Posted on 27/11/2021 by Matt Fox
OUR GUIDE TO COUNTER OFFERS FOR EMPLOYEES AND EMPLOYERS
Counter offers have become increasingly commonplace in the past ten years. When you consider the cost of recruiting a suitable replacement for most skilled roles, the hit to productivity while onboarding a newcomer, and the general lack of candidate availability in the current climate, it’s no wonder that up to 50% of employees who resign end up with a counter offer to consider.
But is making a counter offer typically the right thing for companies, and will an employee who accepts one end up regretting it? The answers aren’t as straightforward as you might think.
Here, we investigate managing counter offers from both perspectives.
Managing counter offers as an employee
So you’ve read an intriguing job spec, got your CV together and applied for it – then nailed the interview process, and finally been offered an exciting new position. Congratulations – and well done!
But what if your company counter offers? And, more importantly, what if the offer itself is enticing enough for you to consider accepting it?
These are the things you should consider before saying yes or no to staying put.
The benefits of accepting a counter offer
- Familiarity: Some people simply don’t like leaving their comfort zone. If you’re content where you are and had your reservations around moving on to begin with (especially if the travel or work-from-home conditions are more favourable where you are), then an appealing counter offer can help you resolve that cognitive dissonance.
- More money for (often) the same workload: If you enjoy your job but applied elsewhere because you were starting to feel taken for granted, a healthy boost to your monthly income (or your agreed annual bonus) could be the thing that helps you to feel appreciated where you are.
- Do you really want to leave? Do you genuinely love what you do, where you work, and the people you work with? If so, then it’s safe to assume your motivation to apply for the new role was either financial, as mentioned above, or revolved around wanting more flexibility or opportunity. (Or quite possibly a combination of any of those). That being the case, you’re now in the driving seat to get those things while doing the thing you really want to do. That’s a major win, and sets you up to bed in for many more years of high-level productivity in a place you love being, with people you never really wanted to leave behind. In those circumstances, accepting a counter offer could be the best thing for you.
The drawbacks of accepting a counter offer
- The risk of stagnation: Staying put can have its advantages, but moving on to a fresh challenge can be even more beneficial. Never underestimate the growth you’ll experience by getting out of your comfort zone. Not doing so when you have the chance can lead to you sliding backwards, which you’re bound to regret before too long. The real question is, does your current role offer the scope to grow and develop the skills you need for the future? If not, accepting a counter offer could be a mistake.
- Reduced job security and damaged personal relations: It could be that company management can’t afford to lose you but also resent you playing hardball. In some situations, they could even make the offer to keep you, just to buy them time while they find a replacement or restructure your department entirely. Then they might manage you out of the business later on or make your role obsolete. Even if they don’t, though, the process you took to get there certainly shows reduced loyalty, and can even mark you out as one of the first candidates for redundancy if the company hits hard times. It can also damage your relationships with co-workers who could feel bitter about your increased wages compared to theirs if they find out, as well as the way you went about getting them. In truth, giving in your notice rarely ever strengthens your position at your existing company in the long term, even if you do decide to stick around. That’s something to be deeply mindful of when you’re considering how you handle counter offers as an employee.
- Do you really want to stay? Only around 12% of people who apply for a new role and give notice do so for financial reasons. For the others, it can be a combination of factors, from needing that new challenge to either the roll or support deteriorating or the company’s politics and culture changing for the worse. Think carefully about why you applied for that new position in the first place. Take the money out of the equation – are you happy with your current job? Your career prospects? The way the company operates and the values it works to? If the answer is no, declining a counter offer and moving on instead is the smartest thing for all concerned.
Managing counter offers as an employer
So an employee you thought was happy with their role and on board with the company mission has blindsided you by handing in their notice. They’re a key member of your team, and you can’t imagine losing them.
How do you handle counter offers in such a situation? These are the things you need to consider.
The potential benefits of making a counter offer
- Retain crucial talent: Does your employee have a unique set of skills that are crucial to your department (or even your whole company) delivering on your business targets? That can be a tricky spot to find yourself in, and might leave you with no choice but to start Googling ‘what should be in a counter offer’.
- Cost-effective (at least in the short term): Between recruitment fees, lost work time and training expenditure, replacing an effective member of the team could actually cost your business a significant sum. In these kinds of circumstances, a sizeable pay increase can feel like a big jump for them, but still a drop in the ocean when you consider the bigger picture. As mentioned above, it can also alert your business to the fact that they’re less loyal than you thought, and more likely to leave down the line. This can allow you to restructure the team so that you’ll rely on them less, and put other top talent in place for if and when they do decide to leave down the line.
- The motivation for leaving might be easy to address: Though they’re rare, we’ve certainly seen examples of candidates going through the whole recruitment process with a competitor, just to put themselves in the best bargaining position with their current company. If you sit down for a one-to-one with your employee and they’re candid that they love where they work but their finances, flexibility or specific opportunities are the sticking point, making the effort to give them what they want could just be worth it – especially if the fix is relatively straightforward.
The likely problems following a counter offer
- It could cause unrest in your workforce: the urge to retain important talent (especially talent you’ve maybe undervalued until they handed in their notice) is understandable. But if you raise someone’s salary and their co-workers get wind of it, it could hit hard on your entire team’s esteem and even lead to more employees making moves to leave. Even if the adjustments you make are non-salary-specific, like offering the person in question more flexible working patterns, it might cause resentment if your team at large consider this to be preferential treatment. In truth, that’s one of the most challenging things about managing counter offers. You can please one person, but you can rarely please them all, and when the perception of unfairness takes hold, it’s tricky to stop that snowballing.
- Their reasons for leaving probably run rather deep: Offering to increase someone’s salary might be the obvious go-to, but as we’ve already mentioned, that’s only the motivation in 12% of cases. The other 88% of employees will want to see changes to the role, company, culture or working practices that you simply may not be able to deliver – especially while keeping your other employees happy too.
- They’re likely to leave anyway: Given the 12% stat above, it probably won’t surprise you to know that an incredible nine out of every ten people who accept a counter offer leave within the next 12 months anyway. That’s near enough the same as the 88% who weren’t money motivated. It goes to show that while those people may allow a sizeable pay rise to convince them in the short term, that novelty doesn’t last – and all the extra investment you’ve made to keep them happy might be better off going into someone new instead.
Our take on counter offers
“Our opinion on counter offers? Don’t do it!” says our founder Matt Fox, calling upon his 20+ years' experience in the recruitment industry.
“Let’s be candid. 80% of people who accept a counter offer leave anyway within six months,” he explains. “And that goes up to 90% in the first year. In most cases, financials were only a part of the reason they thought about leaving anyway, and when the novelty of the extra money each month has worn off, those tough issues that were their real reasons for leaving remain.”
“From an employer’s perspective, it’s important to understand exactly what that person’s motivators for trying to leave were,” he continues. “If they were purely financial, then fine. But even then, if you give them extra cash you’ll run the risk of everyone else finding out and wanting the same. Which obviously could lead to team unrest, and then those people being unhappy enough to consider leaving as well – if only to try and give themselves the same bargaining power.
“Similarly, if money was only a part of it, and you aren’t prepared to really fix the management, culture, hours or flexibility concerns they raised, then it’s a sure-fire certainty that the extra cash you’ve stumped up will be wasted anyway further down the line.”
“All of that is an employer perspective, of course,” admits Matt. “But the same goes for candidates. If you went for a new role, the chances are it’s because you wanted to leave. It’s best to be honest with yourself and look at where you’ll be happier in the longer term.
“Accepting a counter offer can feel great – especially if you get more money for doing the same job with better hours and brighter prospects on paper. But in my experience, it rarely works out, it damages the working relationship, and you end up moving on anyway.
“Declining an attractive counter offer can be incredibly brave when it makes sense on paper,” says Matt. “Especially in the current climate, when everything is so uncertain. But being brave and taking a big leap like that is sometimes exactly what you need to do to move everything forward.”
Considering a counter offer – or considering making one to an employee?
At Dynamite, we’re always here for our clients and candidates. If you’re considering a counter offer from either side of the fence, we’ll be happy to offer our extensive experience and talk you through the things you need to consider in your industry. Just get in touch to speak to one of our team.