A counter offer they can refuse...so they do

Analysis

A counter offer they can refuse...so they do

Is it worth making a counter offer to valuable employees when they resign? Usually not – by then it’s too late, according to a recent survey.

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Is it worth making a counter offer to valuable employees when they resign? Usually not – by then it’s too late, according to a recent survey.

The latest annual salary survey conducted by Hays Recruitment Consultants asked the question 'Is it your policy to counter-offer staff when they resign?' Almost half (48%) of the 1,700 respondents said yes, 46% 'sometimes' and 2% 'always'.
 

What happens when offers are made?

But does it work? In 30% of cases, the employee rejects the offer and proceeds with the resignation. A further 42% decide to stay but leave within the next 3 months, and another 8% leave within 12 months. That leaves only 20% who are persuaded to stay at least a further 12 months, so it is fair to say that there is only about a one in five chance that a counter offer will work.

The 42% who leave within three months could suggest that employees merely use the counter offer as a bargaining tool to help negotiate a better deal with the next employer.
 

So is it worth making a counter offer?

Commenting on the survey results, Hays predicts that counter offers will become more prevalent as retention of key employees becomes even more important in a workforce environment of widespread skills and knowledge shortages. In that context, it could be argued that making an offer is worth a try.

There seems to be about a 20% chance of success, you may feel you have nothing to lose because the employee will resign anyway if you do nothing, and the cost of the offer is likely to be much less than the cost of replacing the employee.

The Hays survey did not explore issues such as what types of counter offers were made (eg whether remuneration increases, promotions, more flexible working hours, etc), nor whether employers subsequently delivered the promises they made.
 

Decision usually made a long time ago

It is fair to say that counter offers belong with exit interviews in the “after the horse has bolted” category. It appears from the above statistics that few employees are bluffing when they actually submit a resignation, so a counter offer is a fairly desperate attempt to retrieve a situation that has existed for some time.

It takes time for an employee to apply for another job, go through the screening and selection processes and receive a formal job offer. Secondly, not all employees are offered the first job they apply for, they may have been applying for others for quite some time, and in some cases they may have more than one offer to consider.

This means that most employees made their decisions to leave a while ago, usually several months.
 

Avoid knee-jerk reactions

As again shown by the survey’s resignation statistics, it won’t be sufficient to throw an offer together and assume the crisis is averted if the employee accepts it. By the time the resignation is handed over, the employee has had plenty of time to reflect on the consequences of resigning and seriously considered the available alternatives.

Reasons for resigning

This means that the employee is usually very clear about why he/she wants to resign. The challenge for the employer is to identify that reason and assess whether a long-term 'fix' is feasible. The first question should be along the lines of 'what would we need to do to change your mind' rather than 'what if we offered you XXX'.

There are of course many reasons why employees choose to resign – remuneration, learning/development opportunities, management style, working conditions, reputation of the business, personality clashes, etc. However, employees don’t always tell you the real reason why they are resigning – for example they don’t wish to 'burn bridges' in case the new job doesn’t work out.

Fixing problems

If you don’t identify the real reason and take steps to address it permanently, the employee’s original motivation for seeking another job will remain in place. In the near future, another incident will probably occur and the employee will resume job-hunting, or may simply take the extra money or other benefit and continue searching. And needless to say there has to be commitment from the employer to fixing whatever problems the employee identifies.

Before making any counter offer, you must know that you will be able to deliver on your promises. Don’t promise a 'review' of the situation or that you will 'look actively' for alternatives – employees have already lost confidence in the employer to some extent and will quickly run out of patience.
 

How will it affect other employees?

Another issue to consider is the impact a substantial counter offer may have on other employees.

For example, it may create inequities of pay and conditions between employees. The others may receive the message that the only way to improve their position is to find another employer, or at least threaten to resign and see what happens – the 'squeaky wheel' syndrome. This is another potential consequence of knee-jerk reactions – and of course another reason to be proactive in the first place.

Even if the employee rejects the counter offer, other employees will probably find out about it. Then you will have the problem described above as well as the problem of a resignation.

Further information

A full report of the Hays survey is available on the Hays website.

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