It’s fun to play Santa and dole out generous year-end bonuses and raises. But what if your sack is a bit light this year and instead you feel like the Grinch? Been there, done that.
It’s never fun to tell someone – ESPECIALLY great performers – that there’s just not money to reward them. And regardless of how thoughtful you are with your delivery, it will probably land with a thud.
That said, here’s what you CAN do to try to soften the sting…
First, get clear on why they aren’t they getting a raise. Is it due to their performance? Is it due to their team’s performance? Are they at the top of the pay band for their role? Has the company had a bad year?
This matters, because you’ll need to provide context. Here are some additional considerations, depending on the reason they aren’t getting more money:
Poor Personal Performance: If someone is standing in their own way and not getting more money because of their performance, they should know that! (A related tangent: You really shouldn’t be giving raises or bonuses to under-performers because it sends a bad message to the other people who have nailed it. I don’t care if you like them or if their personal finances need help: Your primary drivers should be FAIRNESS and PERFORMANCE when it comes to compensation.)
Poor Company Performance: If someone’s not getting more money DESPITE their great individual performance, it will be important to paint the broader picture for them so they understand what other factors are restricting their income. If your organization doesn’t regularly communicate the health of its balance sheet to employees, it’s probably worth finding out what information you CAN share. In addition to providing a snapshot of where things are, try to contrast it against a successful previous year so they have a better basis for comparison. And look to the near future so you can set the stage for what to expect – if the organization is on pace for better funding/revenue the next year, show that so they know what to expect. (Conversely, if there’s no hope in sight, you’ll want to talk to them about the fact that things may be flat on the income-front for a bit and explore what other benefits or rewards they could derive from their employment that would make the experience worthwhile.)
Poor Team Performance: This one’s on you. If the company’s doing well and there are bonuses/raises to be had but your team isn’t earning them due to its collective performance, you owe it to your team (and the organization) to make some changes in the new year. Create a vision and roadmap for how you’ll turn things around and share that (minus any potential staff changes) so people can see there’s a plan for success in the coming year.
Top of the Pay Band: Unless you work for a well-organized company with clearly defined and publicly shared pay bands, your team members might not realize how they’re compensated in relation to others. This can be tricky because in your eyes, they’re already making a lot and should appreciate it – but if they aren’t aware of that, it will feel like a smack in the face if they don’t get a raise. If you can: define pay bands and communicate them. (This will become even more important as laws take effect preventing employers from asking about a new hire’s previous compensation and allowing employees to openly discuss their wages.)
If you can’t create transparent pay bands, you probably can still communicate what the top of the range is to people so they know that they’re making as much as they’re going to be able to get in their current role. If that’s the case, be prepared to talk about other roles or paths that might open up more earning potential for them.
Now that you’ve considered WHY they aren’t getting more money, some tips for the conversation itself:
- Whenever possible, separate money conversations from performance reviews. This is a best practice even when someone IS getting a raise because you want them focused on the conversation – not distracted by money. If you currently combine these conversations, consider unbundling them and let people know to expect that.
- If you know raises/bonuses are not likely to happen, try to give people a heads-up as early as possible. You generally get a sense of the financial climate before any compensation changes are communicated – share that with people so they have time to adjust to the idea. (To keep this informal, I’d handle it during 1-1s rather than in a team setting.) As an example, “We haven’t talked about our financials lately, but we’re off budget by X%. I’m not sure how that will impact comp adjustments, but I suspect it will be challenging to get any sort of raise or bonus approved, regardless of how well our team is doing. I just wanted to plant that seed now so you aren’t blindsided if it goes that way.”
- When you DO have firm numbers to communicate:
- Rip the bandaid: Get to the point quickly so they aren’t hanging in suspense.
- Explain WHY. Provide context. This might be organizational finances, a broader look at their compensation in comparison to the overall market (if they’re already well-compensated), etc. – all the things I mentioned above.
- Be compassionate. Even though raises/bonuses are business decisions, they FEEL very personal. Acknowledge how your employee feels and empathize. I’ve been known to say, “I know this is disappointing and I wish I could do more.”
- Acknowledge the hard work they’ve put in and make sure they’re clear that the money is not an indication of their performance – unless it is!
- Give them time to process. Depending on their expectations, this news can take some time to absorb. Don’t shift gears into trouble-shooting or future-planning mode too quickly. You might say, “Once you’ve had a chance to process, let’s talk about where you are and what – beyond money – might make this work feel rewarding for you over the next six months. Or if money is your big driver, let’s talk about what the options are to tap into that moving forward.”
Again, it’s never easy to disappoint someone – especially when it’s linked to something as charged as their income. While you can’t change the outcome, you can be thoughtful in how you share the news. I’m curious to hear from you: What other tips/tricks have you found helpful in delivering sub-optimal raise/bonus news?