If you’re in the HR business, it’s pretty likely that you’ve had an exchange similar to this:
Manager: Sally just got an offer from Company X and it’s for more than what we’re paying her. We need to put together a counter offer ASAP. We can’t afford to lose her! How come we’re underpaying her??
HR (usual response): Ok, let me talk with a few people and we’ll get a counter offer together right away. Thanks for letting me know.
HR (what we should really say): Thanks for letting me know but we don’t make counter offers. Wish Sally the best and let’s get moving on filling her role.
Yup. You heard right. Throw Sally a nice party, give her a gift, wish her well and move on. Maybe she’s a high performer and you really can’t afford to lose her. Too bad. In my opinion, the manager missed the boat. No matter how much pressure you get, under no circumstances make a counter offer! Because they’re insulting and they will ruin your company.
The Insult: If you’re an employee and your company makes you a counter offer to stay, think long and hard before you accept it because they’re insulting you. If it has gotten to the point where you’re about to leave for your company to pay attention to you, then it’s already too late. Plus, don’t fool yourself into thinking the company is going out of its way to help you. They’re not. It’s really about the manager not wanting to look bad for losing a top performer. You might be happy with some extra cash for a while but deep down you know you should have left.
Everybody Else: If an employee has gotten to the point where they have an offer in hand, it’s a pretty good bet that a few people in the company already know about it. Well what do you think happens when you make the counter offer to Sally? You guessed it – people find out and fast. And what do you think their perception will be? If you’re underpaying Sally, then you must be underpaying me too. At this point it really doesn’t make any difference if it’s true or not. You’ve just sent a clear message to the organization that you only really care when it’s almost too late. That’s a morale killer.
Look, business is business and I understand that sometimes you might need to counter offer because the person really is too important to lose. I get it. But, as an HR Pro, if you find yourself using the counter offer as a way to keep your retention numbers high, you’re probably going to make them worse in the long run.
Totally agree. 90% of people who accept a counter offer are usually gone within 12 months, because the reasons they were looking never change, and their loyalty is questioned going forward.
Agree, never ever make a counter-offer.
I don’t see any evidence here that it will kill your company but maybe you were just being a little glib to be fun.
As I’ve stated before (and I’ll state many times over), having a blanket policy on this is really quite silly and completely unnecessary.
Most turnover isn’t surprising and if they cut loose, that’s fine. I’ve turned over hundreds of people and not so much as blinked when they left. But some of it is unexpected because an employee never expressed a desire for change. Or maybe they had thought of it but it wasn’t a huge concern until a recruiter swooped in and offered the “perfect job” (lol) that would solve all of their problems.
I’ve batted 1.000 with the counter offers I’ve done. The key is to be selective, not inclusive, in your decision to make an offer. Rarely making a counter offer is much different than never making one. One is responsible, letting the circumstances dictate whether you offer a counter or not. The other is reckless, saying that no circumstance is worth the risk of a counter.
Agreed, nice article.
Fun to see this point explained from the HR side.
I am a recruiter and always warn my candidates about the risk of accepting counter offers.
A unique take. I agree with you about it needing a person to arrange their exit before they get what they “deserve.”
I hate the be “that guy” but I actually wrote a post today that goes along with this one. It focuses on why companies may not want to disclose a salary offer to potential hires at all.
http://theleaderlab.org/2011/11/we-dont-negotiate-salary/
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Anyone who gives or accepts a counter offer needs to collect data on the ultimate outcome (I would bet it is almost always negative).
On the other hand the desire to give a counter offer may be an early indicator that you indeed are underpaying high performers and putting an expert in rewards into a room with talent management and looking at your pivotal jobs and how we are rewarding the people in them…one more time might be a good idea.
I do. Just because someone doesn‘t love you the way you want them to, doesn’t mean they don‘t love you with all they have.
Schools want to know as early as possible so they can give your callback to someone else.
@Lance – I agree there’s no need to have a blanket policy. My POV is it’s bad business if your high performer retention strategy is to counter offer!
@Gerry – yes, it would be interesting to collect data on outcomes of counter offers.
Thanks for reading!
Great post – I never thought about it this way, but you’re 100% correct. On top of that, from what I’ve learned from recruiting for expansion stage startups for OpenView, most top employees leave for non-monetary reasons. If a counter offer is made and accepted, you as an employee, will ultimately still experience the same pain points and will probably be looking in 6-12 months from now anyway. It’s time to move on and let the team recover quickly from the departure. Thanks for sharing this insight!
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