The raise that wasn't in the budget

Out there

Most owners treat hiring from outside as the safe bet. Fresh eyes, a proven résumé, and some other company already paid for the training. The research says the safe bet is the expensive one.

Wharton professor Matthew Bidwell dug through seven years of personnel records at a big U.S. investment bank, comparing people promoted into a job with people hired from outside to do the same work. The outsiders cost about 18 percent more from day one. That would be worth it if they were better. For the first two years, they weren't; their reviews trailed the people who came up from inside. They were also quicker to leave, on their own or otherwise.

So the person you promote is cheaper, and better sooner. And the person you pass over? Some stay. Many don't. When Gallup asked people who had quit, about half said their manager or company could have done something to keep them. Gallup puts the bill for replacing someone at anywhere from half to twice their yearly pay.

Half of them could have been kept. That's the number that stays with me, because it means most goodbyes start long before the two weeks' notice. And the conversation that might have changed the ending is rare: in LinkedIn's 2025 survey, 15 percent of employees said their manager had helped them plan their career in the last six months.

In here

I saw this one from a contractor's chair, which is a front-row seat with no vote. Picture a houseplant with a badge.

He was hired as a helpdesk technician. No level, just the title. Over seven years he became the expert on one of the company's key applications, because the business needed one and he did the work. The company had a systems engineer it never had to post for. Nobody updated the paperwork.

So he paid for his own certification exam, passed it, and asked his manager whether his role could catch up to his work. The manager was proud of him and said so. Then: there's no room in the budget for a raise, but we can change your title. I've managed IT budgets, and I know how reasonable that sentence sounds from the side of the desk holding the spreadsheet. He took the title. Within a month he had an offer at a fair market rate for the same expertise, and he gave his two weeks.

The counteroffer was a smaller raise and a promise that yearly raises would pass the outside offer in four or five years. The other company would be giving raises for those years too. He left. Plenty of people called him disloyal. From my chair, the feeling started on the other side of the desk.

Six months of searching turned up nobody who could do both jobs near his pay. They split it into two roles, posted the specialist at market rate and the helpdesk seat on its own, and replacing him cost more than double what he'd been making. Add training, and it was close to a year before the delays stopped. The history of how those systems were set up left with him. The notes were too scattered to pull together.

The cheaper version was sitting right there: give him the engineer role at a fair rate and hire a new helpdesk technician he could help train.

When I think about where that could have gone differently, none of it needed a bigger budget at the start. It needed someone to notice.

That's part of what Nexus is for. Rewind to his early years, with the company's skills on record. His job role says helpdesk technician and lists what that role asks for. As he learns the application, he rates himself, his manager rates him, and both sit next to the role's targets. Somewhere along the way, the screen says what everyone in the building already knew: this isn't a helpdesk tech anymore.

The capability heatmap would have shown something less flattering, too: one key application, one person who knows it. That's the moment to give him someone to mentor, so the knowledge has a second home, and to write the setup down in the project's notebook where the next person can find it.

When he starts studying for that certification, it goes in a development plan with a due date. The company sees it coming months ahead, which leaves time to plan for the raise instead of being caught off guard by the request. A career path shows him what the engineer role takes, so the conversation is about when, and the company is the one who starts it.

Nexus can't find money in a budget. What it can do is make sure the budget meeting knows what he's worth before another company does.

What to do Monday

Take one sheet of paper. For each person on your team, write two titles: the one on their paperwork, and the one you'd have to post if they gave notice on Friday.

Wherever those don't match, that's your conversation this month. If the answer is a raise you can't afford yet, say when, put a date on it, and write it down where they can see it. And if anyone paid for their own certification, pay them back. It's the cheapest raise you'll ever give, and the only one that comes with a receipt.

Sources

• Matthew Bidwell, Paying More to Get Less: The Effects of External Hiring versus Internal Mobility, Administrative Science Quarterly, published online December 27, 2011. Personnel data from 2003 to 2009 on 5,260 workers at the investment banking arm of a U.S. financial services firm. Summarized by Knowledge at Wharton, March 28, 2012.
• Shane McFeely and Ben Wigert, This Fixable Problem Costs U.S. Businesses $1 Trillion, Gallup, March 13, 2019.
• LinkedIn, Workplace Learning Report 2025. Survey of 937 learning and HR professionals and 679 learners; LinkedIn sells learning products.