Are Counteroffers Counterproductive?

What is the timing?

If your employee announces that he has accepted an offer, he tells you that he has made his decision, has taken the offer, and is ready to move on. Suppose you didn’t already have an indication that your employee was unhappy. In that case, if he hadn’t already come to you seeking more money or career opportunities or voiced other concerns, you probably weren’t doing a good enough job keeping the door open to communication.  In this case, a counteroffer is likely to be counterproductive.

On the other hand, if your employee indicates that she has a new offer that she has not accepted and is taking the opportunity to talk to you about job-related matters, there may be a good reason to extend a counteroffer.  If you have built a culture of safe communication, you may be able to resolve the issues that were prompting your employee’s job search.

It could be the money, but it’s likely more than that.

Nobody satisfied with her current job looks for another one. On some level, your employee thought she could do better somewhere else. Even passive job seekers eyeing a competitor’s unsolicited offer are looking for something their current employer isn’t offering.

If an employee considers accepting a job offer for purely financial reasons, a solid counteroffer may be just the fix to keep her on board. But these situations are rare. Money is important but not usually the primary reason people leave.  There are problems it simply can’t resolve.  Even with a salary increase, if she feels she’s outgrown her position and sees no career path in the organization or has an irreparable relationship with her manager or coworkers, she will likely end up quitting not too far down the road.

Address the real reasons an employee wants to leave.

Get to the root causes of why your employee feels the pull to leave, whether a counteroffer will cause him to stay, and for how long. After talking with him, you might discover there are things you can do. Can you assign more challenging projects, provide greater scheduling flexibility or better career opportunities? Can you improve work/life balance, make changes to noncash rewards like vacation days or training and continuous learning opportunities?  The key is to look for ways to improve what you can offer your employee rather than just increasing cash compensation to match a competing offer.

It could be a short-term fix.

A Robert Half International survey found that employees receiving counteroffers remain with their employer for less than two years on average. You have to decide what it’s worth to you.  Retaining a valued employee for even an additional year or two could give you time to develop current staff or focus your recruiting efforts on finding new talent.

Evaluate realistically.

Evaluate the wisdom of making a counteroffer based on the employee’s performance, value to the firm, and how her leaving might impact its succession plan. Has he truly outgrown his position, so it’s time to let him go?  Is she too embittered toward the organization that it’s unrealistic for a good relationship in the future?  Are you just trying to avoid change?

Ultimately, it’s a judgment call.  If you can deliver your employee’s requests or change the situation that made her want to leave, it could be worth making a counteroffer—especially if she is a high performer or in a critical role. 

However, it’s essential to be honest with yourself and the employee about what you can and cannot deliver to remedy the situation. Suppose the offer doesn’t address what’s driving an employee to leave. In that case, if he wants assignments, recognition, a working environment, or a leadership style your company can’t provide, a counteroffer will only prolong the inevitable and ultimately work against you. Overpromising is never wise. Setting unrealistic expectations and leaving them unfulfilled erodes your credibility with your employees.  They won’t believe you’re committed to them and, in turn, won’t be committed to you.

Do you need help retaining valuable employees?  Ellen Warden works with BV/LS practices around the country to align their HR solutions with long-term objectives. You can reach Ellen at WorkPlace Synergy.