Should I Make A Counter Offer To An Employee?
That sinking feeling when a valued employee resigns hits every employer at some point. It's a domino effect—disrupted workflows, recruitment costs, and the potential loss of valuable knowledge. In the face of this potential skill gap, a tempting solution arises, the counteroffer. But before throwing money at the problem, it's crucial to understand the implication of retaining talent by offering a counteroffer in the overall employee morale.
Why Should You Make a Counteroffer to an Employee?
Counteroffers can be financial incentives, promotional opportunities, or flexible work arrangements. It’s a reality of running a business or managing a team: Over the years, people will come and people will go. Sometimes, departures will suit you, but at other times they won’t.
You may be particularly reluctant to part ways with an employee if they are:
- a significant contributor to the business
- working on a time-sensitive project
- moving to a direct competitor
- someone you want to retain, as you had them earmarked as part of your succession planning
You may want them to stay, as it will save you from starting the recruitment process from scratch, trying to attract and hire a new employee as their replacement who will have the same impact on your business. But once they’ve signalled their intent to find a job elsewhere, you may doubt whether they will ever regain the same standards of work and level of commitment as before.
You’ll find yourself swinging between “What can I do to keep them?” and “Should I even try?”
Strategic Considerations When Making a Counteroffer
If you can fully understand why they were considering leaving, then there are other ways you can try to convince them to stay aside from putting forward a counteroffer.
In this situation, you should depersonalise your reaction to whatever they say and be honest and realistic about whether their concerns at work and reasons for wanting to leave can be addressed without them leaving.
The two most important questions to ask, before proposing a solution, are:
- Do you like this business?
- What specifically prompted you to look for another job?
- Taking these immediate concerns out of the equation, do you see yourself having a future here?
If you don't hear a resounding "yes" to the first and last questions, it signifies a potential disconnect. However, before saying goodbye, explore the possibility of addressing their reasons for leaving.
The questions you need to ask yourself are:
- Can you offer solutions that bridge short-term gaps? This could involve exploring flexible work arrangements, workload adjustments, or fast-tracking a promotion that was already in the pipeline (if applicable).
- Are there opportunities for professional development or mentorship programmes that could address their desire for growth?
Other factors to consider are:
- Employee contribution: are they truly irreplaceable? Do their expertise, experience, and established relationships with clients make them worth the effort to retain? Consider the impact their departure will have on your projects and team dynamics.
- The reason for leaving: What prompted their resignation? Is it purely financial, or are there whispers of a toxic work environment, lack of work-life balance, or limited career advancement opportunities? If the issue is beyond compensation, a simple raise won't be enough to keep them happy in the long run.
- Your budgetary reality: Can you comfortably afford to match the competing offer in the long term? A temporary raise to keep the leaving employee unhappy won't benefit anyone. Analyse your budget and be realistic about your financial sustainability.
If both parties would genuinely prefer it if a solution could be arrived at, then you can start to examine options like giving the person a role that better plays to their strengths or offers a fresh challenge.
The most common issues revolve around miscommunication or a lack of effective management. If this does happen to be the case, then seek to address those shortfalls.
Always try to avoid emotional and psychological pressure - it’s unfair and unprofessional.
Any commitments you make, be sure to stick to them, or you’ll be back to square one!
So, should you make a counteroffer?
Imagine Sarah, a tenured marketing manager who leads countless successful campaigns, considering a new opportunity. Her departure would be a significant blow. While a counteroffer can act as a safety net, simply throwing money at the problem won't guarantee her retention. Here's where understanding her motivations becomes crucial.
The reasons for wanting to leave can extend far beyond compensation. Perhaps Sarah feels she's reached a ceiling in her current role and craves the challenge of a promotion. Maybe the workload has become overwhelming, and she desires a more flexible work arrangement. There's also the possibility of a strained relationship with her manager, prompting a search for a more positive work environment.
By having an open conversation with Sarah, you can uncover the true drivers behind her decision. This allows you to tailor a counteroffer that addresses her specific needs. This could involve offering her a long-awaited promotion with increased responsibility, exploring flexible work options to improve her work-life balance, or even facilitating a change in her reporting structure to address any managerial conflicts.
This indicates counteroffers can also serve as a valuable diagnostic tool. Your employees’ resignations might be a wake-up call, revealing underlying issues you weren't aware of. By discussing the counteroffer, you have the opportunity to understand what truly motivates your employees and address potential shortcomings in your company management or compensation structure.
There are many reasons beyond just money that may initially cause employees to apply for other jobs. All of these can be more influential factors in an individual’s career than their salary.
While the need to retain talent is strong, counteroffers come with hidden costs that often outweigh the initial benefit. The bittersweet reality of counter offers is that, in many instances, the person who accepts your offer will still most likely want to leave the business anyway.
To be confident this won’t happen again in the short term, you’ll need to ensure the real reasons for wanting to change jobs in the first place have been addressed.
When to counteroffer with a salary raise
Financial incentives can be a powerful tool, especially when deadlines loom or critical projects hang in the balance. If you truly want an employee to stay and see an assignment through, offering a competitive salary increase can be a viable solution. This is particularly true in situations where you've already identified them for a promotion and have secured the budget to expedite it. In these cases, a combined approach of immediate financial reward and a faster track to career advancement can be a strong counteroffer.
You should always benchmark their salary against industry averages before having any conversations - A skilled recruiter can be your best resource for benchmarking your employee's salary against current industry averages for their position, location, and experience level. This insider knowledge equips you to craft a competitive counteroffer that reflects their true value in the market. Secondly, a recruiter can provide valuable interim solutions if a counteroffer isn't successful and there are critical projects to deliver. Their network of qualified contractors can help bridge the gap while you find a permanent replacement.
Maybe the salary is just not sustainable for the person, in which case you need to assess the risk and longer-term return on investment for the business that comes from increasing their salary so that they don’t leave just because of money.
If you believe they will have a big impact on the business in the future, and you trust their motivations and the information they have given you, then you need to find a solution that will be attractive enough for them to stay.
Prevention is better than searching for a cure
Counteroffers can be a tempting solution in the face of employee departures. But remember, they are strategic decisions that must be made. By carefully considering the situation, the potential consequences, and the underlying reasons behind the resignation, you can make an informed choice about whether to fight to retain a specific employee.
You want the people on your team to excel while they are with you. Create an environment and strong corporate culture where people can excel and have open lines of communication, so small problems don’t become big problems.
If your best people can achieve their career goals in your business, they will naturally create and deliver value. If they need to leave to achieve their goals, then be glad for them and wish them every success.
