During my 18-year corporate career in marketing, research and product management, I felt that raises were an important way that the leadership at my organizations demonstrated their recognition for what I contributed in my role and in the enterprise as a whole. Interestingly, the conversations that took place leading up to the actual raise or promotion were at least as impactful as the raise itself.
If I found that my manager communicated effectively both praise and constructive, thoughtful feedback and indicated an understanding of how I personally contributed to the team, those interchanges helped build trust, loyalty and commitment, often as much (if not more) than the additional money in my paycheck. But if the conversations around raises and promotions weren’t clear, honest and supportive, inevitably I’d feel less positive and engaged in my role.
Turns out, this is an extremely common experience. In working now as a career and executive coach with professionals around the world, I’ve heard from thousands of people about their deep challenges in trying to figure out how to ask for a raise, the best way to build a case for it, and how to deal with their disillusionment when they didn’t receive the raise they believed they deserved.
To learn more about how employers and employees should approach handling raises, I was excited to catch up this week with Lydia Frank, who is vice president of content strategy for PayScale, the leading compensation data and software provider, helping employees and employers understand market pay and have more open and mutually beneficial conversations about compensation.
The recent PayScale Raise Anatomy study examines which workers are asking for raises, which workers are receiving them, what is preventing certain workers from asking and how the raise conversation – whether the outcome is positive or negative – can impact employee engagement and retention.
Here’s what Frank shares:
Kathy Caprino: Why did PayScale feel it was important do this research into pay raises now?
Lydia Frank: We’re in an extremely tight job market currently in the U.S. with unemployment under 4%, and oddly, wages have not grown to the degree that we’ve seen historically when similar positive conditions have been in place in terms of the economy and labor market.
And, while 59% of employers are saying that talent retention is a major concern, according to the results of PayScale’s most recent Compensation Best Practices survey, most organizations are not addressing that concern with higher base pay increases. This places more burden on individual employees to proactively manage their own earning potential by asking for raises and making a solid business case for more than the standard 3%.
We also knew from past studies that a good portion of employees don’t proactively ask for raises. We know that wage gaps do exist for women and people of color. So, we wanted to really understand the dynamics at play and provide guidance for both employees and employers to ensure that every worker has equal opportunity to make a fair wage for the work they’re doing.
Caprino: What were the most interesting findings? Were these surprising to you?
Frank: Only 37% of workers have ever asked for a raise from their current employer, which is lower than I’d expect with it being an employee’s job market right now, but of those who did ask, 70% received some type of raise, even if it wasn’t for as much as they requested. It’s a good reminder for employees that the outcome of a raise conversation has a high likelihood of being favorable for you.
However, not every employee has the same chance for that positive outcome. We saw no difference by gender or race in terms of who says they have asked their current employer for a raise. We did find, though, that people of color are far less likely to receive a raise when they ask for one than their white male peers (women of color are 19% less likely and men of color are 25% less likely).
There was weak evidence showing that white women may be receiving raises less often, but the findings were not statistically significant. We controlled for job title, job level, experience, geography, industry, etc. so we could really isolate the effect that the gender and race of the employee might be having on raise decisions. This runs counter to a common narrative, especially in the tech industry, around the workplace being a meritocracy. This may not feel like a surprising finding to many, but there’s a difference between suspecting something is true and knowing it for sure.
Another key finding in this report is that how the raise conversation unfolds can have a critical impact on employee engagement and retention. It really comes down to how much employees trust the organization and their managers. If an employee is denied a raise, 33% are provided no rationale for the denial.
Of those who do receive some type of rationale, only 23% of employees believe it. If they don’t believe it, their satisfaction with the employer takes a serious hit, and they are far more likely to be seeking a new job in the next six months. What was interesting, however, is that when employees did believe the rationale when denied a raise, they had similar levels of employer satisfaction as employees who received a raise.
They were also much more likely to stay with the organization than employees who received no rationale or didn’t believe the one they were given. For employers, the takeaway here is that you don’t necessarily have to grant every raise request to retain your best employees, but you do have to ensure they understand how compensation decisions are made and feel fairly treated. Treating employees fairly isn’t necessarily the same as them feeling fairly treated, so communication strategy around pay is important to get right as well.
Caprino: Why do you think people of color are more often denied a raise when they ask than white men?
Frank: With more than 160,000 survey respondents for this most recent PayScale study, we can say with certainty that there is clear bias at work in pay raise decisions in the workplace – whether unconscious or overt. Unconscious bias has been something employers have been trying to combat for a while, from hiring practices to organizational culture. I think this is just more evidence that it is difficult to eradicate bias when people are involved. We all have biases, whether we’re aware of them or not.
Caprino: I noticed that women cite being uncomfortable negotiating as a reason for not requesting a raise far more often than men. What can be done to ensure women feel more comfortable initiating pay negotiations?
Frank: Yes, 26% of women cite being uncomfortable negotiating as their reason for not asking for a raise vs. 17% of men, while men are slightly more likely than women to say they didn’t ask because they received a raise before needing to or they’ve always been happy with their compensation.
There are systemic issues at work that chip away at women’s confidence levels. For example, based on research from linguist and Textio founder and CEO Kieran Snyder, not only do women receive more criticism in their performance reviews, it’s less constructive and more personal. In Snyder’s analysis, she found that character critiques – words like “abrasive” – showed up in 71 of the 94 critical reviews received by women and was completely absent from reviews received by men.
There’s also research on unconscious bias showing that women pay a social cost in the workplace for initiating negotiations. Essentially, we as a society are conditioned to have different expectations of how women and men behave, and when our expectations are not met, it creates cognitive dissonance. We don’t like it. In many ways, I think the fact that some women feel uncomfortable initiating negotiations is a learned behavior. If you do it and don’t get a positive outcome, you’re more hesitant to try again. Unfortunately, women are more likely to be met with resistance.
Alternatively, there’s newer research from Boston Consulting Group showing that ambition levels in women are impacted significantly by how progressive their workplace is in terms of gender equity.
The key is to fix the systemic issues. Employers can ensure they’re digging into workforce analytics to understand the obstacles to advancement women are facing within their organization, whether that applies to pay or promotion. They can also proactively address underrepresentation of women in leadership. Take a look at your board of directors, your executive team and your most senior managers. Are you demonstrating that women are valued members of the organization?
Caprino: What can employers do to ensure every employee is given equitable consideration when requesting a raise?
Frank: When compensation decisions are data driven and there is clarity around what’s required to advance within your pay range, there is less opportunity for pay inequities to emerge. I’d encourage employers to think about setting up a process for how all raise requests are treated. If there are multiple checkpoints and transparency around the process, one person’s bias is less likely to impact the final outcome of an employee’s raise request.
Caprino: Asking for a raise can be scary for most employees. What guidance do you have for anyone thinking about asking for one?
Frank: Again, I’d point to the data point that of those who ask, 70% receive some kind of raise, with 39% getting exactly what they asked for and another 31% receiving a smaller raise than requested.
The key for employees is to be data driven in your approach to the raise conversation as well. Ensure you’ve done your homework and know what the market is paying for roles like yours. PayScale has a free employee compensation survey, for example, at http://www.payscale.com, where you can receive a precise pay range that takes your background and skills, the talent market you’re competing in and the job role into account.
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