Why is offering even a small raise so unpalatable?
I've been through so many cycles of: work 1-2 years on the same domain (or product), finally achieve mastery of all its components: infrastructure, dependencies, dependents, product vision, to the point where I can give detailed and relevant assessments on the future planning of whatever I'm working with.
Whenever I get to that point my salary stagnates, I need to change teams or domain, or company, to get a decent bump (10-20%), if not I will be stuck on the forever cycle of either aiming for a promotion or getting 2-5% raises/year.
It looks so stupid from the factory floor side, when I'm finally a master of what I'm working with I get devalued. When we hire a new senior+ engineer they will get a similar or higher salary than I have. That will naturally push me to search for something else.
I simply cannot understand on an organisational level how can not giving raises but paying premiums for new hires is sustainable or even in the best interests of said organisation... I have never got a good answer from CTOs (or other C-level executives).
Two examples to illustrate this. Back in the 2000s, I got an offer from a larger corporation, for 25% more than what I was making at the time. Told my then manager and his counter was a 5% raise, plus a not quite moving “we are all a family here” speech. It wasn’t only me though, at least ten other engineers left in a few months, all were offered between 3% and 7% raises. The team was eventually disbanded and people were reassigned to other projects. After some years, someone told me that they simply didn’t have the budget.
In the late 2010s, while working at a large multinational, I asked for a raise. At the time, I was repeatedly told that the project I was leading was, by far, the most impactful of the whole division, so I thought I would deserve it. Manager went to HR they recommended that I shouldn’t get a raise, since I was doing “well” already, according to their salary charts. Now, my manager could have fought it harder, but the disconnection and power over budget HR and higher ups have, made it so difficult and dragged for so long, I ended up leaving.
Instead of telling your employees "no" you can tell them "ask again in 6 months" because of the "budget process" or "headcount approval" or "appraisal process" or "salary bands" or "fixed pool for raises" or some other nonsense, as a soft way of refusing their request. Junior managers will be able to deliver that message sincerely, because they genuinely believe it. Maybe the company finds there's a good chance the employees stay around.
Of course, if the job market favours workers this tactic doesn't work any more. But how many companies are agile enough to respond quickly to changing employment market conditions?
As a manager it's your job to wheel and deal within that constraint. Eg turn a vacant role into a less senior position to free up budget for keeping a valued team member.