I’ve been asked about this topic a few times in recent weeks, so here’s my take on how to ask for a raise (and how to build a cycle for continued increases).
The formula is the same whether you’re an employee, freelancer, or business owner with external customers.
1. Add value consistently.
Most companies don’t care how hard you work. They care what the results are. Getting better results leads to better compensation. Results are increased revenues, decreased expenses, improved cash flow, improved customer service, improved processes, or another measurable improvement. (Results are not the number of hours worked in a week, the number of years you’ve been at the company, or a difficult personal situation.) If you have a team, your value is measured in their results (not just your own). If they’re not performing, it’s up to you to lead better.
If you’re doing only your job description (or what the contract specifies), then your existing compensation is likely fair. To earn more, do more – or do at a higher level. Start thinking better, as John Maxwell teaches. Identify your high value activities and focus on them. Get disproportionate results from finding your leverage points. In short, learn to solve increasingly bigger problems.
The consistently part is important too. One event isn’t enough. I’d recommend at least 60-90 days of excellent performance before you take step #4.
2. Document it.
Measure and track your own results. Don’t assume someone else is.
Use a system to keep a list of projects completed successfully (and on time). Take measurements at the beginning and end of the project to demonstrate improvements. If trends are important, continue to take the measurements at regular intervals.
Be creative. Set up monitoring systems or automatic reports to capture as much data as you can. You can always filter it later.
3. Communicate regularly and effectively.
Whether a communication is effective or not is dependent on the receiver’s perception, not the sender’s. The raw data is important, but the meaning behind it is even more so. Explain the benefits in terms your audience understands. (This is particularly true for technical roles.) For example, let’s say your role is to perform maintenance on a fleet of vehicles. You could report that you changed the oil on 25 cars this week. Or, you could report that you extended the life of those vehicles by x number of miles, saving y dollars. Make it as easy as possible for your boss or your customer to see your value.
It’s also important to have a steady track record of communication before you get to step #4. I’d recommend a written report weekly and a verbal conversation at least monthly. During periods of high activity or stress, I’d do both weekly.
If you’ve delivered value, documented it, and communicated it well, it’s time to follow through with the ask. The strategy that’s most effective is to explain the future benefits the company will receive, based on your documented past performance. Play the movie, so to speak. Outline how you’ll continue to perform at a higher level and what those benefits will be.
If you value the relationship, it’s also important to be flexible in the format of the increase. As your compensation increases, it’s likely a greater percentage will be in the form of a bonus or incentive. If you know you can perform (because you’ve been tracking it), there’s no reason to be intimidated by this type of structure. In fact, it often ensures goal alignment and a win-win situation.
That’s it. I know that simple doesn’t necessarily mean easy, and it does take time.
If you haven’t done steps 1 or 2 for a while, you’ll likely have to backup and start there. Consider it deliberate practice. The really great aspect is that there’s no limit to the number of times you can repeat the cycle. As long as your performance and results are always growing, you can always look forward to another increase in due time.
Also, my friend Sarah Zink recently published a post (Do Women Really Earn Less than Men?) that I thought was spot on. Here’s a snippet:
Fresh out of college, similarly educated men will make 5% more than women (according to the American Association of University Women 2007 study). 10 years later, the disparity has grown to 12%. WHY?
As a rule, women are terrible negotiators, and often enter into the workplace unprepared to know what is a fair wage and/or unable to ask for what they believe is a fair compensation package. If we want to change the outcomes, we have to change the ROOT of the problem. It’s not about whose FAULT it is – the solution is simple – teach women to become better negotiators. Period.
Neither of us are saying that sexism is never a problem. But the more likely problem is one that can be solved with direct action. Right now, I can think of a handful of colleagues or friends that have aced steps 1, 2, and 3, but haven’t found the “right time” to have the crucial conversation.
Go for it!
(If the answer is no, you’re in the exact same spot you are now.)