Welcome to the beginning of the year. It’s a beautiful time when the snow is falling, new year’s resolutions are not yet broken dreams, and employees suddenly demand a steep salary increase in your chronically underfinanced start-up. You check your bank account with the usual anxiety and realize that this whole salary-increasing-thing would be a wonderful activity…in the very distant future. But you need that dear employee, and they surely know that. Neither messing with your staff’s motivation nor breaking the bank sound like the confetti party you hoped to start the new sun rotation with. So, happy new year — sometimes being a start-up CEO sucks.
I recently coached a founder who stumbled into such a catch-22 for the first time. Having been through the fireworks many times myself, here are some principles that I would recommend to cure this new years’ hangover of a situation.
Don’t respond right away
Salary discussions might be highly emotional for the employee and you as a manager. Resist the urge to respond right away and listen carefully to the employee’s position. Never say ‘yes,’ ‘no,’ or anything that might be understood as a decision. It’s reasonable to take one or two weeks to respond.
Take some calm time in a rational mindset and think about the employee’s journey in your company so far. How have they evolved since you hired them? How did their salary change over time? Did they take on new responsibilities along the way? How do you rate their performance? How does their salary compare to similar positions in comparable companies? The goal is to get an objective sense of a fair salary. If possible, ask others for input and benchmarks. Also, think about biases: Studies have shown that on average, men ask more aggressively for higher wages than women.
Focus the discussion on the contribution and not the personal situation
Employees often state their individual circumstances as a reason for the desired salary increase. “I just moved to a bigger house,” or…