A Cautionary Tale: Counter Offers

Bob has just turned in his resignation, handing you a paper with a single line of text; he is leaving in two weeks.  Cripes!  Bob is one of your best team leads, and his departure will leave a hole in your organization that will be hard to fill, especially in the short term.

Is there anything you can do?

_________________________

At this point the question of a counter offer will pop into every manager's mind who has ever faced this dilemma.  Give Bob what he wants and he'll stay - right?  Find out what's been offered and promise the same.  Problem solved?

Not by a long shot.  It's not that simple.

Bob may or may not decide to stay, but meantime other other discontented employees will note your response, the relationship with Bob has already been damaged by his resignation, and any new "arrangement" might create internal equity troubles.  Productivity and morale could be impacted, no matter what happens to Bob.

Your solution might even cause more problems for yourself.

What to do?  Let's look at the omplications of a counter offer from both sides.

The Employee Perspective

If an employee has made the decision to leave, and subsequent actions have progressed to the point where an offer has been received, then mentally they have already left.  Any internal debate they might have had over making a change has already been resolved, and they're comfortable with their decision.  They may even be anxious to leave, as the new employer offers a fresh start, with new challenges, new faces, increased responsibilities and of course more money.

They may be enticed to stay by increasing their rewards package, but you can't be  certain.  Their true motivation may remain an unknown, leaving you to deal with only what they are willing to disclose.

If the catalyst for resignation is not rewards (i.e., friction with the boss, perceived dead-end job, dated technology, long commute, too much travel, etc.) a counter offer focused on more rewards will miss the mark.

The Employer Perspective

If you extend a counter offer, it will become known and discussed.  Employees may get the idea that such is the way to get a better deal from the company - by threatening to quit.

Those who accept counter offers often leave within six months anyway - that's all the time you've bought yourself, as other unresolved issues would remain sources of continued dissatisfaction.  More money will not solve those problems, and typically counter offers address only the quick fix money issue.

Once an employee has resigned, even if later rescinded, their relationship with the company is forever altered.  It's unlikely that management will retain positive thoughts about the individual, even if the immediate boss still loves them.  Career prospects will have taken a body blow.

If you do extend a counter offer and it is rejected, the same internal damage will be felt as if it had been accepted - so you better be careful befor extending yourself.  In any case, the employee is no longer considered loyal, and thus can't be trusted to remain longer term.  They're considered "for sale."

Could This Work For You?

If an employee tells you they are thinking of leaving, vs. actually having an offer in hand, then you have more room to manuver.  But the company should examine how they deal with threats - because other employees will be watching.

However, if your world will end if Bob leaves, or you need to buy time until a replacement can be put in place or a project completed, you may wish to consider negotiations.

Caution: Line managers may advocate a counter offer more because their own lives are made difficult by an employee's departure, rather than the business impact of the separation.

Doing It Anyway

If you are planning to make a counter offer, prepare yourself in advance by:

•  Learning the nature of the offer you're competing against

• Ensuring your period of vulnerability is minimized

• Developing a backup employee as soon as possible

• Deflecting employee criticisms over favored treatment, dangerous precedents, etc.  Word will get out, so you should have a story ready that rationalizes your decision.  You don't want to face a host of "what about me?" calls.

For those companies who may have a policy that allows managers to consider counter offers, the approval process should be visible enough to ensure that the broader issues of business justification are discussed.  Personally affected line managers should not make the call.

A final caution: Like a fine aged whiskey you should only sip at this practice and savor the mutual gain, not gulp it down and feel the burn.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Createive Commons image courtesy of Leeks

Comments

[E. James (Jim) Brennan]

There is an old joke: "the simplest way to get a raise around here is to quit and get rehired for your old job."

Since tough times create such situations, it is important to have articles like this to prevent short-sighted knee-jerk responses that spin into chaos.

Having written quite a few articles named, "Counteroffers are Counterproductive" in The Day, I counsel against it, too. Being seen rewarding undesirable behavior (blackmailing management) simply encourages more of the same. It also activates interest among employees in collecting as many handsome offers as possible as often as possible, so they can parlay them into a big raise. That undercuts commitment, distracts attention, blackens your reputation on the street and focuses ee attention on constant alternate job-seeking rather than current job performance. Not good.

People really don't leave for money, although it is The Acceptable Reason Cited. So more money never solves the real issues. Simply letting your good worker go rather than attempting to fix cancer with a bandaid is actually the superior response. Then, you might get sufficient support to change the underlying problems that really inspired the star to leave. Buying time with cash never succeeds. You really DON'T want to know what some major employers do instead.

The successful hold-up artist never stays much longer, but the damage wreaked by counteroffers lasts forever.

[Juliana]

My experience with employees indicate that when you counter offer they get the bitter feeling that you have been underpaid them all these while and even if they do stay on, there is already the lack of trust there and eventually they just leave anyway.

One of the things that the friendly HR can do is make sure to compare the market to the internal especially when you are recruiting for the department and on annual review. I admit that I was spoiled by the seemingly 'unlimited' budget but it's cheaper to adjust salary over 6 - 12 months to arrive to the right market rate then to be without someone for a few months and spend money on headhunters/ads/recruitment process and retraining the new candidate. We do this for technical candidate though, so support team, unless you are outstanding... you are out of luck.

[Chuck Csizmar]

You make a good point, Juliana. Often there are no winners when a counter-offer is made, only degrees of loss. Even if you REALLY NEED that employee for the next xxx number of weeks / months, the working relationship would be damaged to the extent that recovery is highly unlikely.

[E. James (Jim) Brennan]

It can be even worse when you fall for the blackmail. Some really well known enterprises will pay the counteroffer demanded, smile sweetly, then wait until the cocky disloyal mercenary culprit's offer has expired, when their resume is no longer circulating, and then (after a carefully surrepticious search process)replace them after a public burning.

They all get their come-uppances, one way or another. Since what goes around comes around, the lesson that you don't humiliate the boss gets learned; and no dissatisfied employee thereafter ever allows word to leak that they are considering leaving, so managers find themselves suddenly abandoned without warning in the future without opportunity to prevent the quit or properly prepare for a replacement.

Counteroffers wreak havoc. They literally are a confession of error and admission of weakness. It's cheaper to have designated backups for everyone, cross-trained in advance... helps retention, too.

[Christine]

Really like the blog, appreciate the share!

[Bern Lefson]

All have made excellent points. Over the years when forced to make counteroffers I noted that what the firm got was a 3 to 6 month extension. It raises all the havoc already noted. I would offer one suggestion that worked. If you want a year from that employee offer a stay bonus instead. Then be sure to find a replacement or train a junior person to be ready to replace this employee.

I do not like counteroffers under these circumstances.