How to Reframe the Lack of Money Conversation (and Maybe Get What You Want)

This is the July 2024 Pragmatic Manager Newsletter, from Johanna Rothman. The Unsubscribe link is at the bottom of this email.

Years ago, as a director​, my VP, Fred, told me there was no money for raises.​

I looked at him and asked, “Really? No raise money? Even though all the senior managers just went for a week to do ‘strategic planning' at a fancy-dancy resort?”

Fred said, “Nope. No money.”

I wasn't done asking questions. “Even though you're doing some kind of big party at the user conference in a couple of weeks?”

He shook his head. “That's one of the reasons we have no money for raises.”

“But we need to keep the people,” I said. “That's how we can ship the product as often as we do.”

He cocked an eyebrow. “I don't care about retention,” he said. “Salary matters more than retention. I want people to leave so we don't have to pay them.”

Surprised, I asked, “Even though we won't be able to ship as often?”

“Yup.”

I was lucky. Fred and I had a frank—if disappointing—conversation. That's when I realized the money for raises was partly about the project portfolio and partly a cultural issue of what's important to whom. Let me start with the culture.

Rewards Reflect the Culture

Unfortunately, that organization's senior management was great at spending money on customer-facing events but terrible at planning for the future and managing risks. The company had trained its customers to wait for the end-of-quarter sale when we decreased prices—every quarter.

Worse, the company had no idea why things “took so long.” That was a problem of the Cost of Delay Due to Multitasking. I didn't know how to measure that Cost of Delay then, but I knew it existed.

As with too many other organizations, we spent more money than we anticipated before seeing the returns on that money.

However, even though Fred didn't consider retention, I asked for a different form of reward: personal book allowances and team-based training. (I knew I would not get approval to send people to conferences.)

Those rewards focus on personal and team-based learning, the culture I wanted to reinforce.

Fred did find a way to  “pry money out of senior management,” as he said, so I could offer those rewards.

However, even though I got what I wanted, those rewards did not make up for not giving people raises. And people left once they realized the company would not compensate them fairly for their work.

Although I “won” the battle, I totally lost the war. That's because management's attitudes toward the people who worked there were incongruent. Everyone could see through the excuses.

Congruence and Respect Matter

Every leader chooses where to spend money. Spending money on strategy decisions? Sure, that makes sense. (Although an entire week of strategic planning offsite is useless.) Spending money to reinforce customer relationships? Sure, that makes sense, too.

But not spending money on the people who do the work? That shows disrespect for the people doing the work. And it breaks the implicit promise organizations make to the people who work there. That action is incongruent with a healthy culture.

Even worse, Fred and the other senior managers could have solved this problem by changing the project portfolio to have more teams on fewer projects.

Change the Project Portfolio to “Find” More Money

While money does not grow on trees, managers can choose to fund fewer projects. Then, they can choose to add more teams to fewer projects. Assuming those teams collaborate, the teams can complete these fewer projects faster. (Read the newsletter about Flow Metrics to see more details.)

The customers were clamoring for three of this company's seven projects. I have no idea if finishing those projects earlier would have changed our cash position, but I am sure it would have.

However, an incongruent culture, where managers decide they are “more equal” than others, tends to create a toxic culture based on hierarchy, not valuable deliverables. Toxic cultures can succeed—as long as they pay people to stay.

This organization did not.

Reframe the Money Conversation to Responsibility and Choices

When managers decide to withhold raises, they don't keep one of their essential promises to the employees. And there are certainly times when companies must make tough choices about what to fund and when. However, that is always a choice.

If you worry you can't find enough money to do it “all,” first, rethink what you must do. Those are the challenging portfolio choices. Use Cost of Delay to decide which work will make you the most money fastest. Then, eliminate as many of the other projects as possible and assign more teams to the most lucrative work.

Then, decide who will get raises. Will it be the senior managers, the middle managers, or the people doing the product work? Will you ask anyone to take a pay cut?

Finally, have honest conversations about the company's situation. Consider asking everyone for their suggestions about what everyone can do.

But, years later, people always remember how you made them feel, even if they don't remember or know the circumstances. Be as congruent as possible and search for better decisions than Fred made. Managers take the responsibility for creating the culture. You can, even in difficult times.