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The most recent installment of our Business Practice feature involves a promotion without a commensurate increase in salary:
You’ve been at your current company for three years in a middle-management role. You get on well with your handful of direct reports, and your team has earned a reputation for high-quality work over the course of a number of successful projects. In fact, things have gone so well that your boss has just delivered the good news that you’re being promoted: senior is being appended to your job title, and you’re being given another team, effectively doubling your managerial duties.
This new position is a standard part of the career path at your company for those moving from middle-management to executive-level positions. But it’s not all good news. “As you know,” your boss tells you, “the economic downturn has really affected revenue, at least temporarily. Although we’ve avoided implementing a formal hiring or salary freeze, there’s just no budget to give you a raise at this time. We’ll make it up to you down the road.”
You’re pleased to have been recognized for your work and to have taken a necessary step up the corporate ladder, but promotions are the key inflection points for compensatory changes at your company. You’re concerned that if you don’t get a raise now, your salary won’t fully level up until your next promotion—which could be years away, if it ever happens. Do you try to negotiate for a raise, or hope that when economic conditions improve, your patience will be rewarded? Write a script for what you would say to your boss.
This scenario shares some similarities with previous installments of Business Practice. Like many of our scenarios, you face a decision to engage or acquiesce. And if you do engage, what do you say? In this case, engagement is negotiating. And the negotiation involves something we all care about—salary, a domain we’ve addressed before in different contexts.
Why is this question difficult?
Negotiating a salary increase is difficult even under ideal circumstances. Ordinarily, a promotion, especially a substantial one such as that depicted in this scenario, would create a natural opening for asking for a raise (or negotiating an even bigger raise than what your boss offers). In this case, however, your boss is NOT inviting you to negotiate. In fact, your boss is explicitly trying to shut down this possibility—“There’s just no budget to give you a raise at this time.”
This scenario is challenging for many reasons. First, it’s not clear what’s going on. Maybe it’s true that a raise right now is impossible, in which case the vague promise to “make it up down the road” serves to ease this uncomfortable situation. Or, perhaps, a raise is possible, but your boss is hoping that he or she does not have to work to find a little extra money. Or maybe it’s a hardball tactic: Why wouldn’t your boss give you a bunch more work without any extra compensation? And later on, why wouldn’t that boss just kick any salary requests further and further down the road?
The basics of Business Practice
Business Practice is a quarterly tool created in cooperation between Chicago Booth Review and the Harry L. Davis Center for Leadership at Chicago Booth. Its purpose is to allow readers to rehearse their responses to challenging professional situations, and to get crowdsourced feedback on those responses from other readers. For each installment of Business Practice, we:
1. Describe a workplace scenario that includes a strategic or interpersonal conundrum
2. Invite readers to script a response to the scenario
3. Allow respondents to rate each other’s answers on a scale of 1 (“Strongly disapprove”) to 7 (“Strongly approve”)
Maybe it is true that a raise at this time is off the table. But then what? Should you trust your boss to be proactive about getting you that raise when things are better? And if your boss isn’t one to be proactive, when and how do you remind them that now is the time to play catch up?
As uncomfortable as this situation is for most of us, research suggests that it is hardest for women. Data from employment website Glassdoor indicate that under normal circumstances, men are slightly more likely to negotiate for a better salary when starting a new job, which is consistent with the findings of a meta-analysis that examined gender differences in initiating negotiations.
A 2015 study by Monash University’s Andreas Leibbrandt and University of Chicago’s John A. List further suggests that our Business Practice scenario could be especially challenging for women. The researchers manipulated a job advertisement, with one version of the ad indicating the salary was “negotiable” and another merely stating the salary and leaving the possibility of negotiating ambiguous. While there was no gender difference in negotiating when doing so was explicitly invited, women were considerably less likely than men to negotiate for more money when it wasn’t. That finding may be particularly salient here, where negotiation is effectively discouraged by the manager.
The 94 responses we received, which ranged in length from 2 to 518 words, were rated on average about 11 times each on a 1 (“Strongly disapprove”) to 7 (“Strongly approve”) scale. A histogram of all ratings is shown below.
Distribution of ratings for all responses
1 = strongly disapprove • strongly approve = 7
As has been the case with past Business Practice scenarios, the average rating, 4, was pretty modest, which I interpret as a reflection of the scenario’s difficulty. Of the 65 responses that had five or more ratings, 69 percent came from men, but answers from women were rated considerably higher (4.47 average versus 3.98 for men).
To give you a sense of the range of ratings, below are a few responses spanning the range from unfavorably rated (10 percent in the distribution, meaning that 90 percent of responses were rated better), to average (50 percent in the distribution), to favorably rated (90 percent in the distribution). All of these responses had 5 or more ratings.
- 10 percent response
- Answer: “I am not able to accept this promotion without a raise.”
- Average rating: 2.36
- 50 percent response
- Answer: “Take on the new title and promotion despite the lack of a pay increase. Opportunity and experience are more valuable than the higher salary. Later, as business conditions improve, if you continue to be underpaid relative to the value you create, have that conversation with your manager—or leave for a job that compensates you appropriately.”
- Average rating: 4.38
- 90 percent response
- Answer: “Hi [Boss’s name],
First, thank you for the promotion and the vote of confidence in my abilities as a manager. I’m confident I will continue to perform well as I take on these new responsibilities.
I fully understand that the budget is tight at the moment, but I also believe that I will create more value for the firm in my new role, and deserve to be compensated accordingly. While it is fair to push back a raise at this time given the state of the market and the company, I would like to have an agreement in writing to raise my salary [x percent], in line with the typical progression for promotion to my new role, by six months from now. At that point, I will have fully grown into the new role, and the company is likely to be in better financial position as the economy continues to rebound.
Please let me know if this is possible. I am happy to discuss further and explore alternate arrangements if necessary.
- Average rating: 4.77
- Answer: “Hi [Boss’s name],
To examine more systematically which elements lead to more favorable evaluations, I coded the responses on various dimensions. First, I examined the effect of turning down the promotion, an option explored by a small minority of respondents. The 7 percent of responses that declined the promotion were evaluated quite negatively (2.61) relative to other responses (4.23).
Next, I examined the responses in terms of whether respondents intended to negotiate immediately (26 percent) or later (4 percent) or not at all (70 percent). Responses that called for immediate negotiations were rated more favorably (4.51) than intentions to negotiate in the future (4.18) or not at all (3.96).
Respondents who were ready to negotiate rated higher
Evaluators gave better marks to respondents who wanted to negotiate the terms of the promotion offer immediately, and to those who laid out conditions for accepting.
Respondents who indicated they wanted to negotiate:
Sixty-three percent of responses accepted the salary, with 50 percent of the responses conditional (e.g., “I understand the budget constraints and am willing to be a team player. Can we please discuss what the raise would be and when it would it be effective?”) and 13 percent of the responses unconditional (e.g., “Thank you!” or “Hmmm OK. I appreciate the new title and responsibility and recognition that comes with it, but I’m disappointed that it doesn’t come with a commensurate salary increase. Thanks for the promotion and I’ll certainly take it, but I’d be lying if I say I’m not disappointed.”). The remaining 37 percent of responses never accepted the salary or the promotion. Conditional acceptances were viewed most positively (4.43), followed by nonacceptances (3.99), and finally unconditional acceptances (3.21).
Finally, responses varied in whether they attempted to leverage the new title as a résumé booster that could be used in the search for other opportunities. (E.g., “Gladly take the position. Start looking for opportunities elsewhere within a year to capitalize on your new, stronger résumé.”) The 22 percent of responses that highlighted external options were rated more favorably (4.37) than responses that focused more internally (4.03).
Now for the top three responses! I’ve listed names and backgrounds when I’ve gotten permission to do so.
3 Response: “I would attempt to negotiate for a raise. If they didn’t budge, I would take the promotion and new title . . . and then begin looking for a lateral role at a new company where I could get my raise. Unless this was a small company with ownership that had a proven track record of taking care of employees, I’d have little faith that my patience would get rewarded.”
- Average rating: 5
- Participant: Leslie DeChurch
- Background: Education
2 Response: “Thank you! I am very excited about the promotion and the recognition of my work over the past few years. I look forward to taking on this new team and continuing to produce strong results with my teams toward our goals. Obviously, I understand and can appreciate the financial uncertainty of the current environment. I also know that salary increases generally are most significant during promotion years, so I am concerned about what this could mean in terms of my compensation trajectory at this company. While I appreciate the reassurance of being rewarded once conditions turn around, given that I will be taking on new work immediately, I think it is appropriate for some measure of salary increase now. While salary increases across the board have been frozen, consideration should be given in cases of promotion and where additional responsibility is being taken on by managers. I believe this is important not just for me personally, but for us as a company in order for us to remain market competitive.”
- Average rating: 5.50
- Participant: Nena Bajaj
- Background: Education
1 Response: “Thank you. I appreciate your support, and all of the support my team members, peers, and colleagues have extended over these years. I appreciate the current challenges, and that the organization will ‘make it up to me down the road.’ However, I think it’s reasonable to define what that means in terms of timing and compensation. Given my direct impact on the organization’s performance, and growing potential impact, I think it is worth considering increasing my compensation by X percent before the end of the fiscal year in June (or the end of the first quarter at the end of March, etc.). Is that reasonable?”
- Average rating: 5.60
- Participant: Robert Mattaliano
- Background: Education
- Clearly this is a frustrating situation to be in, and losing out on a raise at this pivotal moment could have significant consequences for both short- and long-term earnings. Still, the ratings for this scenario suggest that declining the promotion is not a very good option. It risks coming across as selfish, or even petulant, at a time when the company is struggling. But worse, it takes all your other options off the table. If you accept the promotion, you can choose to negotiate for a raise or simply hope the company will keep its word to make it up to you. Without the promotion, there is no raise.
- Although your boss attempts to shut the door on salary talk, a significant minority of respondents nonetheless felt comfortable with some measure of negotiation, and their higher average ratings suggest many people find that approach reasonable.
- As our top response shows, it’s possible to acknowledge the company’s difficult position but still hope to extract concrete promises about the timing and magnitude of a future raise.
- Don’t forget that a promotion isn’t valuable solely for the raise that (usually) accompanies it. Your new position will enhance your value on the job market, so as you evaluate this offer, consider how it will affect your future opportunities.
George Wu is the John P. and Lillian A. Gould Professor of Behavioral Science at Chicago Booth.
- Katharina G. Kugler, Julia A.M. Reif, Tamara Kaschner, and Felix C. Brodbeck, “Gender differences in the initiation of negotiations: A meta-analysis,” Psychological Bulletin, December 2014.
- Andreas Leibbrandt and John A. List, “Do Women Avoid Salary Negotiations? Evidence from a Large-Scale Natural Field Experiment,” Management Science, September 2014.
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