HR Playbook: The Counter Offer Conundrum
There’s an interesting, almost magical growth in a person’s
value to the organization, as soon as they have another job offer. I’ve seen
managers, who have very recently rated an employee as mediocre or poor, hurriedly
change that rating to ‘irreplaceable’ as soon as the employee has an offer.
Now, did the employee’s performance magically swing upward
that morning, or did the manager find herself at risk of being short-staffed?
If this is how an organization rates the value of people,
are the most valuable employees the dissatisfied ones who are most actively
seeking other opportunities?
What to Do?
Managers like the above will commonly come to HR, pleading
for their very existence, and insist that we counter offer. And, of course, the
counter is conveniently positioned right at, or slightly above what the
organization has presented.
As a general rule I have taught my HR teams and
organizations that “we do not do counter-offers.” Of course, there are
exceptions, but the safest starting point is at ‘no.’
What is the risk of the counter-offer? The risks actually
impact both the organization and to the employee.
Organizational Impact
Imagine working for a company where employees knew the best
way to get a raise was to get an offer from another company. What behaviors
would this promote?
Unfortunately, most of the behaviors this behavior rewards
could be categorized as disloyalty to their current company. Employees are
motivated (alas, even incented) to look elsewhere for work. An active job
search most certainly impacts productivity, and prevents the employee from
embracing a long-term perspective with his company.
The better strategy is to take care of your top performers.
Be proactive about those that would represent ‘regrettable losses’ and
recognize that some degree of attrition is natural (and even healthy) for the
organization.
Employee Impact
An employee presented with a counter-offer from a current
employer should probably decline. This may not seem to make much sense, given
that the counter was likely at, or above the offer at the new organization, and
staying-put would be a no-impact transition.
First, consider the scope of your manager’s influence. If
you were underpaid, you have already likely asked your boss for a raise. If you
are bored in your role, you have probably already raised this issue, too. The
areas within your manager’s influence should have been able to already address
are still the limit of his ability in a counter-offer situation. Shouldn’t
these issues have already been handled?
We’re all adults, too. The employee presenting the offer has
already taken the offer letter home to discuss with a spouse, reflected on it,
made a list of pros and cons and ultimately made a tough, mature decision to
embrace this change. Throwing additional dollars at the situation just added
complexity to a decision that has already been a tough mental process for the
employee.
Of course, there are always exceptions. I have encountered
employees who haven’t considered all of the facts. As I have explored offers
with a few, I can sometimes point-out that there are a few, unanswered
questions that would be important for them to learn about their new employer.
Some haven’t considered some of the supplemental benefits or compensation when
comparing their new offer to their current situation. However, most have done a
very thoughtful and thorough job in making their decision.
Also consider these key points:
- By presenting a resignation notice, you've just strained the relationship with your current employer. How likely are you to be considered for a promotion if they question your loyalty or long-term commitment? Who might be selected first if there is a future layoff?
- You would burn the bridge with your new employer. There would be no chance for future opportunities there.
- If you were worth more, why didn't your employer recognize this previously. Did it take someone else taking an interest in you for your company to finally recognize your value?
- Often, a counter offer becomes your next raise, so it's important to understand how this might impact your future salary increases (I wouldn't expect big ones for a while).
- Statistics show that 70 - 80% of those who accept counter offers quit within six months, or are terminated within one year.
- Perhaps most importantly, nothing really changed. Sure, you may have received more pay, but the factors that prompted further discussions with the new employer haven't changed
If you’ve got one foot out the door, ‘the trend is your
friend.’ When the counter offer comes, the default answer might need to be ‘no
thank you’ given the list above.
Exceptions
Now, I’ve approved quite a few counter offers in my career.
My team and my peers know that the starting point with me is “we don’t do
counter offers” out of respect for the company’s culture and also for the
employees.
When I have made exceptions, it is limited to select
circumstances, such as:
- An individual with unique talents, that would be tough to replace, and would unreasonably impact the team's productivity, if absent.
- A key skill at a time of organizational change.
- A key skill in a tight labor market.
Despite a manager’s emotional reaction to call an employee
irreplaceable and march to HR with a request for a counter offer, the fact of
the matter is, that we’re all replaceable.
At an early point in my career, my father once told me to
put my hand in a bucket of water, then pull it out to see how irreplaceable I
was. The image of the water more than immediately filling the void left by my
hand has always stuck with me.
Summary
Although there are instances where a counter offer is
necessary, starting at a standard of ‘it’s not our practice’ is the safest
place for an organization and its employees.
No company wants a culture where salary practices and
dictated by the offers employees receive. I would anticipate that most
employees do not want to be labeled as disloyal and to face the potential
long-term cost associated with accepting the counter.
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