The Hidden Expense of Not Giving That Raise

We were in a budget shortfall – so I raised her salary.

I was an interim ED and a manager came to me worried about losing a critical team member who had the lowest salary on staff. The trickiness was that the organization actually was in need of a full salary overhaul AND was in a budget shortfall. By many measures, this was not the time to raise salaries.  

Many staff were underpaid, though some positions and departments were earning well above their counterparts at other organizations. It was a classic case of an organization inadvertently disincentivizing tenure by only raising salaries in a scramble – when trying to fill a vacancy and not finding any applicants. This of course led to a completely incoherent salary structure.

 But I was there for four months, AND the organization was significantly short on revenue. So what did I do? I increased her salary.  

Providing that one raise was a band-aid solution for sure. Compensation reviews at regular intervals, matched with phased in plans for salary adjustments would have prevented the situation and were needed moving forward, along with a commitment to not grow until the organization was made whole in terms of appropriate compensation for current employees.  

But in that moment, rather than await the employee’s departure and incur the instability and cost of losing, rehiring, and onboarding this position (and very likely having to post this position at a higher salary anyway), I gave her a raise. 

Adjusting salaries during tight budget cycles is tough, but the reality is your financial decisions don’t happen in a vacuum. Capable employees who have their own budgetary considerations will leave if underpaid. They might love your organization and mission, but it can feel pretty lousy to have your organization consistently overlook your needs, and there are a lot of great missions out there. And high turnover can lose you additional funding if community perception of your organization erodes or funded projects cannot be carried out effectively. 

Rather than merely consider if you can afford to give that raise, consider whether you can afford the costs (morale, hiring, retraining, as well as market adjustment of salary to attract an external candidate) of losing that team member.