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A Great Blog Post About How To Ask For A Raise

CFOs control the company’s purse strings. What happens when they want to tug a little harder on it for themselves?

When CFOs want a raise, the process depends on the size of the company, the industry, and how it is organized. “In some cases, the CFO and CEO are one in the same person,” says Paul McDonald, senior executive director with Robert Half, a staffing firm specializing in accounting and finance professionals. “In other cases, negotiating a raise is not always an option. It may be built into the executive’s contract, or predetermined in a company compensation policy or pay scale.”

While anyone in an organization could theoretically go directly to a CFO for a raise request, if not their own boss, CFOs themselves have to go through their company’s compensation committee (if they work at a publicly traded company) or to the top rung of the corporate ladder, the CEO. That’s the route Jim Morrison, CFO for Teknor Apex, a private manufacturing company, says he would take, but he would only ask for a raise if something was odd or amiss. For the most part, matters of salary increases come up automatically every couple of years when adjustments are made.

“If a CFO has to go in and ask for raise, it's not a good sign,” says Morrison, who is also chair of the American Institute of CPAs’ business and industry executive committee.

Why? Despite the fact that the economy is still recovering from the Great Recession, CFOs have been somewhat spared from the salary increase drought. “Salaries have been increasing, as CFOs are in a critical position in good and bad times,” says Michael Kesner, principal, human capital, talent, performance and rewards for Deloitte Consulting. “Some might argue they are even more valuable during difficult times, as improved cash flow, a slimmed down balance sheet, and a more cost efficient organization structure are critical during downturns, and the CFO can significantly influence these metrics.”

What Can You Ask For?

Salaries for CFOs vary greatly with the scope of each one’s role, their industry, and company size, but overall, finance chiefs’ salaries have been growing. Median CFO cash compensation in 2012 increased by 6 percent, relative to 2010, according to the AICPA/Arizona State University 2013 CFO Incentives and Compensation survey. The largest compensation increases went to CEOs, presidents, and chief operating officers, who also experienced the greatest declines in the aftermath of the recession.

Hard-working CFOs will get a change in pay if they request one, according to Kesner. “There is a fluid market for executive talent, and CFOs are highly marketable,” he says. “If a company’s CFO wanted to find another job, chances are he or she would have no trouble getting one. Thus, as a CEO or board member, I would be afraid of losing a top-performing CFO, and would try to do something to meet his compensation expectations.”

Indeed, notes McDonald, the unemployment rate for chief executives, which includes CFOs, was just 1.9 percent in the second quarter of 2013. “In response to today’s tightening hiring environment,” he says, “companies are raising salaries to attract and retain top performers.”

But the doling out of money is not universal. “There is a big difference between big companies and smaller ones, and you can’t even assume that CFOs at big companies always get what they want, because if their compensation is tied to market performance and the economy isn’t doing better, they suffer too,” explains Michal Matejka, a professor at the W.P. Carey School of Business at Arizona State University who conducted the AICPA study.

So, for those who may not have the luxury of having a board or CEO just jumping at the opportunity to bestow a raise on them, how best to approach the topic of more money? Consider taking the following actions:

Don’t ask for a raise on a whim. Craft a compelling, well-prepared case that makes your value to the company clear. “This will help increase your chances of getting paid what you are worth,” says McDonald.

Build a business case. Determine your market value and do your research. Review industry reports to see what other companies are paying and what your firm can afford based on its earnings and current performance. Much like you would prepare a strategic recommendation or business proposal, thoroughly research market trends, the unique value you provide, and the type of compensation you should expect to receive. “When you make your pitch, explain the why behind your request,” says McDonald.

Question whether you actually deserve a pay bump. Be sure your superior thinks you are making a valuable contribution to the company. “You might think you’re doing a great job, but if your perception is off, you want to know that before you put your foot in your mouth,” says Kim Gottschalk, regional vice president, Accounting Principals, a staffing and recruiting firm. Have a list of your achievements at the ready and try to quantify them as much as possible.

Be reasonable. No one knows more about the state of your company’s finances than you. If budgets are tight, acknowledge that fact and be sensitive in your request.

Do the math. CFO compensation is much more than salary. Bonuses are a big part of the equation, usually falling between 30 percent and 50 percent of salary, according to Morrison.

Kesner suggests considering whether it’s worth leaving your salary alone and instead focus on requesting higher incentive opportunities. “For example, I might pass on a 3 percent base salary increase and instead request a 10 percent increase in my annual bonus opportunity (as the bonus is much riskier than base salary, more compensation dollars would be justified),” he says. “Some executives will ask for a retention bonus, rather than a permanent increase in pay.”

Know, however, what goes into determining your bonus. In 2013, according to AICPA/ASU’s survey, private companies have on average just over half of their bonuses contingent on meeting financial performance, 13 percent contingent on explicit nonfinancial targets, 27 percent of their bonuses awarded subjectively, and 2 percent to 3 percent determined in some other way.

Timing can be everything. If your company isn’t meeting its financial goals or has experienced layoffs and is still rebuilding, it's probably best to wait to ask for a raise. “Make sure to schedule your discussion with the CEO, board, or human resources department at an appropriate time,” says McDonald.

Have a plan B and be open minded. “Determine what else would make you happy besides money. Maybe it's additional vacation or flexibility in your schedule,” suggests Gottschalk.

Some executives, says Morrison, are asking for cars and supplementary pensions since some pensions are capped at a certain salary.

Sweeten the proposition. “If you want more than the standard increase, be creative. Build your responsibility base. If you're in charge of finance, then ask for additional responsibility like having IT or human resources report to you,” says Morrison.

Also try to take a step back and fully evaluate your role – are you truly getting paid for what you are contributing to the company, or should you actually be doing more? “There’s a big discussion about CFOs – are they just bean counters, or strategic decision-makers, involved in areas like pricing, targeting. Are they a part of the team – strategic partners willing to step outside their narrow scope?” says Matejka. Which type are you, and are you getting fairly compensated for it?

Sheryl Nance-Nash is a freelance writer specializing in personal finance, small business, general business, and career-related topics. 

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