Imperfect Leader #2

Everything you wanted to know about money but were afraid to ask

Sep 21, 2021

Knowing how to deal with money is a crucial skill for a serious manager. That means offer calls, promotions and salary negotiations.

It’s not comfortable, so it’s very tempting to let our partners in HR and Finance deal with it. But it’s part of a manager’s job. It comes down to:

Knowing how much our team members are paid.
Participating in setting compensation levels and policies.
Being the one who communicates to our reports everything that affects their employment (offer letters and dismissal conversations) and compensation (negotiations, raises and promotions).
Looking at money dispassionately, and handling surprising revelations gracefully.
Being a champion for our reports.

Let’s dive into these topics.

Knowing the salaries

As managers, we have to know about our reports’ salaries, as well as how to handle raises and promotions, for a few good reasons:

Employees go to their managers for raises and promotions. Failing to take action or give answers erodes their trust in us, which in turn harms our relationship - which is a bad thing.
In tech, a big part of management is helping employees progress professionally. It’s harder to do that in a way that’s disconnected from compensation.
No one else has more of an incentive to advocate for our reports than we do, or more of the context that is necessary to decide on raises and promotions. We may need to work with Finance and HR to make things actually happen, but that’s very different from delegating the task entirely on them.

Setting the policy

HR can help decide on compensation levels based on market research and company policy. But we should have our own sources too. That usually comes from experience in the job market, as well as a solid network of other managers and leaders in the regions where our company operates.

We must always be aware of how much our reports need to be paid to stay on, how much can we get them above that, if anything, and what it would take to get there. It’s also useful to keep in mind what kind of company and what kind of role might get them better compensation, if any.

Being in the room

Even if we don’t have much decision power, we need to be the ones communicating things to our reports.

Receiving offers, getting promoted, and being let go are extremely significant and emotional moments in people’s professional lives. Who should be in the room when they happen? Who should be talking to them, hearing them out, and looking them in the eye as they go through these pivotal moments in their career? That’s us. Even if we work for companies that insist on having someone from HR run those conversations, we need to be in the room. Speaking if possible. That is very important.

Anecdote time.

HR took care of those things at the place where I had my first management job here in Berlin. As a consequence, there was a certain disconnection between my coaching and mentoring and the results my reports were seeing.

Later I reported to a Bay Area executive who took a more professional approach to management. “You have a sacred duty”, he said of the need to handle money on behalf of my reports. Jet-lag and caffeine exaggerated the dramatic flair of his words, but they stuck with me.

As managers, it has to be us extending offers, because the offer call is the foundation for our professional relationship with the employee. It’s an intensely symbolic moment that belongs to us and the person, not to Bob from HR.
We have to be the ones formalizing a raise or a promotion. Again, it’s a symbolic and bonding experience. We just got to the next stage together with that employee. It’s important to celebrate it together. Conversely, if the employee goes for a promotion that doesn’t happen, it’s our job to say so and explain why.
When letting someone go, we’re the ones who should break the news. Our reports deserve that much respect and consideration. Again, because we know them best, we can probably give more closure than anyone from HR. These conversations are never easy, but handled with care and respect they can be the touchtone for positive changes and good career developments down the line.

Being graceful

As new managers loading up the HR software for the first time to check on everyone’s salaries, it’s important to steel ourselves against shock. There are usually strange figures there. Things that don’t make much sense. Shocking differences. Well, real life is messy. Everyone is a special case given enough time. Many things can be a bit surprising but are quite normal and should be viewed with dispassion:

We may manage someone who makes more than we do. This should not be surprising. Managing is less and less a prestigious activity, and functional experts (individual contributors) are getting more of the recognition they deserve. Many companies now have separate management and expert progression tracks, where compensation isn’t tied to whether or not someone is a manager.
We may find important veterans being underpaid compared to inexperienced new joiners. The market may have moved since the veteran was hired. The veteran might not be advocating for themselves, or have a manager who can. The new joiner might have an important skill or trait we don’t know about.
We may well disagree with all the compensation figures, whether they’re higher or lower than we’d expect.

As a general rule, when we get access to this data, it’s because someone believed we were ready to handle whatever was in there. We should act accordingly. Anything we disagree with or don’t understand should be handled over the course of the next months, not at the very next management meeting. The very first thing to do is to seek clarification from our own manager, and take it from there.

Being a champion for our team

It’s a lot easier when salaries don’t have to be negotiated.

In a healthy company that cares about people’s professional development and has the budget to compensate career progression, people should not have to come to us to ask for raises. We should always know when it’s time to give them raises and promotions, why, and have those pre-approved by HR and Finance if necessary.

If we can surprise and delight our reports with raises that reward their advancement, and make it clear how we see that they’re advancing, we’re in a good place.

At the same time, it’s our job to advocate on behalf of our reports and get them the best deal possible at all times, while being mindful of the overall budget. Career ladders and compensation bands are our friends here. These usually come with skill / experience / achievement requirements. As long as the bands are in the HR system and we can demonstrate that a person has fulfilled their requirements, raises are as good as pre-approved. If bands don’t exist, we really should consider investing the time to make them happen.

There might not be a budget in really well funded companies. If there is one, we should learn as much as possible about it from our own managers so that we can understand the playing field and make recommendations accordingly.

At the end of the day, if we proactively get our reports raises in a way that’s consistent, fair, well documented, and both generous and sustainable, we’re in management nirvana. It’s not always possible, but it’s something to strive towards.

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That’s basically it. It’s not rocket science, just common sense, the ability to be dispassionate about money, and the willingness to get ourselves into those conversations.

In the end, compensation is a management tool like any other. An important one, which deserves special care and consideration, but a tool all the same.

Tactical advice

Tips for first time managers, or managers who don’t have access to compensation information yet:

Talk to your manager and HR partner about getting access to compensation information. This article might give you ideas about how to argue for it. If they’re not open, that might be a negative indicator about their management culture. Make it clear that you see this as part of a manager’s job, and your interest should be taken as a sign of how seriously you take your job.
Reach out to whoever is currently doing offer calls and offer to join the call, since you’ll be managing that candidate if they join. Learn how it’s done. Later you can offer to run the call yourself. This can be dressed up as a time saver for that person, who probably sees this as a chore.
Similarly for raises and promotions. Find out who does them and get yourself invited into the conversation, learn about it then offer to run them.
If no career ladder or compensation bands exist at your company, work with HR to create them. I’ll link to a site with example ladders below, which you can use as starters.

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