For the past couple of weeks we have discussed the problem with the annual performance review. We have suggested that periodic conversations with your people at key times in their assignments will prove to have a far greater impact on their performance and will provide you with more information as to who is really achieving results for the company.

Now armed with this information you are much better prepared to handle the “Boss, I deserve a raise” meeting. First of all, most employees probably don’t understand how raises are really handled in your company. In their mind, you as the boss of a department or division have a pool of money from which you can issue any raise if you so desire. Even though they have probably seen it and work with it on a regular basis, they don’t tie in your departments operating budget with their need for a raise.

In my experiences, the only person in a company that doesn’t have a budget is the CEO. He can authorize expenditures for any project or raise he sees fit to undertake with the company’s final figures his only restraint. As a department or division manager you have no such authority. Unless you have already had raises pre-approved in your operating budget, you probably have little leeway to honor that request for more money. So what do you do?

If your employee is following the procedures outlined by the management gurus, he or she is first going to try to understand where you are coming from. If you are a good manager, this should not be a very difficult assignment for them. You will have had enough interaction with the employee such that he will know what kind of personality he is dealing with. If you have put your stamp on the group you manage, giving a forthright answer should end the interview immediately if the answer is “there are no raises in our budget at this time.” If you do have money available, let him know you are open to a discussion.

If the situation with the company is not good, the employee should already know this. Reminding them of this should put the discussion to rest. The employee will probably then want to show you how they are worth more even in this situation. Obviously, even if you are sympathetic to the request, the probability is that you have no money available. That should once again end the discussion about money, but you should hear out the employee’s position so that you totally understand what is motivating the request.

Let’s continue this discussion next week.