On my last blog, we discussed what to do when employees ask for a raise. There are a lot of reasons why employees will approach you about increases in compensation. So, the question is: How do you retain an employee asking for a raise when you don't have the resources to do so?
The answer is simple: Tell them the truth about your firm growth.
In the financial advisory business, and in a lot of other small businesses for that matter, compensation has more to do with company growth than is does with the value or experience of your employees. Don't get me wrong, you should pay a reasonable compensation for the position for which you are hiring someone. But if your firm is not growing or is not growing as fast as you anticipated, then increasing salaries is not always an option from a cash flow perspective. Therefore, your employees need to know this.
In my experience, I see an overwhelming number of business owners who will "hide" or fail to share with their employees the status of the company financials and their personal desires on growth, fearing that when employees see more information about the company, like expenses or owners' compensation, they will make judgments on it. In truth, the opposite happens.
