MBA2105 Q&A Wednesday: How much of a raise should I give my employees?

Let me tell you about Intuit QuickBooks. When I was starting out my business, I remember sitting at my desk late at night not working on my business but cleaning up numbers, tracking and reconciling payments and wondering how this became my life. But once I automated the admin side of things of my finances, those nights had disappeared and I felt a whole lot better. Outdo it with intuit QuickBooks QuickBooks is the trusted end to end solution that businesses rely on for getting paid, managing finances, paying employees, finding new customers and more. QuickBooks provides a team of AI agents and trusted experts, so doing it yourself no longer means doing it alone. Their payment agent gets you paid faster, their customer agent finds leads, follows up and secures more sales, and the accounting agent automates and categorizes transactions. Get your critical business jobs done with QuickBooks on the Intuit platform. Ready to save on new Tech? It's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Perks include Dell Rewards, free shipping, premium Support and more. PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals. Hey, welcome to the Hundred Dollar MBA Show. Business lessons you can count on every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company. I started my co founder back in 2014 and today is Q and A Wednesday. On Q and A Wednesdays we answer a question from one of you, one of our listener listeners. If you got a question you want to ask, just go ahead and email me over@omar00mba.net Today's question is from Maggie and Maggie asks. Hey Omar, I've been running my business for a few years now and my team has grown to five teammates. I've never given raises to my team but now the company is starting to make a profit and can afford some increments to people's salaries. How much of a raise should I give my employees? I want to compensate them and reward them for their hard work as well as prevent people from leaving. Hope you can help. Love the podcast. Appreciate your insights Maggie. Love this question Maggie, because it's a very practical question that maybe not a lot of people talk about. How do you give raises to your team members so that they feel like they're being rewarded for hard work and Loyalty, how much makes sense. How should they be rewarded for this raise? Is it about longevity? Is it about performance? Well, we get into all that in today's episode. I'm going to break down my advice when it comes to setting up your structure for giving raises to your team members. Things you should keep in mind, some exceptions as well as how you can make the whole process transparent to ease the pressure on yourself and set up expectations for your team members. Let's get into it. Let's get down to business. USAA knows dynamic duos can save the day like superheroes and sidekicks or auto and home insurance. With usaa, you can bundle your auto and home and save up to 10%. Tap the banner to learn more and get a'@usaa.com bundle restrictions apply. Every business deals with increments or raises for their employees a little bit differently. I'm gonna show you what I've tried and what works the best in my business. Let me just say off the bat that what I'm about to share really applies to full time employees. People that are spending 40 hours or more working with you in the company. Some team members might be contractors or be working part time. And you might want to have a separate structure for those team members because part time and casual staff is a little bit different, because the level of commitment is a little bit different. Having said that, you want to make sure that you revisit people's salaries to make sure that they're happy and that they're fair. So Maggie's direct question is, how much of a raise should I give my employees? Well, we like to tie raises and increments with our evaluations. Whenever we evaluate a team member, this is where the raises come in. And basically we have a percentage scale. It's not an amount of money, but more of a percentage of their salary. Now, I can't dictate what that percentage is for you because you need to see what you can afford and what makes sense for your business. But let's say, for example, your percentage is between 3 and 5%. So every time somebody is being evaluated, they are eligible for that kind of raise. And it's a range, and it's a range for a reason. Because if somebody's doing an excellent job, they're exceeding expectations, they should be at the top of the range in terms of the percentage. If somebody's doing okay, they've done some good things, but there's some areas they really need to improve in. That's somewhere in the middle of the range. And if they're doing the job where they're not doing it so bad, where they're getting fine, but they're doing a job where, hey, there's some major areas they need to improve in so they can continue to have a job. Then they're at the lower side of the range. And basically what we do is we outline KPIs for each department. These are simple KPIs that they have to hit that deal with what they do. Whether it's customer service, whether it's engineering, whether it's a design, they hit the KPIs, they hit their goals. That really dictates their increment or their raise. And this makes it super straightforward. You score, you're going to get rewarded, right? You do well, this is what you're going to get. And it gets discussed during the evaluation. Some companies I've seen just make it straight up like a scorecard. So say for example, a position has 10 KPIs. They say if they hit eight to 10 of those KPIs, then they're at the top of the range. They hit between six and seven, they're in the middle of the range and you know, three and above, they're in another range and that's where they kind of fall. So they kind of know already before the evaluation where they stand because they can just self evaluate if they hit those KPIs. Now there's one little thing that we do a little bit differently. If somebody is joining our team that is new, a brand new employee, we like to do frequent evaluations. In the beginning, their first year, we try to do an evaluation every three months. The reason why we do this is because it's very hard to know if somebody is actually great at their job, mediocre or horrible off an interview. In addition, if somebody is horrible at their job and you need to do something about it, you don't want to wait a year. That's a long time that's being wasted. A lot of time, a lot of money, a lot of customers might be losing. So that's why we have more frequent evaluations in that first year. It also allows us to give them an increment every three months. And it gives us a little bit of wiggle room on that starting salary so they have a chance to prove themselves and say, hey, I'm sure I can do the job. Okay, great, you're going to have a chance to get a raise every three months in your first year to show us that you're worth the salary. You're looking for. So it's a bit of a great way to negotiate a salary you can afford. They perform, they do well. You get an roi, you, you can give them a raise. I highly recommend making this whole process transparent with the department so they know maybe it's in your handbook, maybe it's in orientation, maybe it's even in the interview process where you tell them, hey, this is the starting salary. This is how we do increments. This is how you're evaluated. This is how you can earn x amount more every single year or every single quarter in your first year. This is a part of selling them. On being a part of your company. A lot of people just feel relieved when there is transparency. They know where they stand. There's no mystery. But I'm a big believer in giving raises in a range and based on performance. I'm not saying that people are only motivated by money. There are a lot of other factors that motivate your employees. Their job satisfaction, the workplace, the harmony, the teamwork, the things they actually work on every day, the mission that they're going after with you as a company, the work flexibility, all that kind of stuff. Right? But one of the factors if we're going to be 100% honest is, is financial compensation. And if that's tied to their performance, there's a likelihood just by human nature that if somebody wants something, they're going to work for it. And it's only fair that they get rewarded appropriately.

Valentine's planning starts now. Get ahead of the game with 1-800-Flowers xoxo sale and save 20% on gifts for the ones you love. For 50 years, 1-800-Flowers has made Valentine special by delivering millions of high quality roses with unmatched reliability. Right now, save 20% on premium bouquets all. All backed by their seven day freshness guarantee. This Xoxo sale ends February 5th, so don't wait. Save 20% at 1-800-flowers.com sxm. That's 1-800-flowers. Com sxm.

Now, this may not encompass all of your compensation. Some people, they like bonuses. In certain departments like sales, some people do commissions, some people do annual bonuses or Christmas bonuses as they used to be called. My only advice when it comes to these different options is to look at your business's finances. Make sure you can do this consistently and pay your team consistently. Because people don't like misaligned expectations. People expect something. If you say you do it one year or you fulfill it one time and then the next time it doesn't happen. You lose trust. So make sure that you can actually do it consistently year after year. Your business is actually making well over expected in terms of revenue and profit and that you can afford all these other incentives. You don't have to do them all at once. You can start to build upon them year after year as your business starts to grow and do better. And this is really an investment in your company, in your team, so you can get better work and get better products out there and just have a better valuable business overall. Well, there you have it. Thank you, Maggie, for asking this week's Q and A, Wednesday's question. If you got a question you want to ask again, just email me over at Omar MBA net. As you have noticed, we don't check share your full name. We keep it sort of anonymous so that way other people can benefit from your question and the lessons learned through the episode. And of course you get your question answered. There's one thing I need you to do right now and that's to share the podcast. It's the best way to support the show. If you find this show helpful in any way, the best way you can support us is to get on social media and share that you listen to the Hundred Dollar MBA show podcast. You can share our website link over at 100- MBA-NET. Over there they can choose where to subscribe on their favorite podcast app. Nice and easy. We make it super simple. Thank you in advance for doing that. Before I go, I want to leave you with this. Maggie made a good point in her question. When I read it out in the beginning where retention is really important, I find when you have teammates that stay year after year and they're treated well, that creates momentum, allows you to build upon that momentum. Your business benefits, your product benefits, your customers benefit. It's a lot of time and energy and money to replace people to find new employees. So if you have a transparent compensation program, this really, really allows people to see what to look forward to, what's in store for the future with you, and to think more long term. Thanks so much for listening and I'll check you in tomorrow's episode where we discuss my biggest tips when it comes to being interviewed on a podcast. I'll show you how to get on podcasts as a guest, how to prepare, how to be their best guest ever, and how not to be nervous and be yourself. We get into that in tomorrow's episode. I'll see you then. Take care.

Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.