How to Handle salary reviews

If there’s one area that I believe needs a total rethink in regards how we expect managers to behave, it’s salary reviews.

When the manager was invented, everyone knew where they stood. The manager was your boss, and his job was to pay you as little as possible. He wasn’t your coach, your mentor, or your advocate. He was your boss. I’m not saying that was better, I’m just saying we all knew where we stood. Those employees almost certainly didn’t get upset with their manager at the end of the year when they didn’t get a pay increase, because they knew the manager had no intention of giving them one.

Today though, your manager is supposed to be looking out for you. We expect our managers to pay us fairly. We get to the end of the year and we expect them to give us pay rises based on our worth. We expect them to be our advocates. We walk into our pay reviews expecting our managers to reward us with a pay increase we didn’t ask for based on our performance and based on the fact we want our manager to be looking out for us. The pay rise is how they will show us that they appreciated all our hard work over the year.

But the managers are also working for the company, and the company expects them to keep costs down and to manage their budget. It’s this conflict of interests that made every salary review period horrible for me, before I started working to the principles of minimum effective management.

I didn’t want to let people down, but I often just didn’t have the budget to do anything. If I’ve been given a departmental salary budget that is only 3% higher than the year before, there’s not much I can do if I have a bunch of people who clearly deserve more money.

I’ve lost count of the number of times I’ve given someone a pay increase whilst feeling like I should apologise for it not being enough. The time and effort I used to put into working out how to use my budget was immense, but no matter how hard I tried, every salary review period would leave some people disappointed, and I know a lot of the time that disappointment was directed at me. The fall out could often be long lasting or even permanent. Someone who had been trying really hard would get disheartened and stop putting in as much effort. Someone positive would turn into someone negative. Someone who used to trust me would stop trusting me.

Minimum Effective Management flips the entire process on its head. The reason it’s such a time consuming experience that generates poor results is that it’s impossible. One person can’t be the representative of the employee and the company. That’s like being a football player who has an agent who is employed by the club he plays for. I can’t be responsible for paying you more, and paying you less. The approach to the situation isn’t wrong, the situation itself is wrong.

So let’s change the situation.

Bear with me on this. Every time I explain it the initial reaction people have it borderline horror. It sounds initially like I’m telling you to stop caring about your people at all, but it’s quite the opposite. I made this change because I cared about my staff and wanted the best for them, and when I started working this way all them were immediately much happier. The problems I had relating to pay went away overnight, as did the frustrations they had.

With Minimum Effective Management, you’re going to effectively quit one of the roles you’re expected to do. You’re no longer going to be the agent for your employee.

You tell your team that no matter what, you’ll never give them an unprompted pay increase. Explain that your job as a manager is to keep the salary costs down, so it’s a conflict of interest for you to represent them in this way. However, you’re also going to explain that you expect them to come to you when they have a good case for getting one. Not that you don’t mind, not that you’re willing to listen, but that you expect it. You tell them that you want them to earn a good salary, and that if they make a case for getting an increase that you agree with, you’ll do your best to secure it for them.

That’s it.

Even knowing what I know, when I explain it that way it doesn’t seem right. It seems far too simple and like it couldn’t really work. Here’s why it’s better for everyone.

It opens doors, it doesn’t close them

When you have a manager, and you think that manager is responsible for giving you a pay rise when you deserve one, you wait for them to give it to you. You don’t feel like you can just ask even if you really do deserve it. If the manager doesn’t notice, doesn’t agree, or simply isn’t able to give you a raise for financial reasons, the conversation doesn’t happen. You wait and wait and wait, and you build up resentment, and you don’t get your increase.

If you know that the pay rise won’t come unless you do something, you don’t feel that way. You put your case together, and you come to the manager and make it. The manager can then agree or disagree, and either way the outcome is better.

If they disagree, the conversation has happened. When it was their responsibility to give you a pay rise, you were waiting for them to come and talk to you whilst getting more and more frustrated. But think about it, the manager would only have the conversation with you if you were going to get the pay rise. They wouldn’t randomly come to you and say “Hey, just so you know…I’m not going to pay you any more money today”. When it’s the managers responsibility, they have no way of knowing if you feel like you deserve a pay rise or not.

When it’s your responsibility, you can control if the conversation happens, so there’s no resentment if it doesn’t. If you talk to your manager and it turns out they agree with you, now they can address it. If they don’t agree with you, they can tell you why and you can work on fixing those things so you can get it in the future. And if they do agree, but they just aren’t able to meet your expectations at that time, they can explain the situation and you will know where you stand. No matter what the reality, the outcome is far better when the person responsible for initiating a pay rise conversation is the person who wants it.

It makes people consider their value

When your manager is responsible for giving you a raise, you really don’t have to think about your contribution in detailed terms. You can just think “Yeah, I’m ace” and wait for your manager to realise it and give you all your money. But when you have to make the case yourself, you really have to think about the impact you make. You have to know what you can do that actually does add value, and you have to pay attention to your performance. It’s making you aware that you’re responsible for your performance, not your manager. When you have to make a case for getting a pay increase, it will encourage you to always know and be doing the things that add the most value.

It saves time

If you’re a manager and you choose to work this way, salary reviews take up almost none of your time. At the end of the year everyone knows there isn’t going to be a review unless they have a case to make, so you don’t have to prepare one for anyone. The only reviews you’re going to carry out will have been prepared by the person who wants it. You can focus your attention on the few people who actually need it, rather than spread it around everyone whether they need it or not.

Every problem you have with pay reviews will go away when you work this way. You won’t ever have resentful employees who think you should have given them more, because you made it clear that unprompted pay increases aren’t how you show appreciation. Almost all the staff problems we encounter in relation to pay are not based on the money itself, they’re based on the fact people think we aren’t valuing them highly enough.

Acknowledging to your people that you can’t be their advocate in this regard doesn’t show them that you don’t care about them - quite the opposite. It shows them that you do. It shows them that you think their salary is important enough that the person responsible for it shouldn’t have opposing interests. When I introduced this, it immediately stopped the uncomfortable salary conversations I used to have all the time, and any dissatisfaction about salary went away with it as well. Obviously I was happier that it made my life easier, but there’s something else about this approach that really makes me like it. This is a core tenet of Minimum Effective Management - it treats people like adults. Salary reviews with a manager offering salary as reward are childish. We shouldn’t work this way. When you go to work you’re an adult who is responsible for negotiating your own pay and determining your own value. If I’m your manager, I’m the person you can negotiate with, not the teacher handing out gold stars.

If you found this useful, please share it.