In the July 24, 2018 Ask The Headhunter Newsletter a high-performing reader is looking for a raise.

Question

raiseNext month I’ll have my three-year performance evaluation, and I feel that I am worth more than my current salary. How do I convey the message that my job is worth more and ask for more money?

As my company has grown, so have my responsibilities. I’ve really stepped up to the plate. I’ve earned recognition, but it’s not reflected in my pay. Through discussion with peers in the industry, I have learned that the average salary is much higher. Could you please advise me how to approach my boss during the evaluation, so I can convince him my request is justified? What should I say and not say? Thank you kindly in advance.

Nick’s Reply

There are entire books written about this topic, and compensation experts will offer negotiating strategies galore. But I’m going to refrain from a long lecture, because I think you can figure this out yourself if you keep some basic ideas in mind.

No more boring performance reviews

What you should not do is walk into a review meeting, show some salary surveys, and expect your employer to cough up more money “because that’s what other people who do my job are being paid.” You must justify what you’re asking for.

Perhaps more important, performance evaluations and reviews are the bastard children of Human Resources. They are increasingly ignored in most companies. This is actually good news for you. If you’re going to have an evaluation at all, it will likely be very canned and scripted — and the manager doing it will be bored and in a rush to get it over with.

That’s your chance to take control and turn it into a useful, meaningful and engaging planning session. No more boring reviews! Stand out by showing your boss that you are 100% focused on doing your job — to make him and the company more successful.

Earn a raise with a business plan

A salary renegotiation is pretty simple conceptually: It’s best done with a business plan. In other words, do an analysis of your role as though your job constitutes an independent business. Don’t talk about your qualities or about what others are being paid. Talk about your company’s business and what you add to the bottom line — and what you will add in the future.

  • How do you contribute to revenue?
  • What does it cost to have you do what you do? (This includes not only your compensation and benefits, but the cost of your tools, the cost of your team and support personnel who help you, and so on.)
  • What’s your history in terms of the profitability you bring to the company? (That’s right: Your contribution to revenue matters, but how you impact profits matters more. Even if you can’t calculate a specific number, you need to outline a defensible case that goes into the profit factors you influence.)
  • What are your profit projections for the next two to three years? That is, make some projections of how you will contribute to profit. You’ll need solid evidence to back these estimates up.

Every job is a business

A job is a business. Managers forget that — so explain it to yours. That’s the key to thinking about this in terms your management will understand and respect. As in any business plan, your goal is to demonstrate how an added investment will pay off. You must show a rising return on the company’s investment in you.

To learn more about how to approach any employer with a business plan, check these two books in the Fearless Job Hunting collection:

Book 6: The Interview – Be The Profitable Hire and Book 7: Win The Salary Games (long before you negotiate an offer).

See especially the sections “How can I demonstrate my value?” and “The Pool Man Strategy: How to ask for more money.”

The longer you’re working for the company, the more profit you should yield. A lot of this is number crunching, of course, and there’s seat-of-the-pants estimating involved.

Please read that last part again: There’s seat-of-the-pants estimating involved.

Negotiation is a dialogue

This will scare a lot of people off for fear their employer will challenge the estimates. That’s exactly what you want! A dialogue. A debate. A roll-up-your-sleeves talk about your job! That’s what your evaluation should be.

If your boss is worth working for, then your boss will see that you are worth a good raise because you’re thinking about the company’s bottom line and that you are prepared to discuss the future of your work intelligently.

It will help enormously for you to interview people in the company who factor into this plan — before you meet with your boss. In the process, you will not only build your case, you will also influence (and remind) other key players in the company about your worth. Then ask them to join the dialogue by putting in a good word for you with your boss!

How do you ask for a raise? Have you had a performance evaluation in the past year?

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32 Comments
  1. Good information to know.

    So what do you do if you get performance reviews that make no sense at all? At one big four accounting firm, there was a bit of a mix up transferring from one manager to another, so I ended up with two performance reviews. I had my talking points lined up and as back of the house, my plan was to show the time I saved by automating/streamlining reports and identifying cost savings.

    The two performance reviews couldn’t have been more different, one said I was good on technical analysis but needed to work on my people skills and the other said my people skills were good but I needed to work on my technical skills. Literally for the entire two page report, this was the case. So either I am the worst employee ever, or the best :)

    As far as I am concerned performance reviews aren’t worth the paper they are printed on.

    • I’m approaching employee review season. We get rated on a 5 point scale but no one is allowed to get a 5 no matter how outstanding of an employee we might be so we “always have something to strive for?”. I ran into the same phenomenon at past employers that had numerical review ratings. Never understood that. To me, it removes the point of even having a scale.

      It reminds me of a book I read where team A and team B were always competing and whoever won got special privileges for the next season. Turns out that it was rigged so team B always won so team A would stay “motivated.”

      • Sound similar to the book “Animal Farm” by George Orwell. The hardworking horse Boxer, is literally worked to death while others shirk their duties.

      • >We get rated on a 5 point scale but no one is allowed to get a 5 no matter how >outstanding of an employee we might be so we “always have something to strive for?”.

        I’ve heard that too, but the version I heard was that nobody can get a 5 because nobody is “perfect”.

        It just now occurred to me that the real motivation behind this is probably to avoid promoting people. After all, if someone ranks the highest possible, that tells me that they are ready for more responsibility. But these days the only way for most of us to get promoted is to change companies. … and they wonder why employees are not loyal…

      • @Al: We’ve discussed this “top grading” practice before. It was popularized by the infamous CEO of GE, Jack Welch. See https://www.asktheheadhunter.com/10263/topgrading

        The practice has been widely criticized and debunked.

    • @Anna & @Al: I’m not a litigious kind of guy, but both your stories seem to scream for legal action. In Anna’s case, we have what’s called in the social sciences a lack of reliability in the metrics. That is, the same person is being measured at different times with different results. The metrics are unreliable. They may also be invalid, which means they’re not measuring what the employer thinks they’re measuring. The employee gets hurt as a result.

      In Al’s case, there seems to be a question about the validity of the metrics. If they cannot measure a potentially perfect employee (a 5), then we have a similar problem.

      But I’m not a lawyer and this isn’t legal advice. :-)

      • @Nick,

        It doesn’t matter if a company uses the 5-point system in the performance review. It is legal for companies to do this.

        I used to work for a major Fortune 500 company that uses this rating system and they tell all of us that nobody can ever achieve a perfect 5 and we must go through IDP plan to develop ourselves better to a higher level. It is not objective and the managers doing the PAs use the 360 degree review, enlisting other employees to share opinions or complaints about the person being reviewed.

        However, this company uses a counter-response format for the reviewed employee to write his/her own responses to the manager’s review. This helps to show the HR what both sides see in the review, should a dispute or issue arise down the road. This format is an important feature in the performance review.

        • “This format is an important feature in the performance review.”

          It is an important feature because HR no longer knows the company’s employees.

          Bandaids to cover for a system that has grown out of control.

          Oops! Sorry, JM, I got caught in a time warp.

          Something about ‘the way it used to be’.

          Harumph.

        • @JM: What Paul Forel said.

  2. My current company, a large company headquartered outside the USA, has various salary grades. I happen to be at the top non-managerial salary grade. I can initiate a “Career and Performance Dialogue” where I would have a discussion with my manager, his manager, and I don’t remember if HR is involved. This is to see what your best fit is in the company. Bear in mind that their overall benefits package is better than that of most companies. For example, they do have a 401k with a nominal degree of matching. They also have another fund (which I can track online) that only the company puts money in, and at my age (52), they are putting in 5% of my salary each year. (My wife just got a new job as a librarian in a public library where they have a pension.)

    What I am saying is that in our jobs the process of asking for a raise is more formalized. Usually, to get a significant raise, I have had to change jobs, and a couple of times the new job had such a big raise (40% to 66% – I’m not kidding!) that the previous company could not match it. At the same time, I don’t accept counter offers. My current job boasts a slightly smaller salary for better benefits and more stability. I also get to travel internationally.

    • @Kevin A: It’s not all about the money in your paycheck. You’ve got a nice 401(k) deal and benefits. Glad to hear your company takes it all seriously.

  3. As usual, great input from Nick. A few thoughts and suggestions from someone who has used this approach more than once . . .

    – If you’ve been in the same company for a number of years, the first time you try the business plan approach will be an eye-opener in multiple ways. Your direct manager is likely to be shocked by this discussion format, and may try pushing back by pointing out that “this isn’t how we do” employee reviews, or “we’ve never done it this way before.” I would be politely insistent — because you take your job seriously, and you’re proud of what you bring to the organization.

    – There are employers who will not want you to break out of their format, and will insist on working through their chosen review template, no matter how ill suited to the discussion that needs to take place. Reminds me of the original British version of “The Office,” when Keith is asked to name his biggest weakness during his employee appraisal, and replies, “Eczema.” (https://www.youtube.com/watch?v=IkYUDQCYGHA) If they insist on using their canned forms, I would probably comply, if only because some companies will only process an increase once that particular box is checked. But I would make repeated references to the “attached business plan” and include the most salient points in your favor within the body of the template.

    – An important byproduct of doing this is that you begin to look at your job through that particular lens every day. From now on, it will be important for you to identify, quantify, and document your contributions to the company’s P&L throughout the year, so that you will have a strong case to make the second time you do this. Nothing wrong with that.

    – You’ll probably need to give the manager some time to digest the content of your business plan. Depending on your relationship, and on how he or she receives such information (and reacts to unexpected curve balls), you may choose to share it’s contents in advance of your meeting. But understand that by doing so you are losing the power of surprise. Better, I think, to unveil it during the review, but then be open to revisiting the conversation after the manager has had a chance to absorb and process the business case for your requested raise. But make sure you schedule that second meeting while you are there, and don’t let them delay it for too long. And don’t sign any other forms, the way you might in a “typical” employee eval.

    Not trying to be pedantic here. Just sharing what I’ve experienced and observed over more years than I usually care to admit.

    • @Michael: That’s a great list of lessons on this approach. I agree with every one! Thanks for making this column 3X as good!

  4. We’ve had various styles of performance review over the years: Scaled (here no one gets a 5 for the same ignorant reason mentioned above) Scaled where management then knocks everyone down a point or two. 360°. Most years, no review.

    My motorcycle mechanic sums up the end result of each and every method used as only a guy with grease under his fingernails can: “As long as your employer keeps you on a fixed income …”

    No significant raise, bonus, dividend or honorarium.

    I’m sure the Great Recession, my age, and (Vietnam-era) veteran status have a lot to do with this. (The “you should just be darn happy to have ANY job since you aren’t a millennial!” theory.)

    Equally likely is the fact that companies that contract with us want to squeeze every penny at contract time until Lincoln squeals. (They then, conversely, whine and moan when “key people” from our organization look elsewhere for employment, but that my be different subject matter altogether.)

    I’m of the opinion that (a) most reviews are not worth the paper they are printed on, nor (b) are they worth the time it takes to prepare them. Companies should put the time wasted in reviews into significant raises.

    • Reviews really have become the bastard child of HR. I think the process became so rote that it’s now easier to ignore altogether, and no one seems to complain because (a) managers are loathe to do it and (b) employees are afraid of the unknown outcomes.

      In some companies, regular meetings with the boss to discuss work have replaced annual meetings, and I think that’s great. Reviews should be ongoing, but that means managers should be free to give out raises without a schedule, too.

      I think the underlying problem is that most managers are no longer taught how to assess employees — and that explains why they’re lousy at assessing job candidates, too. HR needs to take some ownership of this if HR wants to justify its role. And smart managers will seek out education about assessing employees anywhere they can get it.

      • I think we’ve already discussed HR’s role:
        1. Make sure the pay envelopes are correctly filled.
        2. Make sure the medical plan is paid up to date.
        3. Make sure the pension plan is correctly funded.

        Anything else is over-reach.

  5. The salary negotiation stuff was great. But performance reviews …
    The ideal case is that performance reviews are not required because managers give immediate feedback on performance, good or bad. Managers who actually do that are scarce, since most managers don’t have the guts to give negative feedback.
    That’s why you get people fired for poor performance, without ever being told that their performance was bad before the exit interview.
    I was on a committee working to make performance reviews better, and we talked to lots of employees about their issues. The number one issue was that their bosses didn’t know what they were doing, so their review had no relationship to reality. We fixed that by requiring that the employee and manager sat down together before rating time, and the employee got to see the document the manager brought into the second level review process. That helped.
    Having no top category or bundling everyone together because Demming said so is a problem with the company, not performance review.

    • Dr. Deming, William Edwards

      • @Paul Forel: Good list. But that requires reading.

        • Dr. Deming deserves better than to have his name misspelled.

          If someone is going to denigrate someone, they ought to at least……

      • Sorry I misspelled it. I worked in manufacturing research and quality, and Deming had many excellent ideas. That almost everyone is the same isn’t one of them. Perhaps in a manufacturing environment (but I never rated anyone there) but definitely not in the many places his work is being used as described by many posters here.
        The way we did it was a flexible ladder ranking. My boss had a rule if that two people’s relative positions required more than about three minutes of arguing that got put together in a bucket.
        I walked out of those meetings not feeling dirty – which was not true for performance review meetings in some companies I worked for.
        If you do a good job recruiting, you shouldn’t have 60 – 80% of your staff as indistinguishable blobs. Not all will be superstars, but if every person is a value to your company – and can do the kind of business discussion Nick recommends – they deserve to be treated as individual people.

    • A friend who consulted a client about employee performance and product quality problems came up with a good solution. He tied (measurable) performance to a portion of a (new) yearly bonus. Performance and product quality improved dramatically. The business group that didn’t improve ended up with a very small or no bonus. They got the message quickly.

      Pigeons are smart enough to fly away when they realize the person who fed them has nothing in their hands. We should probably follow their example more often.

    • “The number one issue was that their bosses didn’t know what they were doing.”

      Yah. What a bigger problem that reveals, eh?

  6. Nick, in the real world, your strategy falls flat on its face. In any company that has established an employee evaluations system, you have to assume that every line manager is not going to forget all of the work they put into preparing those evaluations, and evaluating your contributions and future value to the company. And you can expect that those same managers are going to sheepishly avoid you on the anniversaries of those evaluations when they fail to reward your hard work to show your dedication and accomplishments. All you’re going to do, besides embarrass yourself, is give yourself an opportunity to risk future income, rather than enhance it.

    I used to work for a Fortune 20 company (now sliding down to just under 60), with formal employee evaluation, salary review, and bonus policies. My coworker and I found something very wrong on a project on which we both worked. Another business unit had seriously goofed-up what was supposed to be their premium work product, which jeopardized delivery on time. A different business unit in our company goofed-up another deliverable for this same project that made it impossible to complete it at all. We had to surface this quickly so we could fix it and deliver it on time. The consequences would have been multi-million dollar penalties for each day it wasn’t cut over by the contract deadline.

    The customer wasn’t happy with the problems as they were found, but the customer was VERY happy with how we (our team) turned it around and delivered the project 100% complete on time. My coworker and I worked for months, throughout the Thanksgiving, Christmas, and New Year’s holidays, and put in a huge amount of extra time. Our manager, and his manager were intimately familiar with our contributions, especially since the customer’s complement to our company went (literally) to the CEO of our company and was circulated to everyone in our part of the business. That compliment meant a lot to the company (beyond us) since this was a big customer with more significant income opportunities for our company.

    So, for that amazing feat of magic my coworker and I got…NOTHING extra. When bonus time came around, we learned that the distribution method our division’s VP used gave more money to the incompetent business units for whom we covered, than to our entire group. VP blew us off, said that was the formula for how the money get split, and that was it. None of us saw any salary increases until after we left the company and worked somewhere else. Think your suggestion would work there? Good luck with that.

    For the rest of us who work for a living, and are surrounded by posers who really should be retrieving shopping carts at Wal-Mart rather than trying to pass themselves off as “professionals,” any suggestion that even hints of “salary renegotiation” will fall on deaf ears. If your boss is worth working for, there should be no need to “remind” him of your value to the company, since he should have already seen it for himself. Also if your boss is worth working for, he should be volunteering an apology if he hasn’t or couldn’t announce appropriate financial compensation. Any employer, and manager, who ignores your accomplishments and value to the company is not worthy of respect. Any further explanation beyond that sentence should be preaching to the choir.

    • @Steve: I can confirm your experience is common. And I don’t mean to trivialize the problem when I say what you experienced is the signal to move on. No company that behaves that way is worthy of the kind of work you and your buddies do. Of course, it’s not easy to move on. But nor is it easy to live like that. Again — I don’t want to trivialize the problem. But sometimes a problem has a simple, if not easy, solution.

  7. What do you think of companies that make you do you own yearly evaluation? I’ve seen this in a number of places over the past decade (Fidelity comes to mind, it seemed to be a symptom of their nonfunctional watered-down HR dept)…I also encountered one place that, for your self-evaluation, makes you reach out to three co-workers to write about their experience working with you, kind of like soliciting a Yelp review…

    • In most companies today, doing an evaluation ranks right up there with HR’s other mindless “best practice” — filling out online job application forms.

    • @Sigh: I had one manager who was so lazy he had me do my own. Gave myself the highest scores possible in the 5 areas outlined in the form. Turns out this alleged manager was run out due to incompetence along with several other senior staff who were his buddies. If they won’t actually do the evaluation this may be an indication of things to come in those companies. The bank was also taken over by the FDIC due to a gross level of losses for loans originated by these yahoos.

  8. It’s a great topic, Many good points. In 40+ years in management I’ve lived through about every type of evaluation system you can think of, transitions from one kind to another, ranging from none at all, to anally rigid.

    With that as an experience base, my view is the “No appraisal system” is the best formula for getting the shaft you can come up with. This is not the typical HR whipping point problems. It’s a management issue, top management issue.

    Evaluation systems are the type of thing where you only get out of them, what you put into them…Garbage In, Garbage Out.

    It’s not an HR problem that most do evolve into rote, checkoff, platitude dense crap. Results like that are the spoor of executive teams that place a low priority on the development of what they opine is THE most important resource…people. to them, just an admin function.

    Conversely it’s a management success when workable approaches e.g. ongoing evaluations are used with demonstrably good results, where any evaluations are worth the paper they are written on. It’s a good sign that these kind of execs see these systems as organizational development tools not paper pushing exercises

    HR pushes evaluation systems which have a foundation in trust but verify. HR can’t judge the validity of content…but they can put evaluation processes in place that aim at ensuring
    1. That Managers DO talk to their teams about performance and pay
    2. that Managers DO talk to their teams about career development
    3. that Managers DO effect compensation actions (or not)

    They do this because I can assure you if they don’t, the management team won’t. Not because they’re mean, but for many reasons, …time flies when they are having fun and next thing you know it’s gone and forgotten, conflict avoidance, they can’t because they don’t know and on and on.

    It’s up to top management to put meaningful substance into them. And to see that the Managers understand there’s career limiting consequences for blowing off taking care of their team.

    As to the idea of presenting a business plan…case by case basis…but a good idea if the environment is receptive. Doing your own appraisal, good idea. I’ve personally done this a couple of times and hence got a good TIMELY appraisal. Con’t complain about getting a crappy appraisal, Do it for your manager. These kind of ideas fit into the old management saw…”don’t bring me problems, bring me solutions”. You always have to remember unless you work directly for the CEO, your raise/promo/career direction isn’t just your boss’s business. he/she has to make your case to their boss, and possibly a few other layers up the line. And anything that strengthens their hand in so doing, strengthens yours.

    • PS. It wasn’t clear if the person meant 3rd review after 3 years with the company…or literally a “3 year review” as in a system that did a review every 3 years. If the latter…then I haven’t been exposed to every kind of system. One like this would be institutionalized procrastination, and structured stalling.
      In most companies perf appraisals, (in spite of pontification otherwise), are linked to salary actions. This means one would wait for a possible raise every 3 years. Never heard of this one.
      If so it’s a rigged system, against the employees.
      Worse then just having no formal one, which at least offers the chance to bring up the subject.

  9. We can adapt the way that Spinal Tap used their amps, where the volume dial went to 11 instead of only 10. Make the top performance rating a 6, because 6 is one greater than 5.

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