Growing Companies must be Transparent. However…
Transparency is a quality seen in many startup and SME businesses. A flat hierarchy combined with a (real) open-door policy has a strong impact on retaining employees. But transparency is not only about cultivating friendships or having a beer after a successful project.
Transparency is the CEO’s responsibility. This includes being proactive with the timing of salary increases. Just because these people were at your side when you launched your business does not mean that your employees feel comfortable about asking you for a raise. Because you know them well and you are ‘cool’ with them does not mean their cost of living does not increase. Be fair to them, be fair with your company and be a leader! They still at your side because they rely on you acknowledging the good work they do for the company’s sake. It is important to not forget this.
So what is the right process to increase salaries? Because it is a cost to the company, this process has to be seriously considered, implemented and followed.
- Set up a performance appraisal process and a clearly defined salary increase policy. This needs to be properly communicated regardless of your company size.
- Establish a time during the year in which you launch the process. Year-end is usually the best time to do so because it allows you to crunch numbers, based on a combination of actual company’s results and (each) individual results. Depending on your company’s size, each department’s ROI should also be considered.
- Make your performance forms measurable and quantifiable. Do not leave open questions, your managers are not authors and subjective comments are irrelevant.
- Have a clear and quantifiable policy for salary increases. It is important to make this apply across the board. This allows you to be equitable to all your employees and plan the complete impact.
- CEOs, the assessment process takes time, but you have to be the champion of this important process. Lead by example!
You want to avoid the recurring problem of having to give a raise to an employee that does not deserve it because you did not seriously set up clear goal the previous year. Keep in mind that giving an increase to someone who does not deserve it prevents you from giving a better increase to somebody who has gone above and beyond in your company’s best interest. Don’t run away from your responsibilities.
Put the emphasis on two aspects:
- Quantifiable and measurable objectives set as next year’s objectives. Because these objectives have to be aligned with your company’s growth strategy, it forces you to think about your strategy and assess your options.
- Take this time to humanly reconnect with your staff. Remember that besides their technical skillset, you hired them for their capacity to be out-of-the-box thinker and they brought that breath of fresh air that your company needed. Do not take for granted now that they have been working with you for a while. They probably still have something to say that will benefit your business (and if they don’t, you may wonder why they are still around).
To summarize, follow these procedures:
- Set quantifiable and concrete goals.
- Conduct quantifiable and measurable performance appraisals that are based on merit.
- Implement a proactive and transparent salary increase policy based on a combination of company results and individual’s achievements.
Remember: Your people have regular cost of living increases. Because salaries are such a big component of your cash flow and bottom line, it is important that you actively engage in this process.