The Career Encouragement Blog

Concerned about your 401(k)? - Follow-up

If you think yesterday's post was a joke, take a look here for a little lesson on what happens with government authorities monkey around with private retirement funds, and remember:  "Those who cannot remember the past are condemned to repeat it."

Are you concerned about your 401(k)?

There's a little buzz going around the HR blogs about proposed legislation to eliminate 401(k) tax benefits.  I was going to write a post linking to them, but just found that Ann Bares has already neatly summarized them - read her posting here.  Ann and the others urge HR and reward professionals to pay close attention to this legislation. 

I'm urging you - the employee- to pay close attention! With the results of the recent national election, there's significant excitement about the potential for change in this country, but I don't think this is the type of change that you - the hard-working employees - are looking for.  I'm concerned about legislation like this from an individual perspective for the following reasons:

#1.  Government has many roles, but there are two clear priorities that must be assured before any expansion of governmental purview is considered:  balancing the budget, and securing national defense.  Our national leaders clearly have much work to do on these priorities before attempting to delve into personal money management.

#2.  The foundation of any national economy is personal savings.  Taxing 401(k)'s is a quick way to dis-incent people from saving.  The recent housing market collapse provides plenty of evidence what happens when personal savings rates drop.

#3.  With layoffs on the rise, the last thing I want to see happen is for another industry to go belly up.  The personal finance industry employs hundreds of thousands of white collar workers many of whom will lose their jobs if the government over-reaches into private retirement account management.  The new jobs that will be "created" will be bureaucratic paper-pushing assignments.

#4.  This nation has always been all about opportunity.  The freedoms and wealth we have today are a result of the magnificent sacrifices that were made by generations that came before us.  The results of the recent election are a testimony to what hard work and merit can do for anyone from anywhere.  For many families, the 401(k) has been a means of building assets and creating opportunities for intergenerational transfer of wealth that assures a future for grandchildren and those to come afterward.  Dis-incenting people from making sacrifices today for the betterment of future generations will disincent the trend of self-sacrifice that has benefited our generation.

Pay attention to this legislation - then call your elected officials and make your voice heard.

The Upside of a Down Economy

I was encouraged to see this Newsweek article about the potential positive benefits of the recent economic crisis.  The author notes that one "silver lining" is that:

"Amid all the difficulties and hardship that we are about to undergo, I see one silver lining. This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades. If we can kick those habits, today's pain will translate into gains in the long run."

This makes sense to me.  Year ago my husband and I enjoyed reading "Your Money or Your Life."  I particularly liked how the authors steered clear of the "frugality" mindset (which unfortunately comes across as cheap and stingy all too often) and instead presented a philosophy of "enoughness" as a saner practice for individuals, communities and nations.   It's a recipe for living a sound, peaceful life based on a strong foundation. 

The Newsweek article goes on to talk about how much of the United States' economic "growth" in past years has been on paper only - a house of cards that was waiting to fall.  While some of the financial practices embedded in our economic structures were ethically sound and sustainable, mixed in were practices driven by rampant greed and dishonesty.  It is unfortunate that when the negative practices ran their course and reached their predictable end - destruction - that the good practices have to suffer also. 

However, I am a firm believer that good always triumphs over evil (and some of what occurred on Wall Street over the past decades has indeed been patently evil) and that sometimes scrubbing out the evil requires a strong disinfectant that stings the rest of us a bit.  The Newsweek article concludes:

"We cannot keep preaching to the world about democracy and capitalism while our own house is so wildly out of order.   It's a fundamental American belief that competition is good—in business, athletics and life. Checks and balances are James Madison's crucial mechanisms, exposing and countering abuse and arrogance and forcing discipline on people. This discipline will be painful for a country that has gotten used to having it all. But it will make us much stronger in the long run."

Here's hoping that the current economic crisis causes us all to think about what is "enoughness" in our lives  - both individually and collectively - and together to resist building our nation's economy on air and image.  This time, let's get it right!

The Paycheck Fairness Act

Ann Bares has an articulate and thoughtful post on the content and potential ramifications of the national Paycheck Fairness Act.  While government intervention to equalize pay across occupations despite market demand may sound in theory like a nice, progressive thing to do, it has potentially detrimental implications for the workplace. 

Ann notes:

"I don't deny that gender pay differences exists; in fact I've posted on this topic before.  I do believe, however, that the influences behind gender based pay differences are varied and nuanced.  And my 20+ years of experience in compensation convinces me that aiming an instrument as blunt and misguided as the Paycheck Fairness Act at U.S. pay administration practices will have consequences that are more harmful than good - particularly in its aim to negate the impact of the market.  I see the market performing an important task for society in exerting its influence on pay.  The market drives pay differences for a purpose, the purpose of meeting society's demands for different kinds of work and contributions.

Ann goes on to explain the value of market-based pay (as imperfect as it may be at times) in situations such as the United States' current need to attract more students to the science and engineering fields.  Simply paying women in non-scientific jobs on par with men in scientific jobs may sound nice on the surface, but harms the greater good overall by unduly emphasizing work tasks that don't drive the economy in the same way.

I've dealt with enough unhappy employees to know that pay alone does not drive worker satisfaction.  And most employees want to truly pull their weight - mature individuals don't tend to feel as confident about themselves and their contributions to the organization when they have an inflated title or salary that is not congruent with their cost to the business.  For these reasons, both women and men should be opposed to falsely assigning value to a job in the name of fairness. 

Read the rest of the posting here then take some time to leave either me or Ann a comment and let us know your thoughts!

The All-Important Salary Question

Ask a Manager has a great posting about how to answer the all important question about your salary requirements.  I like her advice, and I think I offer additional good advice in the comment I left on the posting:

"I think many folks get scared of the salary question because it feels so very personal (most of us have hangups/issues with money, right?). That's why the key here is to treat it like a business question rather than a personal question. I am in favor of Ask A Manager's point that the candidate should do some research. With the salary calculator on hotjobs.com you can get a pretty reasonable range for most jobs. Then when the salary question comes up you're not answering personally about your own finances, but you are able to say something like, "Based on my market research, positions at this level in this industry, with this scope of responsibility typically pay between $XX and $XX and that range is acceptable to me." Then follow up with a business question: "Is that within the range you have priced the job at?" If you've done your research and your price range is accurate, they will be impressed! If they get cagey with you about their range and aren't forthcoming, you are going to learn a LOT about whether you really want to work there or not!"

Read here for the details!

Total Compensation

It's important to consider "total compensation" when evaluating a job offer and not just base salary.  For example, if you are making $40,000 per year at your current company and you are offered a job at anoter company for $44,000, on the surface it looks like a good deal - a 10% raise in base pay.  But  before you leap, it's important to factor in the cost of health benefits, the amount of paid vacation and holidays, any waiting period on getting a match on your 401(k) contributions, etc.  When you lay it all out there, it's possible that what appears to be a 10% raise is a wash. 

There are plenty of tools available on the web to help you compare two job offers - here is one example and another.  Be sure to factor in every possible benefit into your comparison.  Ann Bares over at Compforce notes that a new benefit is on the horizon for workers in Japan - Heartache Leave.  It's interesting to me that the older you get, the more time off you have available.  And I thought the drama would settle down as we got older and wiser!

Adjusting to Income Loss

I have written before that more money will not make you happier.  However, a suddenly reduced income can certainly cause an enormous amount of stress.  Despite our best career planning, forces beyond our control can leave us feeling financially vulnerable and stressed.  Some situations might include:

• A layoff
• A business downturn that leads to management asking everyone to take salary reductions
• A job search that goes on longer than you expect after a life transition like moving or graduation

these are normal life circumstances in a shifting, global economy.  But when they happen to you they feel completely personal and very stressful!

Extension researchers at the University of Minnesota have put together a variety of resources that can help you understand and deal with these circumstances.  This is a very comprehensive and useful site.  If you or someone you know is adjusting to a suddenly reduced income, check it out and see if you can find some encouragement to help you get through!

Asking for a Raise

Ann Bares has a great posting on Why Managers are Afraid to Praise Employees.  One of the reasons is because they are afraid that the employees will then ask for a raise.  Based on my own experience as an HR Consultant, this is a very realistic concern.  I have witnessed first hand numerous occasions where a manager has complimented an employee on a particularly well done project, and instead of thanks she is hit with a request for money. 

The request may be direct such as, "I'd sure like to see those words backed up with an increase in pay."  Or it could be indirect such as, "Well I sure do a lot around here for what I'm paid" and "Hmmm.  Words are nice, but something in my paycheck would mean more."  While the indirect method is more annoying, both responses to a sincere compliment are frustrating to a manager and can lead to a fear of praising employees. 

So how can you ask for a raise if you are certain that you are doing a good job?  Let's look to the advice that the experts are giving the Managers, and see how you can use it to your benefit as an employee...

In response to a Manager's fear of praising an employee lest he ask for a raise, Ann says: 

"A frank and factual discussion of how an employee brings value to the table, and what it takes to augment that value, is not something you can avoid by simply holding back praise."

In the original article Ann cites, Liz Ryan adds further detail saying:

[The argument for more money] "is easily countered if, when an employee asks about a possible uptick in pay, you share with him or her the financial drivers for your business. If you praise an employee and her response is "Thanks for the praise, now can I have a salary increase?" you can show her how the firm's operating expenses and its revenues tie together—and most important, let her know the specific results that would make bigger salaries possible. Those might include an increase in sales, a reduction in costs, or both. The more specific you can be, the more your employee will understand where the dollars in her paycheck come from, and what she can do to influence her earning power."

If your read my prior postings on asking for a raise and getting the salary you want you'll quickly recognize that the conversation has similar elements regardless of which side of the table you are sitting on.  The secret for you as the employee to know is that many managers are not particularly skilled at having these types of conversations with employees.  Don't believe me?  Check out the comment's section on Ann's posting. 

The key, then is for you as the employee to lead the conversation in a productive manner and help make it easy for your manager to talk to you about money.  How can you do this?

1. First recognize that timing is everything.  A conversation about money is not one to have "on the fly."  Plan it out.
2. Second, don't expect "tit for tat."  If your boss gives you a sincere compliment, give a sincere thanks in return and bask in the joy of doing good work.  Don't respond like a first-grader with "so what will you give me..."
3. Third, be realistic.  People make more money when what they do for a company is a) mission critical, and b) hard to replace.   If you are in a position where you can be replaced by a temp tomorrow, it's hard to justify higher wages.  Also, be realistic about your company, your industry, and prevailing market wages for the work you do.  It's a new world and seniority rarely pays any more.
4. Fourth, closely related to #3, be prepared to demonstrate how you will contribute at a higher level in exchange for an increase in salary.  A salary increase is about expected future productivity, not just a reward for past work.
5. Finally, have an agenda for the conversation and share it with your boss.  Based on #1 and #2 above, schedule a mutually convenient time to talk about salary.  Have an agenda - maybe 3 or 4 bullet points - on a piece of paper, and give a copy to your boss at the start of the meeting.  This helps ensure that you will mention the key issues that you have thought of in advance, and it helps your boss do a better job of responding instead of sitting on edge wondering what surprises are going to come up. 

If you take a thoughtful, collaborative, business-focused approach to the conversation, you will have a  much higher probability of success than you will with a sly comment in response to a compliment. 

Best wishes, and please let us know about your experiences and successes in asking for a raise!

How to Ask for a Raise

In today's business climate, knowing what you are worth in the marketplace can help you do a better job of negotiating your salary when you start a new position.  Once you land your position, it definitely pays to be a top performer.  So how do you go about negotiating that raise when you have been a star performer all year long?  MSN's Career Page has a great article on 10 Pitfalls to Avoid When Asking for a Raise. 

I've often said that most people stand or fall on very basic professional skills throughout the life of their career.  This article is all about basics:

• Focus on the needs of your company/boss
• Make a connection between your work and the success of the business - focus on how you make a positive contribution to you company
• Listen more than you talk
• Make it a habit to spend less than you earn so that you don't project desperation

As end of the year results are being posted, take some time to think about what your worth in the marketplace was this year, and how you can improve it in the next year.  Your employer will benefit from this exercise - and so will you!

Show me the money!

Ann Bares over at Compensation Force writes about the Growing Employee-Employer Disconnect on Compensation.  She notes that the workforce today is more savvy and demanding about compensation policies and practices, and a "because I said so" approach to doling out comp just won't cut it anymore.  She advises organizations (i.e, HR Reps and Managers):

"[we have] an employee population that is more inclined to challenge and/or disbelieve an employer's pay data, practices and policies than in the past.  We - as HR and reward professionals - need to appreciate and be prepared to respond to this challenge, and I think one of the best tools is transparency.  I'm not talking about necessarily sharing everyone's personal compensation information with everyone else, but rather openly sharing how the pay program is built, where the data used to build it comes from, how it is designed to operate, and what its philosophical underpinnings are meant to be.  And - certainly - I think individual employees should fully understand how the program applies to them (i.e., their salary range, etc.).

I love this advice because it advocates that both organizations and individuals have a responsibility to be savvy and transparent in the comp arena.  If an organization is "secretive" about pay practices, and employees are focused on personal financial desires rather than trying to connect to the marketplace, it's a recipe for disaster in the relationship.  But if both are focused on market data and the demand for particular skill sets, they can have a productive conversation about results and rewards.

Just imagine what we could create together in the workforce if companies were transparent in their pay practices and employees had clear, reasonable, and business-savvy salary expectations!