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Annual raises- need guidance

I work at a small (65 employees, $20 million) manufacturing company, and recently became aware that our General Manager is going to ask our owner for raises for everyone, since he asked me for a list of current employees, their wages, their hire date, and date of their last increase. My concern is that the increases will be arbitrary and possibly unfair, as there is no review process and the recommendations to the owner are coming solely from the GM, even excluding the CFO. The GM has not asked any managers for input or spoken with us about the raises. Last year, when one of my accountants asked him for a raise (I had just started), he came to me and asked what one of the Inside Sales guys made, and gave her a raise to equal the IS guy, as he did not want her to make more than him. Clearly an unfair raise, in my opinion, since it was based on what a Sales guy made, not the fair value of the job she is doing in accounting. - What kind of risks, if any, is the company facing, when raises are determined in this way? - How do I speak to the CFO (my boss) about what the GM is doing, without making things awkward and difficult? The CFO and Owner are in another office, and I work in the same office with the GM, so politics matter. - Is this normal in small companies? Any insight or advice would be greatly appreciated. Thank you!

Answers

Anonymous
(Co-CEO) |

Sounds like you are meddling. Not that meddling is a bad thing.

But, if the guy who is going to get you more pay is mad at you for meddling, guess who gets passed over for a raise. The GM isn't going to be nice if he happens to be friends with the CFO, and in most companies, the GM and CFO are on friendlier terms than CFO to underhire.

If the GM is doing something illegal, then yes, bring up the problem with someone with authority.

Anonymous
(Controller) |

The GM usually circumvents the CFO and goes directly to the owner, because he has been working for the owner for much longer than the CFO has been in place. The owner has given the GM full reign will almost certainly rubber-stamp whatever raises the GM proposes.

Anonymous
(CFO/Board Advisor) |

I think you have made some bad assumptions. First, you are assuming that neither the Owner nor CFO will have any opinions or input concerning the raises being suggested. Second, you are assuming that neither the Owner nor CFO will seek the input of department managers, like you, about specific raises. Third, you are assuming that the raises being requested will be "rubber stamped" by the Owner and CFO. Who knows, they may tell the GM he is all wet and no raises are approved. Thus, all your worries and concerns are for naught.

My suggestion to you, is do your own research and come up with you own recommendations for compensation for each of the people in your department. Share these at the appropriate time with you CFO.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I agree with Anonymous (CFO/Board Advisor) and might even go out on the limb and say you are overreaching your authority.

The CFO typically oversee's the budget. If the raises are problematic, even if the CFO is not consulted initially, there is ample time for that person to discuss the issues.

If the owner insists, unless it would place the company is a precarious or non-lawful situation, it is the owner's business, not yours.

I've had to institute raises I thought were wrong, arbitrary and didn't include myself. But, they weren't illegal and didn't jeopardize the company, so I did it.

Life isn't fair.

Anonymous
(Controller) |

Thanks for all the responses, much appreciated. The responses that describe what is normal or typical of a CFO reinforce the dysfunction I am experiencing, as those processes & oversights are not taking place at this company. Wayne, you're right- life's not fair, and thank you for your insight too.

Bonnie McCoy
Title: CFO & Co-Owner
Company: WhipTek, Inc.
(CFO & Co-Owner, WhipTek, Inc.) |

You actually have an HR issue and it worries me that you never mention this resource. They would research the market rate for each position and use it as a guideline also, there would be a annual review based on the person's hire date anniversary and a set policy for how much raises are for the company's year. Confidentiality is top priority and salaries should never be discussed unless there is a need to know. Otherwise companies are likely to have issues with employee morale and as you are describing this cowboy-managing creates animosity. You are not in the kind of environment that I believe will resolve itself in your favor. I would be looking for a different company to be employed by in my humble opinion.

Stephen Glenn
Title: Controller
Company: Pierre Frey, Inc.
(Controller, Pierre Frey, Inc.) |

Bonnie, HR should be consulted for salary guidelines, IF the company has HR. Anonymous stated they work for a small company. My guess is the CFO and Controller handle all HR duties. Having an HR staff, even a consultant on call, is a luxury that most small firms do not have.

Anonymous
(Controller) |

We don't have any HR resources and I handle all HR issues, the CFO is not involved. Bonnie, your word "cowboy-managing" describes exactly what I am witnessing, and I appreciate your opinion and assessment.

Bonnie McCoy
Title: CFO & Co-Owner
Company: WhipTek, Inc.
(CFO & Co-Owner, WhipTek, Inc.) |

Stephen, having a HR person should never be considered a luxury, it is a necessity; (labor) laws have to be followed and enforced. I know many people have a bad taste in their mouth for "HR" but truthfully, I can usually trace this fact back to the HR person not having a HR education or experience. A great HR person will save a company money and (legal) headaches; they are an added-value just as much as sales, accounting, marketing, and so on. 65 employees by my standard is not small. HR and accounting have a lot responsibilities side by side as partners but, they should never be the same be the same person. You want experts for both departments.

Michael Reagan
Title: Broker Relations - Texas
Company: Aflac
(Broker Relations - Texas, Aflac) |

Bonnie is correct. This is an area where your HR department or HR advisers should be involved.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

Pay adjustments/raises are handled so many different ways. As a manager/supervisor, your role is to look out for the people that work for you. You need to make sure they are fairly compensated for the work being done. Falling into the trap of trying to understand what has gone into determining the compensation structure for every employee is a no win situation.

Jeff Durbin
Title: Chief Financial Officer
Company: F. Gavina and Sons, Inc.
(Chief Financial Officer, F. Gavina and Sons, Inc.) |

Anonymous, the fact that you 'handle all HR issues' makes it part of your responsibility. I think the first step is to look at market salaries such as salary.com to at least get an idea of where everyone is relative to market.

I would not circumvent your boss though and I would ensure that your first stop is him or her. Ignoring the chain of command is a sure way to harm your career.

(Agent, JKS Solutions, Inc.) |

If your General Manager (the person responsible for managing the entire operation) feels the employees warrant pay increases then the GM will negotiate that in the available executive process whether you have an HR department or not. Understanding pay rates and the grade structure (which sounds like there is not one if he was comparing an accountant to a sales person) is part of the projection determination for budget and you can hardly put a stop to their work on this. If you have concerns you should ask for a meeting and ask your questions. Going online to tattle and seek input from outsiders is not really in your best interests professionally.

Anonymous
(VP of Finance) |

You definitely need to put a system in place for raises, reviews and expectations, so this can spiral out of your control very fast. Establish guidelines, talk about reviews (you don't always need proper review process - we all know everyone hates formal review processes and feedback in general - both the given and the receiver) and set something that you can use over the years until you're bigger and more complex.

We have fairly informal review process, and raises happen every year, based on ranges, keeping most folks and most managers happy.

Roger Hardie
Title: Financial Controller
Company: Expert Home
LinkedIn Profile
(Financial Controller, Expert Home) |

Hi Anonymous. Who can take the whole emotive & favoritism angle out of your decision making, by bench-marking your companies postilions against the National Average for that role. I did an exercise for a company a while back where we used the Hays and the Robert Half Salary & Wages guide to set a salary range for each job/role in the company. If the employee was earning more that the top end of the range, or even in last 25% of the salary range - then any increases had to be well motivated. Doing this will ensure that if the GM cannot arbitrarily increase a wage as there is a national range to stick too, also cuts out favoritism as if some employee is already earning the max then they better be a high performer.
To give yourself a bit of leverage with why you are doing the bench marking &the relevance of the bench marking exercise, -it is not uncommon for an Investment Bank that is doing due diligence on your company for equity or debt finance to ask for a Bench mark of all salaries against national averages. Therefore out of wack salaries can harm future access to finance

Anonymous
(VP of Finance) |

We don't benchmark against national averages because we're in Silicon Valley and salaries for tech workers inside the valley are highly skewed compared to tech workers anywhere else. But we definitely compare all salaries and raises to other companies of our size and in our space, and we have to do the same with perks.

Colleen MacRae
Title: CFO
Company: Cambridge Family and Children's Service
(CFO, Cambridge Family and Children's Service) |

Anonymous, Folks are right about the politics. You don't want to step into it. The best you can get is more information. Pulling together the facts is the most important thing you can do right now. Since you are responsible for the HR end of the business, attaining benchmark information for each position is very appropriate. By chance are any set up already? If not this is a great opportunity for you to show your value by pulling this information together, even if it is in broad strokes. Talking to your boss about the facts you have pulled together will help you better understand how he sees things. He will appreciate having an employee who is thorough. This is going to open the communication to discuss how salary increases are determined from his perspective. In the end, you may never agree with the process but at least you understand it.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Hmmm. Lots of assumptions in your questions. Unless you are requested by your CFO to make recommendations on salaries, it isn't your responsibility. Although your title is "Controller" you can't take that to mean everything in your Company will be under your control. By the way, I believe I can assume you report to the CFO, have you talked to him/her about your concerns?

Anonymous
(Manager Operations ) |

I agree with Wayne, if the owner is aware and taking decisions unanimously, please wait and watch.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

Companies who do this soon find themselves broke. Ask me how I know.

I always remind the happy go lucky CEO who is interested in being liked by all and willing to give away across the board raises in an attempt to curry their love and adoration that:

1) Pay should be based on the market. So we need solid analysis of what is required to attract and retain the talent we seek. Not a gift for everyone.

2) A bonus is much better than a pay raise because, we aren't locked in to higher salaries if things go south on us in the future. And, they always go south on us at some point.

I've seldom won with number 1. But often gotten number 2 as the compromise.

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