if you're working a day job while you start your own company, or just thinking of starting your own company, you want to get paid as much as possible for the "cash cow" that you're doing. So knowing how to ask for a raise (and reasonably expect to get one) is a great skill to have.
During most of my career, I managed to get significantly larger raises than my colleagues, often in the double digits. I accomplished this because I understood the psychology of giving raises. This column, which is adapted from my most recent book, Business Without the Bullsh*t, is based upon my experience, along with some statistics I've collected over the years.
1. Now is the best time to ask
While the recipe in this column works any time of the year, it's particularly effective during the working period between Thanksgiving and the Christmas holidays. The reason is threefold-fold.
First, companies--even those that operate on a fiscal calendar-- often have money left over in the budget at the end of the calendar year. Using that money to give a top performer some extra money is as good a use as any.
Second, there is significant culture pressure for people to be generous during the holidays. Even hard-nosed bosses are not immune to this. To quote a classic:
"'Now, I'll tell you what, my friend,' said Scrooge, 'I am not going to stand this sort of thing any longer. And therefore,' he continued, leaping from his stool, and giving Bob such a dig in the waistcoat that he staggered back into the Tank again; 'and therefore I am about to raise your salary!'"
Third, as of this writing, the economy is strong and unemployment is low. That makes you more difficult to replace and more valuable generally as an employee.
So if you can lay the groundwork (which shouldn't take more than a week or so), there's no reason to wait. In fact, you may never have a better opportunity to get what you want.
So let's get started, shall we?
2. Calculate your current value.
Companies view your salary as an expense, so asking for a raise is asking your boss to spend more of the company's profit, cash reserves, or borrowed money on you, rather than on other priorities.
From the management perspective, your salary (and raise) has nothing whatsoever to do with what you need to stay alive or what you deserve to be paid. Both salaries and raises are based entirely on the cost of replacing you.
If the cost of replacing you is greater than what they're spending on your salary, you can ask for a raise and reasonably expect to get one. If not, you won't get the raise. It's really that simple.
When you ask for a raise, you're asking your boss to compare the cost of giving you a raise with the cost of replacing you. It is therefore in your interest to increase your boss's awareness of that cost of replacement. Five costs come into play:
- Salary cost. If you're being paid less than the average salary of somebody doing the same job you're doing, in the region where you are currently located, it's likely that your boss will need to offer a replacement more than you're being paid.
- Recruitment cost. Finding candidates who have specific skills, interviewing them, and selecting a person (who may or may not accept) takes time and money. There will also be direct expenses if your boss needs to use a professional recruiter.
- Training cost. If you have specialized skills and knowledge that are not generally available in the job candidate pool, your company will need to provide training in those skills and that knowledge to your replacement.
- Collateral damage cost. If coworkers and customers see your presence as valuable, the company may lose (and therefore be forced to replace) coworkers and customers who leave as the result of your absence.
- Lost opportunity cost. If you decide to leave for a better job, there will be a period of time when what you're doing isn't getting done. Depending upon what you do, that can mean lost productivity or profit.
Note that none of these costs have any meaning whatsoever unless you are actually prepared to leave your job. Hopefully, you've followed the advice (which I've given repeatedly) that you should have should always have at least three additional job opportunities under development.
3. Lay the groundwork.
Now that you know your leverage points, you can lay the groundwork for a productive discussion of your salary and why your company should be paying you more.
We'll start with the easiest element: salary ranges. Many websites contain salary ranges for job categories sorted for experience and geography.
If your job fits neatly into one of those categories and you're being paid less than the average salary and you're doing at least an average job, you obviously have a case for getting a raise. Unfortunately, it's not always that simple.
If you're an above-average worker, it becomes a judgment call (on the part of your boss) as to how much better you're doing compared to that average. So you'll need to show that you're exceptional (more on this later).
For example, at one point very early in my career I was responsible not only for writing computer operating manuals but also for designing the system we were using to create them. In this case the average salary for a technical writer wasn't a meaningful metric, because what I was doing was unique. (As it happens, this was one of the times that I asked for, and received, double-digit annual salary increases.)
However, if the categories are relevant, and it's clear you're being underpaid, e-mail your boss an FYI link to the sites. Rest assured, your boss will get the point.
Beyond that, many bosses aren't fully aware that it's probably going to be an expensive hassle to replace you, so you need to gather information that makes these costs more obvious.
Casually mention (long before you ask for the raise) that "HR professionals estimate it costs between two to three times an employee's annual salary to replace that employee." Your boss probably already knows this fact, but that the boss now knows that you know it give you additional leverage.
Now make a list of all the training you've received, either through courses or on the job, since you were hired. Compose an e-mail like this to your boss:
Jill, I was thinking about all that I've learned here (see list below) and wanted to thank you for the investment that you and the company have made in my career.
This e-mail is appropriate (you are grateful, right?) while also subtly surfacing how much it would cost to train somebody else.
Finally, if you haven't already done so, solicit e-mails of praise from customers and coworkers when they feel you've done a good job. It's a really easy ask:
"Hey, would you mind sending an e-mail to my boss saying how much I helped you out? Don't forget to CC me!"
Ideally, you want your boss to be getting an audit trail of kudos that not only document what a great job you're doing but subtly imply that customers and coworkers might be unhappy if you left to work elsewhere.
4. Gather your documentation.
Set up a meeting with your boss to "discuss your future." Before the meeting, create a list of the contributions you've made to the financial success of the company. The list should be the results of your activities, rather than a list of activities themselves.
- Worked with Acme proposal team.
- Handled customer information requests.
- Contributed specifications to the Acme proposal that led to a $1 million sale.
- Improved our overall customer satisfaction figures by 25 percent.
Ideally you'll have kudo e-mails that support the list. For example, for the first item above, you might want an e-mail from the head of the proposal team praising your contribution and stating that it was crucial to getting the customer to buy.
Print two hard copies of the above. If the salary range information you've gathered on the Web is relevant, print two copies of that too. Highlight the relevant columns or rows. You are now ready to ask for your raise.
5. State your case.
When your meeting begins, take the lead and set the tone by opening with: "I want to discuss what I see as a discrepancy between my value to the company and how I'm being compensated."
Your boss will not be overjoyed that you're bringing this subject up. However, if you've laid the groundwork (Step 3), he or she will certainly not be surprised. Your boss may try to cut off the conversation with something like:
- "We can't give you a raise right now."
- "We can only discuss raises at your performance review."
- "Corporate policy says no raises this year."
If so, you respond with,
- "Who said anything about a raise? I want to discuss the discrepancy between my value to the company and what I'm being paid."
Give your boss one copy of the material you've gathered and review it with him or her. Since you've laid the groundwork, there's a good chance that your boss will simply concede that you've got a point and there is a discrepancy. If so, jump to Step 7 below.
6. Answer any objections.
If your boss objects to your characterization of your contributions, neither argue nor concede the point. Instead respond in a way that agrees with what your boss is saying but reinforces your point:
- Boss: "I don't think you had all that big an impact on the Acme proposal."
- You: "I disagree, but whatever you say."
- You: "I can see how it might seem that way from your perspective. However, it's clear that I had an impact as evidenced by this e-mail from Acme's head of manufacturing."
- Boss: "It cost a lot of money to train you. You should feel grateful."
- You: "It was hard work learning all of that and I should be paid for that hard work.
- You: "Yes, I appreciate that the training has allowed me to make more of a contribution to the company and increase my value, which is why there's now a discrepancy."
- Boss: "We expect this kind of excellence from everyone."
- You: "Yeah, but I think I'm more excellent so you should pay me more."
- You: "I'm pleased that you realize that my performance has been excellent. I see it that way too."
Remember: your goal is to get the boss to concede that there is indeed a discrepancy between what you're being paid and what you're worth. After you've fielded any objections that your boss has raised, ask:
- You: "Have we established that I should be paid more based upon my value to the company?"
If the boss answers no, the discussion is over. You can conclude that you're not going to get a raise from this boss, regardless of what you say or do. That's bad news, but at least now you know. But chances are that if you've made your case well, your boss will answer yes or maybe (which in this case means "Yes, but I don't like where this conversation is headed"). If either of these is the case, move to the final step.
7. Put the ball in your boss's court and keep it there.
Once you've established that you should be paid more, ask the boss, "What do you intend to do?"
Either you will now get a commitment ("I'm giving you a ten percent raise") or the boss will make some attempt to stall or change the subject. No matter what he or she says, keep driving toward a commitment while you've got the advantage.
- Boss: "I'll see what I can do."
- You: "Exactly what are you going to do?"
- Boss: "I can't give you a raise because there's a salary freeze."
- You: "We both know there are always exceptions. How are you going to get around the freeze so that I'm paid what I'm worth?"
- Boss: "I can get you a raise if you take on project XYZ."
- You: "I'm happy to talk about future projects, but we've already established that I'm being paid less than I'm worth. What do you intend to do about that now?"
Key point: once you've gotten your boss to admit that there's a discrepancy between your value to the company and what you're being paid, do not let your boss off the hook until you've gotten a commitment with a number attached to it.
When you reach that point, you've got your raise... almost. To lock it down, as soon as the conversation is over send an email documenting what was said and what commitment was made. Always get commitments from your boss in writing.