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Do Counter Offers Work?

Edited snippets from KAZIM LADIMEJI article from Recruiter.com July 2013

Many companies will face the situation when one of their valued employees walks into the office and says they are resigning to take up a job with another employer. The question is, what do you do? Should you make a counter offer? And if you do make one, how should you do it?

One of the main stats to guide your thinking is the one uncovered by Bill Humber in his study published in the US in ‘recruiter guy.com’, which is that 69 percent of employees who accept a counter offer leave their current employer within six months of accepting that counter offer. The problem is that a counter offer often only addresses the employee’s concerns in the short-term and can simply act to postpone rather than cancel the inevitable exit. So, in short, counter offers don’t really work in the long term or even medium term.

Is that employee not replaceable?

Another area to focus on before becoming overwhelmed with panic at the loss of this employee is what are the real consequences of this employee leaving and how quickly can his or she be replaced?’ I mean, could the employee be replaced in a reasonable time with an equal or better performer, at a comparable, possibly even lower pay rate (if internal inflation is out of control)?

Over the 12-month period do you think you can realistically engineer a situation where you have similar output and a lower/similar payroll bill as a result of your new hire and letting this one go? If so, then you may feel that a counter offer is not essential and you might consider easing the employee’s path to exit by not counter offering.

Remember, employees have to leave some time; statistics show that the average employee might hold up to 10 jobs in a lifetime, so you might want to be a little philosophical about it if the employee has served well above your firm’s average tenure.

Don’t make a knee-jerk counter offer

So, clearly, the message here is that you do need to be selective about who you counter offer, and ideally, you should base it on your ability to replace the talent in a reasonable time and the impact of this change over a 12-month period. This is a great way to make a long term considered, commercial decision without getting mixed up with the personalities and minutiae of each individual situation.

Always ask for evidence of the job offer

I’d also recommend that you only contemplate a counter offer once you have written proof that a job offer has been made, be that email or print. Insisting on this will, of course, ensure authenticity but will also slow the process down giving you time to regroup.

Counter offers don’t always have to be about “the money”

Don’t just make financial counter offers. You should have some idea of the employee’s all round frustrations and motivators, be that lack of career progression, boring job, wanting to work more flexibly, etc. Talk to other managers and review the employee’s appraisals to make sure to understand his/her key motivators. Is he/she a new parent and looking to work more flexibly or somewhere closer to home? Build a counter offer that is tailored to their needs – and is not just financial. In fact, you might not even choose to make a financial counter offer at all. *History suggests cash counter offers keep employees for only short periods – strategic counter offers can make changes that keep your star performer for the longer term.