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In our company I've noticed a pattern that about 2 months after someone asks for a promotion or raise and does not get it, they are out the door.

Is this the expected result of employees being denied a promotion or a raise, or does it indicate something specific about our workplace that I should investigate?

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People who are content with their job aren't going to ask you for a promotion - it might come up in their performance review, and they won't turn it down, but if they're happy where they are they're already happy.

Generally you have four types of people who will come to you and actively ask for a promotion/raise:

  1. People who are looking to rise through the ranks/income brackets quickly and want the next step

  2. People who need a raise to meet new obligations in their life (house payments, children)

  3. People who feel they're owed the promotion/raise, due to exceeding expectations or taking on new work

  4. People who have been taken advantage of for a long time and have hit their breaking point

There's often overlap between these reasons as well.

When any of these people come to you and ask for a raise, and you turn them down, they're immediately looking for the exit because you aren't meeting what they need from their employer:

  • You've told person #1 that they aren't going to be able to advance at the rate they want in their current position. They're now looking to move to somewhere with more possibilities.

  • You've told person #2 that you can't meet their needs. They're now looking to move to somewhere that can support them.

  • You've told person #3 that their extra effort isn't appreciated to the extent they expect. They now feel they've wasted their time going above and beyond and feel an animosity towards your business, and are looking to move to somewhere where they'll be appreciated.

  • You've told person #4 that they definitely were being taken advantage of and you don't care. They're feeling exploited and possibly ashamed that they let themselves be used like that, and they're looking to move to somewhere where they'll be appreciated and where they can make a fresh start.

All of these people are looking for a new job immediately once the talk happens - 2 months is just the time it takes them to find a new role.

Anecdotally, I was somewhere between person #3 and #4 when I left my first job. I had started in a very entry level role and slowly picked up slack as members of our team left, until I was handling the workload of 2 full-time developers on the salary of less than half a developer. I let that go on for over a year before I asked to be promoted to an appropriate role with an appropriate salary, and was told after weeks of back and forth and arguing with management that the best they could do was a 10% raise.

I started looking for a new job immediately.

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    Very good answer. Gels with my anecdotal evidence as well. I know of a senior developer. I worked with him even. He doesn't usually ask for raises. The only time he actually asked for raise was when he found another job lined up and said so to the management. Because management always kept strictly to promotion and wage levels, despite reality of work done and responsibilities taken. The only way to get more than 5% raise was to literally threaten to leave and him being smart meant that he already found a job before asking. – jo1storm Jul 6 at 5:32
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    This certainly fits my experience. I have to say, in regards to people in group #2 they will generally be upfront about their needs. It can come across as an ultimatum (give me a raise/promotion or I go elsewhere), but having been in that situation myself it is more that they like their job and are giving the company first refusal, otherwise they'd already be looking elsewhere. – GeoffAtkins Jul 6 at 7:56
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    The five are people offered a better contract from someone else and would like to stay if they can get the same raise. – eckes Jul 6 at 9:55
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    I'd label a fifth (sixth?), possibly less common category, of "chancers" - who aren't dissatisfied but reason that if all they need to do to get more money is to ask for it, they might as well try. These aren't necessarily the same as group 1. These might still turn into group 4 depending on the response to this enquiry - being uncivil or dismissive might make them realise they care more than they thought they did about how much they are appreciated. – Tom W Jul 6 at 10:35
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    I would add that your company is less likely to be able to hold people you deny promotions if the higher ups are actively showing signals of "wealth gains". A dev that gets denied a promotion but see his boss working late and eating pizza scraps is more more likely to understand the situation than a dev that gets denied a promotion while his boss shows up once in a week at the office, and spend all the other days posting pictures on instagram about how awesome Dysneland/Malibu was. Don't deny your employees a promotion so you can fund your vacation, please. – T. Sar Jul 8 at 14:43
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Your compensation versus market rate

The key conclusion from your observation "about 2 months after someone asks for a promotion or raise and does not get it, they are out the door." is that apparently the same people could get that promotion or raise in other companies; that you're seeing in practice that in general, "the market" is offering these people better conditions than your company was willing to do.

If your company was approving raises for people who deserve it (i.e. the new, higher compensation is according to market rate for someone with their abilities and performance - this has nothing to do with what the company "can afford") and denying raises for people who don't, then most of the people who are denied raises would not be able to quickly find a job where they can get what they desire, and you'd see that only in cases when the company made a mistake in evaluating a person, not most of the time.

Thing is, if an employee says "Hey, actually I'm worth $x, I expect a raise" and the company responds "No, that's not an appropriate salary for what you're doing" then one of them is either lying or mistaken. If the employee was bluffing or mistaken about their market value, then other companies would tell them the exact same thing and they would not leave. But since all of them seem to be leaving, then it means that other companies are telling them something else.

So this is an indication that your company may be systematically paying lower than the prevailing market rate. This may be an intentional strategic choice - it has its drawbacks and its advantages, perhaps it's what top management has explicitly chosen to do - in which case a somewhat higher turnover and the symptoms that you describe would be a completely expected result. However, if it's not the case and the company believes that their compensation is in line with the market, then your observation indicates that this belief might be mistaken and needs to be verified, possibly resulting in changes to the compensation policy.

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    I feel this answer has the best analysis of the situation so far, +1. IMO it just misses one parameter: someone can stay in a company that offers lower wages but where the working conditions are better than average, environment less toxic, etc. So the fact people are leaving when a raise is refused can also indicate (with addition that is already said) that working conditions are not that great too – Kaddath Jul 9 at 8:59
  • may be systematically paying lower than the prevailing market rate No. If you don't raise salaries (inflation increases do not count), you will be paying below market in one year, and each successive year the gap will increase. – Juha Untinen Jul 10 at 5:50
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You're thinking of it as employees asking for handouts for no reason. Not at all.

The raise request is a courtesy notice

They are telling you that they are thinking about money and their market value, and they are either looking or already have found a better offer elsewhere.

“I need a raise” - “No” - “Here’s my notice” ... is exactly the sequence you should expect, especially if their salary is under market (you are supposed to know if that is true).

But there’s another very important subtext.

It’s also a vote of confidence, for your business

In essence they are saying “But all things being equal, I’d rather stay here”.

They don’t need to say that; they can simply hand in notice and say “no” to your counteroffer (which may well be the very same raise they are asking for; in fact, you might start negotiating after they drop notice, and discover you can keep them for that raise or somewhat better.)

They are inviting you to “make things equal”, and they are saying they will stay if you do.

Rejecting out of hand is a jerk thing to do

If you play the Ebenezer Scrooge game and refuse on general cheapness’ principle, that’s back to the belief that employees ask for raises because they are lazy and money-grubbing. And that is what employees will think if you do reject them.

So if it’s not possible, you better have a reasonable and believable reason why. Not a stock or off-hand reason, not the kind of lies that companies warble in press releases that we all know is BS.

For instance if the company is small enough, you might just show quarterly statements. “Look, here’s what COVID is doing to us”. Etc.

Maybe YOU should be looking around

Some people get into a job and they just want to plotz in that job. They’ll do a good job but they also subconsciously don’t want any moving cheese: they like things the way they are. E.G. they don’t actively search the job market while happily employed, because they dislike/dread the process. They also don’t understand why other employees would want to change so much.

Think hard on whether that is you. If it is, it might be very much worth your whilte to “snap out of it” and truly re-evaluate your own market worth. And do what all those folks are doing; shop for better work and seek a raise yourself.

Not least, it’ll help you understand them better. Because they certainly expect you to grasp all this!

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  • "I'd rather stay here." So true. When I discovered that market rate is at least 2-3x more than my current earnings, I attempted to negotiate with my manager, who replied that this wasn't within policy. Even if I want to work there, if they don't value me, I don't value them. I'm leaving as soon as I find a better offer. They should consider themselves lucky to be warned. – Denis G. Labrecque Jul 13 at 2:08
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@Kayndarr's answer is good but misses an important category of people:

  • People who have noticed that their pay is below market rate.

All they have to do is check some job sites to see that they are under paid. If you don't offer them a promotion and/or raise they can quickly move on to somewhere that values them more appropriately.

If you are seeing people leave just a couple of months after being refused it suggests your pay and conditions are way, way below the going rate and they are having little trouble finding a better offer.

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  • He said "about 2 months after they ask for a raise/promotion" which does not mean "about 2 months after they were first hired." I do agree with the answer in general, though. It's easy enough for them to check if they're being paid a fair rate, and easy enough for OP as a manager to check the same. Making sure they're getting a fair shake should be the first thing to check (and correct, if necessary.) – Steve-O Jul 6 at 13:29
  • @Steve-O I will word it better, that's not what I meant. – user Jul 6 at 14:17
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    I think this falls under "people who feel they have been taken advantage of". – Llewellyn Jul 6 at 17:57
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Probably.

If they have explicitly asked for it, they presumably feel that their performance is deserving of it. It doesn't make any difference whether that opinion is accurate or delusional - if they feel they are operating at that level, chances are they are looking for an organisation who are willing to pay them that amount.

Salaries and remuneration are a double edged sword. In essence it's a business negotiation - you want your employees to do their jobs for the least amount possible while they want you to pay them the most possible to do the job. You meet somewhere in the middle.

At the same time however, you should also want employees who are invested in the company and committed to its vision. If you want to avoid staff who want to do just enough to keep the boss happy and the pay checks coming in, you shouldn't be aiming to pay just enough to ensure they stay.

I wouldn't worry to much about the delusional employees - but do make sure you explain the areas they need to improve in order to gain the promotion/raise. Give them a goal to work towards and the ambitious, hard working ones will deliver - which will be good for you in productivity terms.

Do, however, worry about how you are going to retain the ones who probably are deserving of a raise. Maybe the budget doesn't allow it but remember there are things other than salary. Additional vacation time, flexible working hours, team beers/lunches, fruit and pastries in the morning etc. Some of these wouldn't cost a lot over the course of a year but would earn you a lot of goodwill with your staff. An extra 5k a year with some other organisation might be tempting but you can compete if, for example, you have a good company culture, your staff feel appreciated/challenged and they can go see their kid's play/game without needing to go through a ton of red tape.

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The labour market is a market, even if it has some particular characteristics. Companies are usually not charities, they are buying labour. There is a negotiation going on between the employee and the employer: "For this amount of money and other perks, I will give you that amount of my time and effort."

The market differs from buying apples in the grocery in that workers are not really interchangeable in most cases. Especially for highly skilled and complex jobs, getting a new hire up to speed will take time and money. At the same time, leaving a workplace and fitting into a new team will be stressful for the worker. So there is a tendency, on both sides, not to change at a whim.

That puts the employee at a slight disadvantage when he or she asks for a raise. When people look for a new job, it is clear that there will be the upheaval of a job change. Asking for a raise is saying "pay me more or I will work elsewhere" and the employee has to mean it to make it stick. (In some countries, the best way to get a substantial raise in the IT sector is to change jobs. People who move around every two or three years get paid more than their seniors stuck around for decades in the same company.)

If you talk to your boss and say, "give me more money, but if you decline I will stay anyway," you should not bother with the request.

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