What To Do When Employees Get Praises, Want Unrealistic Salary Increments
So you fear that praising your employees might backfire when it comes to negotiating their salary increment? Here is how you should look at it going forward.
I believe that you should praise your employees for their hard work and fruitful efforts as often as you can. Praising builds self-confidence, it shows the employees that you care and appreciate their efforts and it rewards them for putting in the extra effort. Praising also leads to higher productivity, higher loyalty and higher job satisfaction among everyone in the company. When you have an office of high morale, then incredible things happen for your company. However, most employers fear that more praises will turn into higher costs when it comes time for salary reviews. While this is might be true, some employees take it to the extreme and build unrealistic expectations. What to do when that happens?
Let’s first talk about how to handle unrealistic employee expectations from a services-based company perspective.
In a services-based company, if an employee is genuinely getting praises from management and his/her clients, then yes you need to pay them above market rates so they stay in your company and continue to produce excellent results. Employees that do a great job and keep clients satisfied are worth their weight in gold. I believe if an employee is a perfect fit in your company and provides loads of value, then most of the time it is costlier to let them go. Because, you have to train someone new to take over and you don’t know if they will work out long-term.
You have several costs associated with losing an employee that is assigned to work with a client. One can argue that if you have written systems in place, then you can plug in new people and the company should continue to perform as usual. However, in a services-based company, you have to significantly factor in how your client will react to the new personality on the team. Over time, clients get used to one person they are paired with, and there is NO guarantee they will mesh with the new team member. Also, the underlying skills of the new team member may not be as strong as the existing team member, and therefore clients may notice a drop-off in production.
There does come a time, however, where a company has to make the strategic decision to either continue to pay higher and higher salaries to people that stick around for long periods of time or cap the salary range for a given position. This decision depends on the ability of the company to pass the increased costs onto their clients. If clients are highly satisfied with their assigned team member and they feel they can’t easily replace them with other options, then the client is willing to pay higher rates. For the company, it is critical to be able to pass rising salary costs to the client in order to keep a healthy bottom line. If it get’s to the point where clients don’t accept the rate increases, then the company is sometimes backed into a corner.
Does the company pay the higher salary increments to the employee and allow profit margins to decrease? Or does the company tell the employee they are capped at a specific salary and risk losing the employee? I firmly believe that this is NOT a decision a services-based company should make on its own. This is a time when you need to go to your client and explain to them the situation and offer to replace the employee with a lower cost employee. Explain to the client why this has to happen, what the consequences will be and what the risks of such a move would be as explained above. If the client is on board with getting a less costly person to perform the work, then you must tell the employee that they have reached the salary cap for their position, and they either need to accept this and stay, or they are free to look for a better opportunity.
I never want to discourage people from seeking a better opportunity in life. If the worker decides they don’t want to be capped and the client wants to replace them, then it’s best for both parties to part immediately. However, if the employee understands his current salary is higher than his market value, then they should quickly realize they are already in the best possible situation and stay. The grass isn’t always greener on the other side of the road. We have had several returning employees prove that to us.
The grass isn’t always greener on the other side of the road.
Now, in a product-based company, I believe the company should be more system and process driven. One of the major rules of business is to create your business on written systems. The idea is, if any of your employees get hit by a bus, then you simply hire a new employee, and they should be able to pick up where the last person left off in a short amount of time. In a product based company, most of your employees will NOT have one-on-one interaction with your customers. These employees are mainly behind the scenes while working on the production line or working on product improvement. Therefore their jobs should entirely run on written systems. I’m not trying to say these employees are less valuable than having client-facing employees, but they are somewhat more replaceable. If these employees are demanding too high of a salary increment, then the employer has more power to say no. This statement is only valid if, the company has taken the time to write systems and job descriptions, so it is easier to train new employees.
When companies get into trouble by relying too heavily on a few key employees, that is when they fall into the mercy of those employees and their demands. It is vital for any successful business to run on systems and not on people, so be sure you take the time as a business owner to write out every process of your business so that it can continue to run without a key person in the company.
It is vital for any successful business to run on systems and not on people.
So as you can see, the strategy with how a company handles unrealistic employee expectations depends on the employee’s exposure to the revenue source. In a services-based business when the employee has direct contact with the client, you have to handle these situations more carefully, and this usually involves input from the client on how to handle it. In a product-based company, you have more leeway on how you handle unrealistic employee expectations as long as you have written systems in place to more efficiently substitute in a new employee so your productivity doesn’t diminish.
Here are two of my main secrets on how to retain those high cost employees even though you can’t necessarily continue to offer them more salary increments when they are already well above market rates. The number one secret to retention is providing an unmatched family environment where people feel safe to be themselves and they feel like they are valued. This has been my goal from day one when I started my company, and it still holds true today. If your employees sense and know that you truly care for them, they will realize all the extra perks your company offers, and they will realize the benefits of staying in your organization. The fear of the unknown and joining another company does weigh heavily on their minds.
Secondly, I personally speak with the employees that are unhappy about the salary increments we have offered. I listen to their case, and I take everything into consideration about the employee, their client and the relationship we have with the employee. If it’s worth it to go up an extra amount, then I’ll heavily consider it. If it’s not, then I have to carefully explain to the employee why it’s not possible at this time. Maybe we can look at an alternative, like giving an extra paid day off or giving a one time bonus. There are many ways to “skin a cat” and if you are creative with your employee and they are worth it, chances are you’ll find a way to retain them. If the employee still isn’t happy with anything you’ve offered, then it’s time for them to search for those greener pastures.
Feel free to leave comments below on how you handle unrealistic employee expectations and let’s all benefit from learning together!