The success rate of counteroffers in large organizations is less than 20%.
A counteroffer could provide a temporary spike in an employee’s level of motivation, but it is not sustainable and their motivation will typically fall back to their earlier unhappy level in a matter of weeks. Counteroffers have proven to be more of a material enticement that is insufficient, no matter how dramatic an increase, to keep the employee.
A decision to exit followed by a counteroffer often leads to the deterioration of one’s relationship with their employer due to doubts about the employee’s level of commitment.
How Companies Respond
Although human resources managers admit to providing counteroffers, most carefully restrict what those offers include.
“Our exit interviews clearly show that the No. 1 reason people leave us is for a better job opportunity, not for a higher salary or more benefits, which usually are way down the list,” says a human resources director in Redmond, Washington. “We’ve changed opportunities and responsibilities for people which may or may not affect salary,” he says. “Some stay, but many don’t.” Despite company efforts to retain them the employee’s reasons for leaving don’t change.
A few firms are even more decisive: They simply prohibit financial counteroffers. “We don’t want to send the message that we’ll beat another company’s salary offer. That sets a bad precedent,” says a New Jersey human resource director, adding “I don’t like counteroffers either personally or as corporate policy. There usually are reasons besides money why employees investigate the job market – they don’t get along with their boss or they’re bored on the job – and those don’t change when you return to your desk with a bigger paycheck,” he says.
Some HR managers admit to granting substantial pay hikes, but only when they believe an individual’s salary level is below industry standards. “If someone leaves strictly for more money, it would cause me to examine how I compensated that individual, as well as other executives here who might be tempted into the market by more money,” says the New Jersey director.
On other occasions, counteroffers are rationalized. Many companies realize they have deficiencies in management training and career planning, and they make a counteroffer with the idea that this person deserves better treatment.
To stem a potentially damaging slew of defections at any one time, human resource managers try to catch potentially dissatisfied employees long before they reach the counteroffer stage. “Using performance reviews, we attempt to identify key performers who need greater challenges before they start looking around,” says the New Jersey HR director.
Making a Counteroffer to Keep You Until You Can Be Replaced
A more Machiavellian motivation for a counteroffer is to give a company time to find a suitable replacement for the disloyal employee. “They say to themselves that once you initiate discussions with someone else, you’re out. But then they make a counteroffer to keep you until you can be replaced,” says a Connecticut talent acquisition director.
Occasionally a counteroffer, even one offered belatedly, fulfills a need for all involved. One supervisor accepted a job and, after about a month, he received a counteroffer from his former company, a Mom and Pop firm in the small Virginia town where he had grown up. “The small company had a hard time trying to replace him given his excellent track record, and he was a young single guy who had formerly lived in another state. When his old company met our offer plus a little bit more, and counseled him on the career opportunities available, he accepted,” explained the rejected company manager.
In the wake of losing a top new recruit, did the company offer a counter-counteroffer? “If a person wants to leave us, no counteroffer should change his mind.” The answer was no.
4 ASSESSMENTS TO MAKE BEFORE DECIDING
Here are the steps to take before you actually resign from your current employer:
1. Assess Your Career Goals
Ideally, you should continually reevaluate your career goals before you are courted by another employer. Once you have an offer, you need to figure out fairly quickly what you want most, such as more money, more respect or a promotion. You should ask yourself, ‘Where do I really want to go? Do I want to aim for the C suite? Am I in a position in my life at this time where I want to pull back?” There are times when it’s appropriate to say, ‘I need to pull back, I need a little more breathing room.’ And the place that’s more likely to give you more breathing room, where you have established a reputation, where people owe you favors, where you have supporters, is your current job.
2. Assess Your Market Value
“There are a number of online resources that will help you determine acceptable salary levels in your geographic area or city,” says Jessica Miller-Merrell, a hiring and recruiting expert and author with recruiting site Glassdoor. What you find might surprise you. After researching salary data and talking to peers, one woman learned she was worth up to four times the $250,000 salary that one private law firm had offered her. Others in her same area of specialty, intellectual property law, were making around $1 million a year.
When she received an offer of $300,000 from a private law firm this woman used what she’d learned to counter their offer, asking for a cool $1 million, and the new firm met her at $800,000. Still, she decided to stay at her current job. Her thinking? It offered more stability and better opportunities for advancement. While her current company didn’t quite match the new company offer, they did counteroffer her with a 43% raise, along with a promotion.
3. Assess Your Relationships
Whether you’ll be successful at getting a raise or promotion out of your counteroffer has a lot to do with the relationships you have with your current peers and supervisors. “It can be a useful negotiation tool, especially if you have a manager or boss who is your advocate and can try to fight for an increase for you,” says Miller-Merrell.
4. Assess the New Opportunity
Is leaving your old, comfortable job worth the risk? Pulling the counteroffer tactic entails some degree of risk. You shouldn’t go to bat for just any company’s offer, adds Miller-Merrell. “Don’t waste your time on something that isn’t a good fit for you,” she says. “Understand that taking on a different job involves risks, and you will need to weigh the pros and cons to determine if taking a different role is a good long-term strategy for you.”