leaving will hurt... a lot.
2. You need to be difficult to replace - if you are the only person at the office that knows Python and that is the only thing that makes you mission critical, then it's not as big a deal - Python developers are a dime a dozen and you can even contract one instead of hiring them full time. On the other hand, if you are the only person at the office that has a specific combination of skills that don't come around often (you have a PhD in fruity loop flavor development, I don't know), then you gain a good bit more leverage because the company then knows that the costs of hiring your replacement will be high.
3. You need to be a high flight risk - If you seem happy with your work, happy with your boss, happy with your coworkers, have a good work/life balance, live in a city that doesn't have high demand for your position, have a significant other that also works... you are likely going to be seen as a low flight risk. How do you become perceived as a high flight risk? This is the tough part, because there is no way to convince HR of this unless you essentially have an offer from someone else in your hand saying "I'm going to leave now, unless...".
Which brings me to my final point, and something that I always argue for in this sub: if done correctly, there is no downside, and pretty much only upside in looking for other jobs.
Worst case scenario, you don't get anything, in which case you know that this is not the time to start pushing your leadership for a raise or promotion too much.
Expected scenario, you find something, maybe it isn't great, but it gives you an idea of where you truly sit in the marketplace.
Best case scenario you receive a considerably better offer for a job you like, and then you just have a decision to make among two really good options: leave for a better job, or ask for better conditions at your current job and stay if they comply (and you feel comfortable enough with them to know they're not just going to fire you when they fire your replacement).
TL;DR: HR doesn't want to pay you money because the odds are in their favor. The best thing you can do is always look for other jobs and see if something better comes along
Submitted March 31, 2017 at 12:51PM by drhorn http://ift.tt/2mWnH0r
