Do Counteroffers Work in the Long Run?
When an employee that you value wants to leave, you might dust off the old counter-offer and see if it sticks. But what if that is really only delaying the inevitable?
In the fight to hold onto top talent, many companies are offering higher salaries to workers who announce they're planning to quit for a better job opportunity. But new research from global staffing firm Robert Half suggests this method serves only as a stop-gap retention strategy for employers and isn't a long-term career solution for employees.
The findings show staff members who accept counteroffers typically end up leaving the company in less than 2 years.
Senior managers across a variety of professional fields, including finance and accounting, technology, legal, advertising and marketing, and Human resources, were asked, “Do you ever extend counteroffers to employees to keep them from leaving for another job?”
According to 58% of respondents, they do extend counteroffers to keep talent from leaving, compared to 42% of respondents who say they do not extend counteroffers. Respondents were also asked, “On average, how long do employees who accept counteroffers remain with your company?” The mean response was 1.7 years.
The primary reasons leaders said they extend counteroffers are to prevent the loss of an employee's institutional knowledge and to avoid spending time or money hiring a replacement.
“Counteroffers are typically a knee-jerk reaction to broader staffing issues,” says Paul McDonald, senior executive director for Robert Half. “They are most often a tool to help the employer and not designed to help professionals advance their career. When employees accept a counteroffer, they are likely to quit soon anyway.”
McDonald also cautioned workers to avoid counteroffers. He says it could make workers look less loyal to the company, and may not solve the root problem for why a worker would want to leave the company in the first place. McDonald advises: “Money doesn't solve everything.”
A recent Robert Half blog post offers five reasons why counteroffers may be counterproductive:
1. A Salary Counteroffer Isn't a Long-Term Remedy
Making a counteroffer is like taking aspirin for an impacted wisdom tooth: It might make the pain go away for a bit, but it's not a long-term solution. According to the research, staff members who accept counteroffers typically end up leaving the company in less than 2 years.
2. It Can Have a Negative Ripple Effect
If the word around the water cooler is that you made Jen a counteroffer, Simon may start to wonder why his salary isn't increasing. Then, if Simon really wants to drive a hard bargain, he may start his own job search so he can use job offers as leverage for salary negotiation.
3. A Counteroffer Can Cause a Dip in Morale
When the news of Jen's salary increase gets around—and it will get around—your team may start to point the finger of favoritism. By tendering a counteroffer, you also send the message that threats of leaving are a means of climbing the ladder, rather than outstanding performance and dedication.
And what about Jen? She might find her coworkers giving her the cold shoulder, which probably won't make her want to stick around in the long run. The result? The overall mood in the office will suffer.
4. It Could Cause a Rift in Trust
Say you do make Jen a counteroffer. At first, you might be happy and relieved she's still a member of the team. After all, she makes your life easier getting through tax season. But once your relief starts to wane, you may start to feel less positive.
Now, not only do Jen's peers not trust her, you don't either. Questioning an employee's loyalty is hard to bounce back from, and though you may still emanate professionalism, Jen probably feels the bad vibes.
5. Counteroffers Don't Improve Employee Performance
You may think that Jen owes you one, considering you just bumped her salary or gave her a few extra vacation days.
On the flip side, she may feel like you can't live without her, and the notion of being indispensable doesn't give her much motivation to boost her performance. In either case, the counteroffer is making waves beyond your original intention.
While you should avoid making counteroffers, you don't want to lose your best talent to the competition, either. Fear not, however, Robert Half does offer some alternatives.
What Alternatives Are There to Counteroffers?
Robert Half offers this advice to employers:
- Consult resources such as industry reports applicable salary guides.
- Conduct regular salary reviews to ensure your firm's compensation is competitive, and continue to offer attractive compensation so employees don't look for greener pastures.
- Offer employee recognition on a regular basis. Give people reasons to stay.
- Focus on professional development, mentorships, and defining career paths for up and comers.
- Make sure you have someone you can promote should an employee resign.
- Perform exit interviews to get to the bottom of why employees leave—and then work to address those concerns.
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