There is a particular kind of discomfort that comes with this moment. An employee asks for a raise, and on paper, the request makes sense. They have been with you for a while. They are reliable. They do what you ask. They show up right on time.

And you are faced with a difficult decision. Because there is a difference between meeting expectations and exceeding expectations. For the sake of this blog, we will trust that you have done bi-weekly one-to-ones, clearly conveyed your vision for them and their role, and that they have agreed they are on board with that vision.

Loyalty matters, but it is not the same thing as value created. An employee can be consistent without being impactful. They can be loyal without being proactive. They can meet expectations without expanding what is possible for the business. And when you own a small business, employees that just meet expectations are often hard for us to understand and relate to.

This is where many CEOs start to second-guess themselves. You don’t want to feel stingy. You don’t want to dismiss someone’s effort. But honoring effort does not require misaligning compensation. So, what do you do?

When You’ve Already Poured Into Them

In these situations, the gap is rarely about missed tasks. The work gets done. Outreach happens when you ask for it. Support is provided when it’s assigned. The employee shows up and checks the boxes. What’s missing is ownership. Again, as owners, we are used to going above and beyond, finding solutions before a problem arises. And if one does, we immediately fix things. When someone does not step into that space, the role remains transactional. So, what do you do?

This moment feels heavier when you know you have invested deeply. You have mentored them. You have given guidance weekly. You have created space for feedback, growth, and support. You know you are pouring into their cup. That makes it harder, not easier, to decide what to do.

Because at that point, the lack of growth is not about lack of opportunity. It is about choice, readiness, or capacity. And that is uncomfortable to sit with as a leader who genuinely cares and is often bewildered by an employee who is happy to coast by on the status quo. In moments like these, I find myself questioning loyalty versus ownership of position. Of meeting expectations versus exceeding expectations. Is it enough that they are steady and reliable, but not actively expanding the quality of their role? So, what do you do?

Why This Moment Feels So Personal

This is not just a compensation decision. It is a leadership moment that forces you to hold boundaries and ask more of your team. Maybe they truly are giving all they can. And if so, is it worth keeping them by giving them the raise they asked for?

It challenges the part of you that wants to be liked, appreciated, and seen as generous. It presses on the fear of disappointing someone you care about or being perceived as an ungrateful business owner. Saying no to a raise does not have to be the end of the conversation. In fact, it shouldn’t be. This is an opportunity to clarify what growth looks like in your business and how raises actually work. It also gives you the opportunity to distinguish between loyalty raises and value raises.

A strong response anchors compensation to expanded impact. It makes it clear that raises follow initiative, innovation, and ownership, as well as tenure. It invites the employee to decide whether they want to step into that next level or remain where they are. That clarity protects both of you, because clear is kind. And maybe you have not been as clear as you thought you were. Or maybe your employee truly does not have the capacity right now. So, what do you do?

Leadership Is Holding Standards With Care

For me, I do a very honest evaluation of the value the employee brings to the organization. Even if they are not a go-get-them, fast-paced employee, is their steady presence contributing positively to the business? What would it cost financially, emotionally, and operationally to replace them? Are they neutral, supportive, or toxic to the culture?

If, after that analysis, I discover that their slow, steady, thoughtful attention is actually far more valuable than I first realized, I give them the raise.

If, however, I discover that they have lost clients, show up unprepared, or are coasting without accountability, then I do not give the raise. I show them what I discovered and put a clear plan in place for them to level up. After that conversation, some employees rise, take ownership, and grow. Others disengage and eventually leave.

Leadership is not about avoiding hard conversations. It is about holding standards with compassion and clarity at the same time. You are not a bad leader for pausing before saying yes. You are a responsible one for asking the harder questions and seeking the data to go with the raise

Final Thoughts from Your Favorite Accountant 🧡

Being a CEO means balancing people, performance, and sustainability. Raises should reflect growth, ownership, and impact not guilt, pressure, or fear of someone leaving because you told them no. When you lead with clarity, even difficult conversations become acts of respect. Your team will feel seen, valued, and heard when you approach these conversations with an open mind.

If you want financial support that understands the human side of leadership, here is how we help you:
✨ Daily bookkeeping
📊 Financial Advisory Workshops held quarterly
📘 The STOP Method™ book and DIY Annual Budgeting Workbook

👉 Because at the end of the day, cash flow isn’t luck, it’s strategy.