Counter Offer – Should You?

Don’t want to lose a great employee to someone else? Your initial reaction may be to challenge their intent to resign with an attractive counter offer. After all, a key employee is hard to find and very expensive to replace. But will an accepted counter offer truly keep them loyal, or just give them more time to find a better one?

Here’s why you shouldn’t make a counter offer to stop that top performer from walking out.

Recruiting CEO Mark Wayman offers these words of advice to hiring managers and HR executives:

“Always remember this, HAPPY EMPLOYEES DON’T QUIT.”

 When a key employee decides to leave for a better offer (higher salary or better position) then clearly something is amiss on your end of the deal. But sometimes their decision to leave boils down to just being unhappy working for your company. If this is the case, no amount of money or benefits will turn their decision around.

In some cases, an opportunistic employee will use the threat of resignation as leverage to spur a higher salary. If they’re a top performer, then they should be asking for a raise based on their accomplishments instead. In this case you should let them go. A loyal employee doesn’t use quitting as a tactic for a raise.

Once an employee knows they’re valuable enough to incite a counter offer from you, there is always going to be the threat that they could do it again.

Many firms prohibit financial counter offers for this reason. It sends the message that you’re willing to beat another company’s salary, and you can run the risk of other employees trying to use the same tactic in the future.

If an employee is critical enough that you do end up making a counter offer, avoid getting into a compensation war. Make it clear that the offer on the table is your best and FINAL offer.

In a survey conducted among employees who accepted counter offers from their employers, it was found that a staggering 80% realised their work life and productivity deteriorated after agreeing to stay. This is due to counter offers being perceived by employees as a band-aid solution for a much larger problem.

If an employee feels unappreciated by their seniors, unhappy with the company culture, or with limited potential at your company – then no amount of money will remedy the situation. Unhappy employees have been offered better titles, nicer offices, and higher salaries before, but those material enticements only served to retain them for a few more months before they realised nothing about their situation had actually changed.

In the event that you decide to try and change their mind with a counter offer, makes sure you investigate and understand their reasons for considering a new role. If the primary reason is not compensation based, then offering a higher salary will not solve the problem.

Make sure you know exactly what their reasons are and clearly address those in your counter offer

By now you have a good idea why counter offers are ineffective in the eyes of an unsatisfied employee. But there will always be that one team member you would do almost anything to keep. Here are a few stats to show just how poorly counter offers tend to work out in the long run.

Survey results showed that more than two-thirds of employees accept counter offers made to them, which sounds good at first. But the results also demonstrate how up to 80% of employees who accept counter-offers leave within six months, with the number hiking up to 90% within a year. Either the employee leaves on their own or the employer ends up firing them.

But why fire an employee after working so hard to convince them to stay? Turns out that a third of executives admit that after an employee considers leaving the company, even after accepting a counter offer, their loyalty is up for question. Managers no longer consider that employee to be trustworthy and promptly begin the search for a replacement.

Countless surveys and case studies go to show that using counter offers as an employee retention tool is often futile and almost never work in your best interest. When they do happen to result in an employee staying, the chances of them working past a year at your company are extremely low.

The best method for preventing your top performers from slipping between your corporate fingers is to have a staff retention strategy in place. This will maintain a stable level of job satisfaction and help you identify potentially unhappy employees long before they reach the counter offer stage.

Need to replace an employee fast? We can help you hire the perfect candidate.