So most of us go to work because we need the money. We can put lots of wonderfully worded, good intentioned arguments together about how money is not the motivator, but let’s be honest job satisfaction doesn’t cut it when it comes to paying the mortgage. We may choose one job or one type of work because we prefer it and trade-off some money, but essentially we are all there because we have something that we need to pay; food, shelter, energy bills, addiction to Coco Pops etc.
Which is why pay is such a sensitive issue within organisations. Ask any compensation related questions in a survey and you will get significantly lower results than for environment or leadership for example. I’ve worked in organisations with very defined pay structures, I’ve worked in organisations with broad pay bands and I’ve worked in organisations where there was little if any structure at all. And I’ve heard the dissatisfaction from employees in each different scenario.
But there are two specific things that are on my mind at the moment, which I think are interrelated: negotiating salary increases on internal moves and counter offering to defend against poaching. Both are event-based situations that occur outside of the normal salary management process and require both a strategic and tactical approach, because invariably they also involve your organisational talent.
I know that decisions in either case will depend on a number of factors, the employee’s current salary, their “demands”, internal comparators, affordability etc. However, those are the mechanisms, I’m interested more in the moral/emotional arguments that are expressed in these circumstances. Is it ok to negotiate a bigger increase when you are promoted internally or should you just get what you’re given? Is it right to counter offer or should you accept that people will leave and move on?
I’ve worked in cultures where if you were being offered a promotion and you tried to argue for more money it would be seen as a black mark on your career. You were expected to answer the call of duty and THEN get rewarded when you delivered (although funnily enough, that was always after the next milestone….). But I know in other organisations it is run of the mill stuff. Similarly, I know organisations that see resignations as the quick route to ex-communication, with no thought for trying to retain people, and others that will fight tooth and nail for their “talent” regardless of whether they are really…..talented.
So, more questions than answers I guess. Am I making too much of this and getting confused? I know the theory, but does anyone really operate like that or are we all in the quagmire of uncertainty when it comes to pay and talent. Is it fair game for employees to use their skills to negotiate more if they can? After all they need to feed their families and over the past few years we have hardly done much as organisations to bolster the psychological contract.
Do we need to accept as employers that this is fair game? Work is part of a transaction for money and any opportunity that arises to improve your lot, you’re in your right to take.
change-effect 
Like you, I’ve seen them all: chaos, pretend pay structure and rigid pay structure. Like you, I’ve seen the cultures that say ‘all good things come to those that wait’ and those that say ‘grab it while it’s hot’. Like you, I’m confused about the line between venality and a reasonable response to market forces.
Also like you, I have no real answers. Although they are sometimes the best paid HR specialists to hire and those that the business will often most readily accept, Compensations and Benefits people seem to me to be grappling with a fundamental lack of science in their roles. Because, in the end, it’s about a market. A willing buyer and a willing seller. Everything else is just process and fluff.
“…in the end, it’s just a market. A willing buyer and a willing seller. Everything else is just process and fluff.”
Amen.
A good post indeed. There should be nothing wrong with seeking to be paid the most that you can, unless you do not value yourself very highly. Employers are not running their business for the purpose of enhancing the careers and personal development of those who work for them- the business needs to make money. If the employers can get people to work for them for less money, they will. That is why there has been a need for trade unions and regulation of things like the minimum wage.
the employer / employee relationship remains contractual. There should be no reason to agree for another person or company to tell you what to do unless you get something out of the arrangement. I suspect that if you ask most people what they would do if they won the lottery, fairly high up on the list would be ‘quit my job’.
Employees, in my view, should have no hesitation in seeking to negotiate the most money they can get. Employers are doing a similar thing- trying to get the work at the best price for them. Such is the employment market.
Totally agree Mike, and your point about the lottery is a good one!
The following is a comment from Charles Cotton, Public Policy Advisor – Reward from the CIPD. Unfortunately for some reason the site and Charles’ PC were incompatible….
‘I think this is where having a reward strategy and philosophy is important as it gives HR and compensation professionals something to refer back to when dealing with ambiguity. CIPD research shows that pay decisions are influenced by a mix of internal and external issues, such as employee performance (however defined), cost of living, market rates, recruitment and retention, the going rate of pay awards, employee potential value, the economic climate, the ability to pay, etc. All these factors come into play when making a decisions and a judgement has to be made as to the appropriate weighting of these factors. Hopefully, adopting a strategic approach ensures that managers know how to deal with this ambiguity.
In addition, a decision to give an individual more money to entice them to join the firm or to encourage them stay can have an impact on the rest of the organisation. Evidence appears to suggest that as pay increases, employees start to be less concerned with the absolute amount and more concerned with the relative amount, ie how their pay compares with that of their colleagues, family and friends. So, someone who was satisfied with their salary can quickly become dissatisfied if they find out that their colleague is receiving more money because they asked for it. Employers may also find aligning pay and benefits to their talent management strategy a helpful way of think who and how to reward.’
Charles – Thanks for the comment…even if you couldn’t make it yourself!
I’d be really interested in seeing some of this research if you could reference it or send it by email? I understand the points that you are making, but I think sometimes in business we need to also make tactical decisions as well as strategic ones.
I get the theory, but f it is easy, why are so many companies struggling with it?
Thanks again,
Neil
If an individual has an opportunity to go and get more elsewhere, then this signals itchy feet to me; paying them more money rarely in the long term satisfies (unless they were underpaid) and annoys everyone else that isn’t in that type of market. Let them go and see what potential is able to flourish in their space. Any organisation has to be bigger than an individual.
Meg – I think that is ok in some circumstances, but whilst I wouldn’t argue that you should always pay to retain I don’t think you should always let people move on. I guess that is what makes it so complicated?
Great comment from megp. I recall being told to take a more senior role with lots more responsibility and no increase in pay, it was poorly packaged as a development opportunity. I explained my reasons for declining and was told by my bosses boss that he would move me anyway (this is what passed for management in BT in the mid 90s). Very calmly I explained his actions would drive me to find another role in the company which I did. The day I told the dinosaur guy I was heading for pastures new he offered me a ten grand pay rise to stay. I was on £27k and I declined his offer. You should gave seen the look on his face! Sorry for going off track a bit but this post and the comments reminded me of the tale I’ve just recalled.
Great story Doug, but isn’t that more about the management than the pure financials?
The one topic not mentioned so far here is salary secrecy. Some organisations (like the public sector) do have fixed, public, pay guidelines, whereby everyone knows what their colleagues will be earning. Most private sector jobs have employment contracts that forbid employees from revealing their own salaries (or ask others about theirs). This very environment of secrecy inevitably engenders suspicions and potential envy from colleagues.
Personally, I believe in openness, and that employers should have the confidence to value and pay each employee differently. This of course, can be difficult to manage, but I believe can make for a better and more stable working environment.
I agree that openness is important, I’ve been thinking a lot about pay transparency at the moment and its importance for motivation etc. Good points well made.
Interesting thinking about the moral/emotional arguments….
So you are promoted internally… That promotion most likely recognises the abilities you have, what you have done and that you are capable of more. Sometimes it’s a question of needs must. However, the organisation wants you to fill that role not someone else.
If the manager is asserting conditions, implied or explicit, such as a probationary period or even greater responsibility for the same terms then both parties should expect to negotiate. Not for a biased outcome but for a fair and constructive one.
The moral question of is it right to expect someone to perform a higher role without higher reward is a personal question. However, your behaviour shows your morality be it good or bad. For me this is where an overarching code of ethics would be beneficial…
Why is it that organisations don’t develop a code of ethics for their management / leadership?
In terms of counter offering, you are basically saying that either staff are a commodity or that you had comp/terms wrong already and want to make right (ie renew the psychological contract).
The former perpetuates short term mercenary behaviours. The later moves beyond the money and if you work at the relationship perhaps you can retain someone who had “already left”. The reality though is that often managers don’t resolve the issue and they still leave a year later.
I think comp., benefits & terms of employment are hygiene factors. Required, mandatory even but for most people just the foundation. Once those are satisfied (& they do change of course) then what really matters is the fulfilment the role gives you either in that organisation, for the future or even outside of work.
If you don’t know how your team finds fulfilment beyond the money then you’d better watch out!
I hate it when people write a better comment than the original blog post…..