That depends on how much one is risking by putting their boss on the spot for an out-of-band/ultimatum raise. People can get very vindictive in response to being forced by aggressive moves like that.
If they're paying you so low that you must have a thick raise, it is probably better to go elsewhere.
"Hey, Tom. ZipCo offered me a great position with a AB% raise. I really like the new role, but I'd prefer to stay here if we can make it work. What can we do to bridge the gap? Oh, by the way, they'd like an answer by Friday, but I'm sure I can put them off for another week."
That makes it clear that you have an offer, but would stay if the current company can match or exceed it without being too "in your face" about it. It's just business, most managers are not going to take it personally.
That might go over OK in small shops where the manager is the owner or very close to the top.
In reality, in a company of hundreds of people, that just isn't going to go smooth. Firstly because raises are performed in lock-step with annual performance reviews. Asking for a raise outside of the annual performance review time window really puts stress on the boss and casts the employee into a prima-donna.
Much better to have a frank discussion about salary if it is a problem and maintain an authentic dialog with the boss about career progression. If that isn't possible then jump ship, because it's only a matter of time before you're obsolete. The best way to keep oneself in "top-condition" as far as salary is to regularly interview and talk with potential employers and keep the professional network maintained. This way you know what you're worth and you can consider other opportunities on a regular basis in a way that is under your control.
Pulling a stunt where you force an employer to give you an "emergency" raise on your timetable might work once and for a short time at the expense of permanently damaging trust.
So I'm going to respond to one thing that stuck out to me, this is my anecdotal response to:
> because raises are performed in lock-step with annual performance reviews. Asking for a raise outside of the annual performance review time window really puts stress on the boss
so I used to think this was how things were done at my last job (mid-size ~150-200 employee company), this was the impression they liked to put out, but the reality was they would go out of their way to retain/raise people if they deserved it or were going to lose the employee (some people took advantage of this situation).
Personally, I'm not a fan of these (as you put it) "prima-donna" games unless I really think something is deserved/owed[1], luckily for everybody I was happy with my annual boosts so never did try them.
[1] I was once promoted outside of the annual cycle without asking
It's not that simple. Higher paid employees who received raises organically or by asking (based off of this article) are less likely to get cut compared to employees who threaten with separate offers.
I think "threaten" is the wrong word in an at-will employment context where the employee can be terminated at any time for any reason or no reason, barring exceptional circumstances involving discrimination. I'd rather view it as someone requesting a market rate salary, with proof of what constitutes market rate. Moreover, the employee didn't have to give you a chance to retain them at all. They already have an offer -- they could have instead told you that today is their last day and good luck.
If a valued employee came to me showing that he or she had received a large raise from another company and they really don't want to go but don't see how they can turn down the money, rather than resenting them I'd wonder (1) why were we underpaying a great employee at all? (2) why did we create a culture where they felt like they couldn't discuss this without another offer in hand?
