Counter Offers – Are they ever a Good Idea?

Every manager dreads the day a great employee drops the bomb that they’re leaving the Company for another job. In our current economic environment, many workplaces have hiring freezes or hiring delays making it painfully difficult to replace departing employees.

In a recent study, one in five executives admits their companies have made more counter offers in the last six months. Nearly 40% say the main reason for making a counter offer is to hold onto employees with hard-to-find skills, while 27% say they want to retain long-term employees who have knowledge of the company.

The US job market has gone from a relatively even split to be about 80% in favor of candidates. High performers are more valuable than they’ve ever been. “Quite simply, offers to candidates with desirable, in-demand skill sets are going to have to get sweeter, and they are going to have to happen faster… the lesson is that just like in the market for a desirable real estate in New York or San Francisco, the market for top candidates is likely to be super-competitive, with candidates holding significant leverage and multiple offers.” — Steve Boese (@SteveBoese)

 

Six in One Hand, Half-dozen in the Other

Many HR professionals warn against making counter offers for the simple reason that they believe once an employee has made the decision to leave, even if a counter offer is made and accepted, the employee has “one foot out the door” and will never be a loyal employee ever again. And they aren’t wrong. Statistics show that up to 80% of employees who accept counter offers leave within six months. The number jumps to as high as 90% at the twelve-month mark.

The key to determining if making a counter offer makes sense is uncovering the underlying reason for the resignation.

Throwing money at someone to keep them once they’ve made a commitment to another employer could make your company look desperate. There may be rare cases where money is the only motivator, and someone who’s otherwise happy with his or her job may reluctantly decide to leave if the salary isn’t high enough. But other issues, such as a lack of development opportunities or the company’s culture and work environment typically play a significant factor. Though a raise can push these feelings down for a while, they’ll ultimately pop up again.

Make sure you discuss the reasons for the resignation with the person before making any decision. Remember, the reason an employee decides to leave an organization in the first place usually doesn’t change or disappear. The additional cash from a counter offer simply delays the inevitable, and employees who accept counter offers because of the fear of change or out of some misguided sense of loyalty recognize the error of their ways and eventually leave anyway.  Peoplescape Consulting Group are experts in the art of the counter offer. Contact a Consultant today for help determining if a counter offer is a good idea in your unique situation.

 

Know When to Hold ‘em

The No. 1 error that managers make when engaging in counter offers is assuming that money is the only issue.

A successful counter offer must come from a place of genuine concern for the employee’s needs. When someone is ready to end the employment relationship, special care must be given to the individual’s concerns. Money is important, but it’s less important than individuals’ perceptions of their own career growth and development, and their ability to make a difference in your organization.

Remember, employees have to leave some time; statistics show that the average employee might hold up to 10 jobs in a lifetime, so you’ll want to consider if the individual has served well above your company’s average tenure. And also consider their reasoning: career progression, a bad manager/boss/work environment, desire for more challenging or different work, an opportunity to join a high-profile company, work/life balance, work flexibility…all of these tend to come before salary. Also consider how even when the person has been indispensable for so long, how it might be a great opportunity to hire someone who is even a better fit, that you never knew existed. Now that you are a few years down the line, you might even do with fresh eyes and fresh approaches and be improving upon the skillset of the original person. In the majority of cases, just giving a salary increase will not solve the problem – and may even cause other issues.

Examine options like giving the person a role that better plays to their strengths or offers a fresh challenge; exploring flexible work hours; properly address communication or management issues that are negatively affecting performance or morale; hire a more junior person to relieve workloads; outline a career progression path and where you see them in the next 2-5 years. Effective communication and real action are key for this approach to be successful – otherwise, we know the person will leave within 6-24 months. Even better though, do these things BEFORE someone approaches you that they are resigning. There is nothing like looking out for them before they expect it. (See “don’t wait for a resignation” below).

Most importantly, only contemplate making a counter offer once you have written proof that a job offer has been made, be that email or print. Insisting on this will ensure authenticity and will slow the process down giving you more time to organize.

 

Know When to Walk Away

Employees join companies but leave managers. When this applies to a situation in your workplace, you’re best off allowing a resigning employee to leave and get on with his or her career elsewhere. In these cases, it is better to leave the headcount unfilled than attempt to convince an unhappy employee to remain onboard.

If your reason for wanting to counter offer an employee is solely for your own benefit, the counter offer will not work. Although you may have delayed the individual’s decision to leave, you won’t be in a position to better the individual’s career development and success because your focus is on your own needs rather than his or hers.

Recently, a Peoplescape Consulting Group client told us about how they lost a star employee to an opportunity that no-one could refuse. The client, respected the employee’s decision, treated them like gold as they exited, stayed in good contact and a few months later, when the employee decided the new opportunity was not all it had been made out to be, they returned with even more commitment, vigor and appreciation for the company than ever before.

Again, the key here is to correctly understand the person’s reasons for wanting to leave, depersonalizing your reaction to this information, and being honest and realistic about whether those reasons can be addressed without the person leaving. The two most important questions to ask, before looking to offer any solution are, “Do you like this business?” and “Taking your immediate concerns out of the equation, do you see yourself having a future here?” If you don’t hear “Yes” and “Yes,” shake hands and wish them the very best in their new role.

 

Don’t Wait for a Resignation

Counter offers are highly reactive responses that put you on the defense. Generally, a counter offer attempts to solve a problem with an ineffective solution, or at least an expensive solution that could likely have been solved another way. Once an employee has had one foot out the door, even if the counter offer causes them to stay, the relationship is rarely ever the same. You will always know they were close to leaving, and others will question their loyalty and commitment.

Be proactive, focusing on employee retention by asking “Why People Stay” far in advance of any potential resignation of great employees. Many companies conduct exit interviews to find out why people leave (but remember once you are conducting the exit interview, it’s too late to remedy anything).

A great strategy is to conduct interviews or climate surveys asking people why they continue to stay with you. #eNPS for example puts the question to employees on whether their workplace is a good place to work. (See our blog Whats#HotinHRT – HR Tech Talk). Not only is this a proactive approach to a potential problem, it sets the stage to learn what is important to your people. You can use this as an opportunity to discover what people like (and dislike) about their work, what their career aspirations are, and how you can work with them to help them move along that path.

Having a plan for keeping good people engaged and decreasing the likelihood of being caught off guard when someone walks in to tender their resignation will greatly benefit your business. As the expert in workplace surveys and retention strategies, contact Peoplescape Consulting Group today to formulate and implement your plan!

 

The time to focus on keeping good people is now!