The Curse of the Counter-Offer

Statistically, more than 80% of people who accept a counter-offer leave within 6 months, and that percentage rises to 90% when looking at those who leave within a year.

So, why is this practice still so rife among employers?

In this article, we explore the reasons an employer may present a counter-offer, before highlighting the consequences for all parties involved – or more specifically, all the reasons why you shouldn’t make, or accept, a counter-offer.

What is a counter-offer, and why do companies continue to present them to employees looking to leave?

When an employee hands in their resignation, it can often come as a surprise to the employer, especially if the employee is seen as a valuable asset to the company – and even more so when the employee is leaving to join a competitor. In such a situation, the employer may look to retain the employee by presenting a counter-offer; promising an increased salary, promotion, and more!

Alongside the risk of losing a team member to a competitor, there are several reasons why a company may present a counter-offer. One is to avoid the costs associated with hiring a replacement. Recruiting and training new employees can be time-consuming and expensive, and it may take some time before the new hire is able to perform at the same level as the departee.

Another reason might be to retain the employee's skills, knowledge, and experience. If the employee is a key player in the company, losing them may have a negative impact on the delivery of critical projects, or day-to-day operations and business performance. By offering the employee a better deal, the company can ensure that they continue to benefit from such expertise.

Many employers are often mistaken in thinking that a counter-offer is a good way of showing that they value and appreciate the employee's contributions to the company. However, quite often employees feel this 'reactive approach' is just a little too late.

"Why wait until now to show me how much I'm valued here...

The Employee's Perspective

CONGRATULATIONS! You've been offered a new role, with a company you've admired for a while.

You’ve told your closest friends and family, and everyone’s ecstatic for you!

But what next?

Well, in most cases, after a momentary feeling of joy, reality sets in and your mind quickly shifts to the conversation you’ll need to have with your current boss...

"When do I do it? What do I say? And how will they take it?"

If you’re good at what you do, there’s a strong chance they’ll do their utmost to hold onto you by promising something completely out of the blue - maybe a salary increase, a retention bonus, or just like magic; that promotion you’ve been asking about for the past 2 years!

It would be easy for anyone to get suckered into all of this. It’s human nature, and at the end of the day, maybe it is easier (and less risky) than starting afresh somewhere new!

STOP. Take a moment, breathe and remind yourself of all the reasons you wanted to move in the first place.

Do you still feel so keen on that offer to stay where you are?

Here we’ve highlighted just some of the reasons to avoid accepting a counter-offer:

1. Short-term fix, not a long-term solution: Whilst you may be enticed by the prospect of a higher salary, a promotion, or other promises made; this doesn't necessarily address the underlying issues that caused you to want to leave in the first place. Accepting a counter-offer might provide temporary relief, but it's unlikely to solve your long-term career goals or job satisfaction.
2. No guarantee of job security: While your employer may have promised you a promotion, job security and a long-term career path, there is no guarantee that they will keep their promises. The company could also go through restructuring or downsizing in the future, leading to layoffs – and if this were to happen, you may be seen as the most expendable.
3. Lack of trust between you and your boss: Accepting a counter-offer may lead to a lack of trust between you and your boss, as they may wonder whether you’ll continue to look for other job opportunities - and you may feel as though your loyalty is in question (as you constantly feel them breathing down you kneck).
4. Severed reputation with colleagues: It could create resentment among your colleagues, who may feel you are not committed to the team or the organisation. This can affect team morale and productivity, and they might also view you as someone who is disloyal or untrustworthy.
5. Missed opportunities: By accepting a counter-offer, you may be missing out on potential career progression. You may be limiting yourself to a single employer, and this could hinder your career growth and development.
6. Reduced negotiating power: Accepting a counter-offer may weaken your negotiating power in the future, as your employer may feel that they have already given you a significant concession, and may be less willing to negotiate in the future.
7. Failure to address work-life balance issues: If the reason you were looking for a new job was due to issues with work-life balance, this won't address the problem. It may provide a short-term fix but may not result in a long-term solution.
8. Burnout: If you've already reached a point of burnout, accepting a counter-offer may only delay the inevitable. It is likely you'll find yourself back in the same position in a few months' time; however, this time, without any job offers on the table.
9. Burnt bridges: And finally, by accepting a counter-offer you will likely burn bridges with potential employers and recruiters that feel you have wasted their time, energy and resources during previous recruitment, interview and offer processes. This could seriously tarnish your future job prospects when you do decide to move on.

The Employer's Perspective

The dreaded moment when your star performer asks if you have 10 minutes for a quick catch-up on a Friday afternoon...

You know what's coming, you've felt it coming for weeks now.

Panic sets in...

"What about all of our projects? We've got deadlines to meet and targets to hit! We cannot afford to lose them now!"

But deep down, you know you should have done more to show how much they're valued a lot, lot sooner.

SOLUTION = Offer them way more money than they're currently on; give them a massive on-the-spot bonus; and promise them the world! That'll do, won't it?

WRONG!

Here are just a few reasons why making a counter-offer could be detrimental to you, your team, and the culture within your organisation:

1. Time-consuming and very costly: The process itself can be very time-consuming. As the employer, you may need to spend time negotiating a new salary or job title, dealing with HR to get approval on these, and making unreasonable adjustments to their working conditions; all of which can distract from other important tasks and projects. In the long run, it can also work out to be more costly than hiring a new employee.
2. Negative impact on team morale: It will likely create resentment among colleagues, who might feel as though the employee is being given preferential treatment; especially if they feel that their contributions aren’t valued as much, or being rewarded in the same way. This can lead to a toxic work environment, lower productivity, and high attrition of staff.
3. A breakdown in trust: An accepted counter-offer could lead to a breakdown in trust between you and your employee. They may feel that they weren't truly valued before they said they were going, whilst you may question their loyalty to you and the organisation.
4. There's still a risk of losing them: This brings me to my next point. Even if the employee accepts the counter-offer, what’s to say they won’t leave in the near future anyway? After all, 80% of people who accept a counter-offer leave within 6 months and you're only delaying the inevitable.
5. Short-Term Fix: Very rarely does a counter-offer address the underlying reasons why an employee was looking to leave in the first place. Can these issues be resolved?
6. Damage to Reputation: Organisations (and bosses) that make counter-offers may be seen as indecisive, and could struggle to attract top talent in the future if they are perceived as a company that doesn't invest in employee retention and development. They may also damage their reputation with other employees, recruiters, and professional networks, as it can be seen as an attempt to retain employees by buying their loyalty.
7. Reduced negotiating power: You might lose all leverage in future negotiations, as the employee knows you are willing to make a counter-offer to keep them. Now they hold all the cards.
8. Legal implications: It may have legal implications, especially if the employee has already accepted a job offer and signed a contract from another company. It is important for the employer to be aware of any legal obligations they may have and to consult with their HR team before making any counter-offer.
9. Inequity among employees: It creates inequity among other employees, who may wonder why they were not offered the same benefits or incentives. This can create resentment and further affect employee morale.
10. Culture fit: It may not fall in line with the organisation's culture or values. You may want to consider whether the employee is a good fit for the organisation long-term, and whether they align with the company's goals and values.
11. Strategic priorities: Will making a counter-offer to said employee support your organisation's strategic priorities? Especially if they are not in a critical role, or if the business is focused on growth and expansion in other areas.

In Summary

While counter-offers may seem like a quick fix to keep a valued employee from leaving, they're far from the golden bullet and often end up causing more harm than good.

For the employee, accepting a counter-offer may lead to feelings of distrust and resentment from both their current employer and potential future employers. Additionally, the underlying reasons for wanting to leave in the first place may still exist, leaving them unfulfilled in the long run.

For the employer, counter-offers may lead to increased costs, decreased morale among other employees, and the possibility of the employee leaving soon after anyway.

Ultimately, it's important for both the employer and the employee to carefully weigh the pros and cons of a counter-offer, and to make a decision that's best for their respective careers and goals.

(...in other words, don't do it!)

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