It’s the beginning of another year and many of you are hoping for a raise this year. Ask yourself this: “How much profit did I make my employer today?” If the answer is “a lot” you have a shot at getting a raise this year. If the answer is “none,” it’s time to get your resume updated.
An employee cannot be just an expense to the company. The rule of thumb is that the efforts of any employee must generate 3-5 times what the company pays that person. Don’t expect a raise just because you’ve been with the company one more year – especially as most companies are looking for ways to eliminate employees. If your efforts are not adding profits to the company every day, you are extra baggage that they will look to discard.
Raises are given because you are worth more than what you are currently being paid. How can you make your company more successful? Do you see ways to decrease costs? Systems for increasing efficiency? Will you sell more this year? Do you help others complete their assignments when you are current on yours? Those are legitimate ways to expect a raise.
The economy doesn’t determine whether you will get a raise – your contributions to make the company more profitable will — even in a “recession.”
Dan Miller's Blog 
January 8, 2009 at 11:21 pm
In reference to using the term “rule of thumb”..This is from numerous websites I have seen..
There is a second origin given for this phrase. In early English law, and potentially brought over in colonial American, a man was allowed to discipline his wife by beating her provided he used a stick no greater than the diameter of his thumb.
January 9, 2009 at 12:45 am
I understand your point, but in a normal company there are some strictly administrative positions. HR is an obvious one, Accounting is another example. There is no way that I know of that any of these positions can create profit for a company except through providing cost-cutting ideas, and then it’s not profit per se, just reduced costs. As an I.T. person with numerous companies, I have seen first hand that administrative postions (including I.T. staff) are viewed as a commodity, a necessary expense that can be easily replaced. A very good employee will usually be kept and possibly given a 3-5% raise, period, if the company is doing well. Anything less and you will be “let go” and replaced with the next qualified resume for your original starting salary. So not only are you trying to justify your raise, you are trying to justify why they should keep a 5 year employee who is now making 20% (after raises) more than what they can hire a “replacement” for.
I know this sounds negative, but I am living this scenario right now. And it inspires me even more to become my own boss.
January 9, 2009 at 7:19 am
I believe that HotRod is more than just an “I.T. person.”
If we use the tools that Dan provides to assess our passions and gifts, then combine them with our skills and abilities; we begin to understand what we have to contribute. We might then become:
“the I.T. Leader who builds strong teams,” or
“the I.T. Specialist who is committed to systems never being down for more than 15 min.,” or
“the I.T. person who champions remarkable projects”
The focus shifts from justifying a position to being confident of the real added-value we bring to the table. We can use our intangible gifts and passions to always give more than is expected, and this might ultimately be very difficult to “replace.”
January 12, 2009 at 4:37 pm
Oh no. Please don’t bring this dose of reality into my financial planning for 2009.
😉
January 12, 2009 at 10:20 pm
Hey Dan,
That is well said Dan.
It reminded me of when I heard a gentlemen that was working for Napolean Hill (author of “Think and Grow Rich”) and how his associate said, “Well I’m wearing long pants now. I used to wear shorts, but I’m wearing long pants now and people who wear long pants get a raise.” It laughed so hard when I heard that, but I think it is really important that people realize that they aren’t paid per hour, but what they are worth in ‘the marketplace.’
Jared Matthew Kessler
(Author of “The Poet and the Billionaire”)
January 16, 2009 at 2:05 am
Golly, I am SO GLAD you asked!
My employer owns several convenience stores.
We have approx 25 employees, all of whom are believed to earn within a range of twenty cents per hour. As we are clustered around $8 per hour, a ballpark estimate suggests we earned collectively approx $400K last year.
Our employer is believed to have earned a net profit of $3M for 2007.
There are no benchmarks or performance evaluations at my workplace.
Questions:
Do you seriously believe all employees are worth within a narrow range of twenty cents per hour – that our most productive employee isn’t worth, say, fifty cents per hour more than our least productive employee?
Do you believe the value or worth of employees can be properly measured without benchmarks or performance evaluations?