Staff Retention: Counter Offers – 4 Reasons why accepting a Counter Offer could be the worst career mistake you ever make!

Proper, proactive talent management is a particular passion of mine. Having worked in the recruitment game for several years it always amazes me how companies can spend thousands, if not hundreds of thousands, of South African rands (ZAR) on acquiring talent, yet once the talent joins the team these individuals aren’t adequately retained. For whatever reason, the talent management pipeline breaks down. Whether adequate on-boarding and ensuring an employee has all the tools necessary to do the job, to successful workplace integration and/or ongoing feedback cycles which include further training and employee support. Although employers know that the first 90 to 150 days of any new employee in an organisation is crucial, I often seen an incredibly reactive approach to engaging with and retaining staff.

Just as a little FYI: Even when a placement fee is not spent, a company still spends a lot of money on the salaries of a talent attraction team, licenses for various recruitment software, job boards, LinkedIn, and the cost of the hours required of each interviewer in attendance at every interview. Fun Fact: Did you know that an all-inclusive corporate license for LinkedIn for just one or two users can cost as much as a million or more ZAR per annum? Crazy right!

Thus, following on from my previous article, Staff Retention: Clawback Bonuses, Share Options and other Long-term Financial Retention Schemes: Are companies losing touch with the times? (available here: https://www.dhirubhai.net/pulse/clawback-bonuses-share-options-other-long-term-schemes-nikki-pahliney?trk=mp-author-card), I’d like to reflect on another questionable, reactive staff retention technique. This particular strategy gets pulled out of the hat at the very last minute and is the dreaded counter offer!

Counter offers are offers of employment presented by an employee’s existing company. These tend to materialise right at the end of the recruitment process between an employee and prospective employer (interviews, assessments, psychometrics, background checks, references, etc.), so as to counter or better the prospective employer’s offer of employment. The most common counter offer strategy includes that the current employer attempts to match the same salary or offers a slightly higher amount than that of the prospective employer’s offer. The financial remuneration is frequently accompanied by promises of internal promotion or lateral skill enhancement opportunities, such as exposure to more exciting projects or initiatives, facilitated within the existing company.

The employee: 

For yourself, the employee, this sounds great! Finally, the company is appreciating you and there is now opportunity for internal movement or promotion with a pay increase, whilst you get to stay in your comfort zone by not having to move companies! However, what many employees don’t factor in includes the various short and long term consequences of accepting a counter offer and/or using counter offers to try get even more money out of a prospective employer.

Current employers:

Counter offers are incredibly contentious. Some companies spew counter offers every chance they get to prevent turnover of staff; whether because it is more expensive to have to go back to the market to hire staff, because line managers may lose head count when an employee leaves or because a line manager really doesn’t want to lose a particular staff member. The raw, painful truth is that sometimes it is a lot cheaper to give someone a raise to retain them, versus the man-hours it takes to replace a resource and the negative impact on the team which has been left one-man down.

Then again, I’ve seen many occasions where line managers genuinely wished they could retain their staff by offering better packages, but were limited by internal policies and procedures. Often line managers find their hands tied and no matter how much they motivate, they aren’t allowed to offer their valued employees any more than the top end of a standard inflationary increase, year on year. Then, the shock and horror when their prized employee brings an external offer to the table! For some line managers it is only at this point that they are finally able to use counter offers as a last resort to retain valuable staff members who are already on their way out the door. Problem is: the employee feels undervalued and wonders why it took the company this long to finally “value” them appropriately. A little too little, too late.

Future employers:

For future employers whom have already put an offer on the table there is great fear as to the possibility of a prospective employee being counter offered and whether that might turn salary negotiation/s into a tug of war. Many prospective employers view counter offers in a very negative light because counter offers are seen as another tactic which some employees may use to extort as much money out of the prospective/future employer as possible. Unfortunately, some employees are driven by money and may use counter offers to push up the offer at a prospective employer. But this is not always the case.

Please Note: No matter whether an employer does or does not provide a counter offer, the employee is still very much responsible for the consequences of his or her actions in such a scenario.

Career-killing consequences of accepting a counter offer:

Using the example illustrated below, I would like to highlight 4 reasons why accepting a Counter Offer may be the worst career mistake you ever make.

Scenario: Ok so you’ve signed an amazing offer from a great company and you’re not looking for a counter offer – you’ve made up your mind! Or maybe you thought you had. All of a sudden your current employer (Company A) offers you an increase in salary and (a favourite of mine) a whopping retention bonus with a 24 month clawback clause to ensure you stay with your current company. Your current employer even promises (verbally) that in the next 6 months you will be promoted into a more senior position in the team and given exposure to that awesome upcoming project. The head of the division himself called you in and promised you this!

Consequence #1: Reputational Risk - people remember

The scenario above sounds amazing and happens all the time. Problem is, let’s say you do now turn around to the other company (Company B) and tell them, “Sorry I’ve changed my mind – I’m turning you down. My company have finally given me what I wanted all along” or “Better the counter offer from my company and we have a deal!” What do you think that Company B is going to think, especially if you have already accepted their offer?

The consequences for Company B can be an absolute minefield. Regardless of whether they aren’t able to match the counter offer, or you simply accept Company A’s counter offer, Company B have to start the whole recruitment process all over again, which can take months if not years to complete. If they do increase their offer to compensate for the counter offer, it often leaves a bad taste in everyone’s mouths; i.e. you haven’t even started the new job yet and even though you had potentially accepted the hand offered to you, you then changed your mind, manipulated the situation and tried to take an arm!

As a potential future employee your actions can have quite a negative impact on strategic planning, budgets, projects, cost of recruitment and more. Not only that, but if you do renege on your offer you have broken your word. You have shown Company B that you are not a trustworthy or reliable individual. Believe me, they will put your name on some sort of blacklist going forward: “Counter Offer risk”, “Money hungry candidate”, “Reneged on Offer”, “Don’t Touch!!!”, etc.

The likelihood of you ever interviewing with that company again, even if it is in a different department, is very low. Not only do managers talk, but so do the talent attraction team. Even if the circumstances on your side were exceptional, your actions may very well tarnish your reputation. Even worse, if you are a specialist working a niche market, the likelihood of word getting out to the industry as to your actions is high.

Consequence #2: Short term gain, long term consequences: money, broken promises and a definite mood change in the atmosphere

Continuing with the example above, let’s assume that you, the employee, have accepted the counter offer from your existing employer, Company A. Everything seems great at first. As the months pass, the cracks start to show. On a number of occasions, I have seen organisations actually offer retained staff members lower annual increases, because the rationale or logic is that the counter offered individual has already received an out-of-cycle increase. Why on earth would they give you another decent increase?

Then there’s that awesome retention bonus with the 24 month clawback clause which you accepted? That money is all gone now because you’ve spent it. You then realise, if you want to leave this place anytime soon over the next 24 months, that’s a lot of money to pay back!

Next on the list – remember the promise the head of your division made about that promotion in 6 months’ time? Guess what? You didn’t get it. Either someone else on the team was found to be more suitable and/or the head of the division has moved on within the company. You are the last concern on his priority list! Unfortunately, there is nothing in writing so you don’t have anything to hold Company A to. Alternatively, let’s say you were clever enough to get something in writing. More than likely there is a clause in your paperwork which states something along the lines of “… subject to management / company discretion in line with prevailing market conditions.”

An empty promise, hardly ever fulfilled.  

Oh yes, since you accepted the counter offer, how have your colleagues and line manager been treating you? How is the atmosphere at work? Does it suddenly seem strange that your line manager is keeping a little more distance and doesn’t really ask for your thoughts or ideas anymore? Do you walk into the office and suddenly your colleagues stop talking, smile at you sheepishly and walk away? Does it seem like people are talking about you? Very possible. After all you are the one that wanted to jump ship, but didn’t, and now everyone is wondering whether you will stick it out. There may even be a betting pool as to how many more months you’ll stay with the company.

The work atmosphere has changed and you will never be able to go back to the way things were. In addition, your line manager might be thinking - “well this one is just a ticking time bomb, a flight risk. Let’s see what happens.”

Consequence #3: Job satisfaction

As the months continue rolling by the reality sinks in. This place, Company A, is where you will continue your existence for the next 2 years. How do you think that impacts your state of mind and the way you feel about your job? Do you really think you are going to remain the same productive employee you were before?

Often when dealing with employees facing counter offers I ask those individuals to go back to the drawing board and revaluate why they wanted to move in the first place. We run through the pros and the cons of both the prospective offer (Company B) and the counter offer (Company A). The number one reason employees move is because they are looking for that next level; they want to develop their skill sets further and continue to learn. Most employees feel they are stagnating in their current environments.

When you accept a counter offer and stay in the same environment (and often the same job), what is the likelihood of expanding or diversifying your skill set? Very little. Many employees end up becoming highly dissatisfied in their jobs. After all, if you felt you were stagnating the first time around how can you expect a different result going back to the same environment?  

Consequence #4: Putting your career on hold

The last career-killing repercussion I would like to mention, which many individuals actually don’t realise, is that by accepting a counter offer 99% of the time you are actually putting your career on hold. Why do I say this?

• You are staying in the same environment or company in which you were originally dissatisfied, potentially under-appreciated and probably already highly unproductive. It is a proven fact that once an employee has made the decision to leave a company they become disengaged and productivity goes out the window.

• You may have taken a dramatic increase in salary and/or accepted some sort of retention scheme with a clawback, which means that the likelihood of you being able to move companies or even divisions is VERY LOW. Yes, in many environments your future internal manager would still have to take over the cost of your retention bonus in order for you to move internally into another team. When that internal line manager finds out that you are a counter offer risk, what is the chance of them taking you on as a resource? Furthermore, depending on how high your salary is, most agency recruiters will probably tell you it is best to stay where you are until the retention period is over.

• What this all boils down to is: when you had the opportunity to take your career to the next level, you didn’t. Instead, you stayed in the same environment and your skill set slowly becomes incredibly niche or outdated. Those exciting job opportunities which could help you to diversify will pass you by as you desperately wait out your clawback period, or as you struggle to come to terms with the fact that in order to make a career move, you might have to take a financial drop in salary. Once a person has become acclimatised to a certain standard of living, there is little chance that they would be willing take a drop in salary. Instead, you may continue job hunting for years to come, whilst suffering in silence in your current situation.

In conclusion…

Bringing this article to a close, my advice is this: Counter offers can be incredibly tempting, but see them for what they really are; a reactive staff retention technique which may well result in a host of negative consequences for an individual’s career. Current employers use a range of supporting arguments to retain staff via counter offers, including the use of the “guilt-tripping” emotional argument, “We are building something together, don’t leave us!” versus the logical argument, “The grass is often not greener on the other side so why take the chance of being unhappy in a new job?” Many companies will throw the emotional kitchen sink in to get you to stay and will even make sure that all the best internal promoters of the business each have a cup of coffee with you with the aim of persuading and influencing your decision.

Yes, sometimes line managers do genuinely want to retain their valuable staff members and have tried to do everything in their power over a period of a time. Nevertheless, in the final analysis the decision you make needs to come from having weighed all the pros and cons. Sometimes sacrifices must be made. Sure your current employer offers a comfort zone with more money, but remember why were you looking in the first place? Be selfish with your career and your decision. You are the one that has to live with the consequences, not them. The company will continue functioning with or without you.

In another scenario, if there is any chance that you are not serious about the job hunt and just want to see what offers you might get, be very careful. Such ploys can have far reaching results. That is not to say that you shouldn’t keep your options open and investigate opportunities as they arise. Of course you should! Go for as many first interviews and coffee chats as possible! There is always opportunity for future interactions with companies that you meet in the present.

However, if you know you won’t accept a certain role no matter the offer, don’t toy with the company and don’t let the process move forward. Be transparent, maintain good relationships with your industry networks and keep looking. On the money side, believe me a job will never be fulfilling if it is only about the money. If you are going to spend 80% of your life in a job, it had better be something you enjoy doing or you will very quickly find yourself on the job market once again.

Once more I emphasise, be selfish with your career but remain aware of the consequences of your decisions. You are the only one who should be allowed to determine the path you choose to take.

Nikki Pahliney specialises in providing individuals with 1-on-1 career mentorship, interview process preparation (incl. salary negotiations) and coaching. Utilising a variety of techniques, including role-playing, simulations, competency based screening, telephonic discussions and 1-on-1 pow wows! Enabling and identifying next career steps, resume enhancement and social profile/personal brand development.

For companies: Advising on end to end talent management, including talent attraction, acquisition, remuneration benchmarking and employee retention strategies.

For entrepreneurs, executives and the like: Mentoring and facilitating a platform for budding entrepreneurs around idea generation, definition and development, including providing the necessary tools and guidance to take an idea from thought, through incubation, to making it a reality!

Nikki can be reached at [email protected]