In a recent presentation that I was making to a group of executives, I was asked for recommendations on how to deal with employees who are always asking for more money.

The challenge for most managers is the feeling of vulnerability when being asked for more money. You can avoid this if you have a system in place - one that is driven by goals, objectives and performance. This will also help minimize the risk and fear of losing a good employee when you’re not able or willing to hand out a raise, or if the timing isn’t right. Following are some tips:

• Establish a calendar-based performance appraisal system with agreeable goals and objectives.
• When you say no to a raise, it only really means no if you both “know” the reason. Is it budget, timing, poor performance, or is it personal? Give the real reason. Dishonesty builds distrust and disloyalty.
• Make it a positive experience. If you can’t give the raise, consider what other things you can do for that employee that may not require money.
• Avoid using the word “policy.” It makes you look impotent.
• And keep in mind that, in the normal course of raises and bonuses, you will rarely be in a situation where the money you give to an employee is truly life changing.