If a company has any cash flow whatsoever, the boss is making decisions about where to spend based on what the boss feels is a priority. Your salary isn’t the priority, so can’t really means won’t.
First of all the author of this article is a complete moron. A positive cash flow does not necessarily equate to profitability. A company could have a positive cash flow but also carry heavy debt and or carry large liabilities on their books.
I am reminded of the job I held many years ago as the “finance director” (read – full charge super bookkeeper - the payroll, AP, AR general accountant, HR person) for a small family owned private social work and home health care company. The husband of the owner was my boss and he had no finance or accounting background whatsoever and his wife, the owner was even more clueless and for years this company’s books were a real mess – they didn’t even know what was actually in their business checking account at any time live alone whether they were making a profit or not and that the previous “bookkeeper” had been embezzling and they didn’t even know it, were completely clueless until I found it. After many, many long hours, many late nights, I finally whipped things into shape and started providing them with monthly P&L and Balance Sheet statements along with reconciled bank statements and a weekly and monthly projected cash flow analysis. I remember my “boss” Mel (who was a really sweet guy but not all that financially savvy), after several months of providing these financial statements, started questioning me how it was possible that the P&L statement had been showing a loss when the bank statement showed a positive balance. He questioned that my financial statements couldn’t be right since their checking account still had a positive balance (Headbang!). I had to sit down with him and for many hours over the course of several days tried to explain the basics of accounting, of accrual accounting, of carrying liabilities on the books, how to read a P&L, etc. He still had trouble conceiving that just because they had a positive check book balance – a positive “cash flow”, how they were still losing money. It wasn’t until he and his wife brought in a new outside accountant from a well respected CPA firm, who reiterated exactly what I had told them and commended me for doing such a good job. Did I get a raise? No. LOL!
So is the author of this article much like my old boss Me? Is he really suggesting that a company should put every dime they have in terms of any positive cash flow at any given moment (or even all their profits in any given year) into doling out raises?
And FWIW, any business that does this will not be in business very long. For a business to survive (and continue to employ you) and hopefully grow and expand, giving you opportunities for advancement and create job opportunities for others, they have to do things like build up reserves for times when their sales or profits go down or when they have to invest their capital in improvements such as new equipment or R&D or to expand their market reach, etc. Those also cost money. Salary increases are not the only thing a company has to spend.
Since your compensation always reflects the minimum your boss believes you’ll accept, when you hear this lie, it’s a signal that you need to renegotiate the compensation agreement you have with your boss.
Again – BS! If the company you are working for only is paying you the minimum they “believe” you are willing to accept; 1) you are a moron for accepting it if in the job market you are actually worth more and 2) they will not retain good workers and will eventually lose them to competitors, spending more in hiring and training costs in high turnover rates than they save by low balling on wages. And I would argue that it is a fallacy that your compensation “always” the minimum. The idiot who wrote this article doesn’t have a clue and IMO, is probably way over compensated. I would also mention that there are other things other than just your hourly wage or salary that factors into your overall compensation package.
Let’s say that the health insurance premiums your company pays goes up by 10% but the company decides to only increase your payroll deduction by 5%, absorbing the other 5% by what the company pays. Guess what? You just got a 5% increase even though your gross and take home pay didn’t change. Many employees only look at their weekly paystub and forget to factor in company paid benefits as being part of their total compensation.
2. “Your raise is above average.”
If you’re in an organization in which the compensation for everyone in the group is pulled from a set amount of money, there’s a good chance that the boss is describing almost everyone’s raise as “above average.”
What I think he “might” be talking about here is an employee evaluation system commonly referred to as the “vitality curve” (or forced ranking, forced distribution, rank and yank, quota-based differentiation, and stack ranking) made famous or infamous by Jack Welch at GE.
http://en.wikipedia.org/wiki/Vitality_curve
This was popular for a time in many big corporations (GE, Enron, Microsoft and others) but it has very much fallen out of favor. Microsoft and many other have recently abandoned it. Some companies use a rather modified form of it like the one I work for. But at the end of the day, when it comes to annual raises (if the company you work for even decides to grant annual performance or COLA raises at all – and I’ve worked for quite a few that don’t – they only give raises out based on longevity or commensurate with an actual job promotion or a measurable metrics like production or sales goals or a measurable increase in skills), the company most like (if they are smart and manage their finances well) has an overall annual budget for salary increases. That means if there are a high number of high performers who merit raises, that piece of the pie gets sliced among them all so your share will be smaller.
Companies that employ nonunion labor are exquisitely sensitive about anybody sharing salary information, because such sharing inevitably makes somebody feel that he or she is being slighted.
Bosses therefore tell this lie because they’re afraid that if you knew what your coworkers were being paid, you would quit in disgust.
Oh. I see. Only companies that employ “non-union” labor are at fault? Only non-union companies lie to their employees? The Unions don’t lie as well. Gee. I’m seeing some real “pro labor union” bias here in this piece and am surprised no one else has picked up on it.
There are many very good reasons why you don’t want to discuss with your co-workers what you make. For one thing, you might actually be worth more than one of your slacker, marginally performing co-workers who just happens to have the same job title as you. Do you also tell your co-workers how much your monthly mortgage payment is?
And what if while discussing with your co-workers how much you make, rather than finding out you are being paid less (and quitting in disgust), you and your co-workers find out that you are making more? What then? Are you supposed to go to your boss and demand that everyone you shared how much you are making; should they get a raise so and just because they should make the same as you, or are you going to volunteer to take a pay cut to make everything “more equal”?
I could go on and on, there are so many other things completely wrong, factually incorrect and misleading in this article. It sounds like it was written by someone who spent last summer camped out at OWS rallies.