Should I Make A Counter Offer To An Employee?
When an employee tells you they are leaving to move to another company, is it wise to make a counter offer?
It’s a reality of running a business or managing a team: Over the years, people will come and people will go. Sometimes, departures will suit you, but at other times they won’t.
You may be particularly reluctant to part ways with an employee if they are:
- a significant contributor to the business
- working on a time-sensitive project
- moving to a direct competitor
- someone you want to retain as you had them earmarked as part of your succession planning
You may want them to stay as it will save you from starting the recruitment process from scratch, trying to attract and hire a new employee as their replacement who will have the same impact on your business. But once they’ve signalled their intent to find a job elsewhere, you may doubt whether they will ever regain the standards of work and level of commitment as before.
You’ll find yourself swinging between “What can I do to keep them?” and “Should I even try?”
So, should you make a counter offer?
To answer that effectively, we need to explore the potential outcomes of if they accept your counter offer and outline the other options available.
If they stay…
The bittersweet reality of counter offers is that, in many instances, the person who accepts your offer will still most likely want to leave the business anyway; the real reasons for wanting to change jobs in the first place are unlikely to go away.
If anything, this proves that there are reasons beyond just money that initially caused them to apply for other jobs.
- Career progression (or lack thereof)
- A bad boss or negative working environment
- A desire for more challenging work
- An opportunity to join a more high-profile company
- An improved level of work-life balance
All of these tend to be more influential factors in an individual’s career over their salary.
In the majority of cases, just giving a salary increase in the form of a counter offer will not solve the problem – and may even cause other issues:
- the person is likely to leave anyway
- the salary increase may create an imbalance in your salary scales
- other team members may pressure you for an increase if word gets out
- it may negatively affect your cost competitiveness in the market
- your relationship with the person may never be the same
If you can fully understand why they were considering leaving, then there are other ways you can try and convince them to stay aside from putting forward a counter offer of more money.
In this situation, you should try to depersonalise your reaction to whatever they say and be honest, as well as realistic, about whether their concerns at work and reasons for wanting to leave can be addressed without them actually leaving.
The two most important questions to ask, before proposing a solution, are:
- Do you like this business?
- Taking these immediate concerns out of the equation, do you see yourself having a future here?
If you don’t hear “yes” and “yes”, then maybe now is the right time to say goodbye.
If both parties would genuinely prefer it if a solution could be arrived at, then you can start to examine options like giving the person a role that better plays to their strengths or offers a fresh challenge.
The most common issues are around miscommunication or lack of effective management. If this does happen to be the case, then seek to address those shortfallings.
Always try to avoid emotional and psychological pressure - it’s unfair and unprofessional.
Any commitments you do make, be sure to stick to them or you’ll be back to square one!
When to counter offer with a salary raise
Offering more money can often be the only solution if you really want them to stay and see an assignment through to completion or meet a big deadline.
This said, you should be mindful when offering a salary increase as there can be hidden repercussions.
You should always benchmark their salary against industry averages prior to having any conversations - our salary guide calculator allows you to view pay rates by industry, location and level of seniority.
Maybe the salary is just not sustainable for the person, in which case you need to assess the risk and longer term return on investment for the business that comes from increasing their salary so that they don’t leave just because of money.
If you believe they will have a big impact on the business in the future, and you trust their motivations and the information they have given you, then you need to find a solution that will be attractive enough for them to stay.
Prevention is better than searching for a cure
You want the people in your team to excel while they are with you. Create an environment and strong corporate culture where people can excel and have open lines of communication, so small problems don’t become big problems.
If your best people can achieve their career goals in your business, they will naturally create and deliver value. If they need to leave to achieve their goals, then be glad for them and wish them every success.