Why Giving a Counter Offer is Never a Good Idea

July 14, 2015, by Tam Campbell Trant | Recruitment

One of your employees enters your office with bad news: they’ve been offered a position elsewhere and they are giving their 2 weeks’ notice.  You are surprised by the news and let’s face it – possibly panicked at having to find a replacement.  Your first reaction is to convince them to stay.  However, giving a counter offer is never a good idea.

According to research by a Pittsburg staffing firm, more than half of all employees who accept counter offers will ultimately change companies within the next two years.  The reason being is that their current dissatisfaction prompted them to look for other opportunities in the first place.  Throwing money at the problem does not solve the issue, particularly when compensation is only the fourth reason why employees choose to stay at a company according to the authors of “Love ‘Em or Lose ‘Em”:  “If your talented people are not being challenged, or grown, or cared about, a big paycheck will not keep them for long.”

A counter offer is essentially a band-aid solution.  It will keep your employee for the short term, but not necessarily for the long-term, and damage has been done to everyone involved.  The employee has undergone the stressful process of looking for a new job and what prompted them to look has likely not been addressed.  The manager and company have been taken by surprise and may now be feeling pressured to increase the salary or job responsibilities.

Here is something else to consider: if you provide a counter offer for one employee, will other employees follow suit as a way of getting a pay increase as well?  Perhaps it’s time to review your salary structure to ensure it is competitive.  This will help ensure that those employees who do feel undervalued don’t look to other companies for increased compensation. 

In order to avoid being in a counter offer situation, you should be having on-going performance coaching discussions, including annual reviews, which keeps a pulse on career happiness.  You can use these career discussions to ask employees what keeps them at your company and what might entice them away.  Any desire for increased job responsibilities or compensation dissatisfaction can be addressed early on, and your employee won’t be enticed to search for another job.

You should also have a program in place for attracting, developing and retaining top talent.  If you don’t, start working on one now so that you don’t feel pressured to give counter offers in order to retain your star performers.

When an employee hands in their resignation, while you may be disappointed with their decision, you should accept it.  Move on and find new talent to fill their place.  In the long run, it’s the better decision to make.