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Salary Signals

Posted 26-Nov-2008 by Robby Slaughter (@robbyslaughter)

At various junctures of employment, we may encounter an almost mythical event: an increase in wages. A raise is always desired but rarely expected; seldom sufficient but never refused. Practically everyone thinks they are underpaid, and the even the mere mention of the topic of money can lead to a Lord of The Flies scenario. Extra cash may be a blessing, but the motivation might be a curse. Be conscientious when seeking—or offered—more money.

Unmarked Markdowns

The most egregious form of salary increase is the counteroffer. A longtime employee announces their intent to depart, and management scrambles in response. “Whatever they are paying you,” comes the anxious reply, “we’ll give you more.” Arrogant candidates sometimes attempt to parlay this desperation into a bidding war between parties. Blindly accepting the largest compensation package might sound like the kind of proud moment shared over cocktails or rounds of golf, but this is a pyrrhic victory. The counteroffer reveals chronic, career-long underpayment. This is wage markdown enabled by employee ignorance.

The unstated subtext of a counteroffer is painful exposure: you were always worth more, we just got away with paying you less. This is an employer who knowingly treats workers with the same mentality of supermarket comparison shopper—hunting bargains, haggling over prices and paying below value. People are not produce. An apple bought with a coupon will taste as sweet and carry no grudges for its unusually low price. A worker who discovers they are valued more than they are actually paid is unlikely to retain past levels of juicy productivity.

No commentary on counteroffers should fail to contain the standard, inviolate advice on the topic. Never accept counteroffers. Any company that is willing to pay you more under a little pressure is eager to pay you less if they can get away with it. No one but you has the right to discount the value of your work. Never pursue a salary increase based on the proof that your past years of service were a bargain. Never become known as the employee who planned to leave but was wooed back by the smell of money.

Growth and Improvement

Life is the opportunity for advancement. We learn new skills, embrace richer ideologies, and become more capable. A pay raise should follow in lock-step with relevant individual achievement. Contribute more to the organization, and receive a greater contribution to your wallet. Work hard and reap rewards, slack off and get fired.

Beyond regular adjustments to match the economic climate (such as inflation or local cost-of-living), no raise should ever be awarded merely for getting older. To earn more, one must act with greater resolve and envision grander possibilities. Grow, improve and receive.

The best time to have a conversation about a raise is months before it will actually occur. By mutually establishing targets, objectives and priorities, both employee and supervisor have a shared incentive. An inability to agree on proposed metrics, likewise, is a signal about salary. If two people cannot find common ground about the value of some effort, especially if that is potential work and payment is contingent upon success, there is little chance of satisfaction. The ideal raise perfectly matches the amount of work and reward originally predicted. No increase in pay should surprise or concern anyone.

Deferments and Adjustments

A counteroffer is evidence of greed; an equitable raise proof of mutual agreement regarding individual progress. Any other salary change should be an earnest correction to serious problems. Startup companies or businesses short on cash may approach employees about deferring compensation or replacing pay with stock options. Such offers disclose stark fiscal reality. “We can’t afford to pay you what you are worth now, but we promise to make up the difference.” Accepting this pitch is risky but potentially rewarding. If the boss is telling the truth and if the company succeeds, your faith will transform into wealth.

Besides delaying salary disbursements to mitigate cashflow issues, an employer can do something which almost never done: adjust compensation to correct for errors made during the initial evaluation. “We hired you at a dollar a day, but after working together for the past several months, it’s clear we were wrong. You’re worth more; we’re going to raise your salary and make up the difference for the time lost.  Almost nobody modifies the base salary ex post facto, because mangers aren’t accustomed to admitting past mistakes or weakening the power of the purse. It’s hard to imagine a better way to build loyalty than by announcing a past wrong and setting it right.

Salary adjustments might seem like a wage earner’s fairytale, but the logic holds firm. A supervisor is in a much better position create a compensation package after a mere ninety days of close contact than on the basis of an interview and a resume alone. The candidate can avoid the pain of negotiating a salary without demonstrable, relevant proof of ability. New hires which fail to meet initial expectations could be presented with a salary reduction, which will either check their ego or incite resignation. Everyone wins when everyone is willing to admit and correct their mistakes.

Financial Realities

The shape of company org charts indicates that most people are employees, not hiring managers, and therefore have less control over compensation decisions. Beyond never accepting counteroffers (which means, to clarify, one should never accept counteroffers), negotiating raises before performing, cautious optimism for deferred compensation, and finger-crossing for the almost-fantasy of salary adjustments, the hopeful, resume-wielding candidate may feel largely helpless. The only obvious leverage available is the offer of employment. Once you have been extended an opportunity, you can pit the organization’s desire to hire you against their willingness to pay more. This is typical salary negotiation, and if successful starts you out with the largest paycheck and the greatest animosity possible. The hiring process begins by begrudgingly meeting your demands.

Instead of shadowboxing over the numbers before your first day on the job, demonstrate commitment by offering to delay salary discussions until after you have some time under your belt. Your leverage will be far more than your potential contributions, but the record of your actual accomplishments. This is a raise you will have earned. Your salary will signal what you have done and what you can do.

Further Reading:

• The Smith-Wenkle Salary Negotiation Method (only three steps!)
• John Porcaro on Employee Reviews
• The Chief Happiness Officer on Salary Secrecy

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