Tom, the son of a friend of mine, had a good sales managerial job with excellent pay and strong benefits. But there were problems: his boss never offered him feedback or praise and pointed out that, with commissions, Tom was making close to what the supervisor was receiving. The boss resented it.
An old boss, who now had a new job and a great past working relationship with Tom, asked if he wanted to work for him once again. Tom readily agreed and when he told his current boss, he immediately received a counter offer that included a substantial increase in pay, a doubling of his annual bonus, and a signing bonus.
Tom turned down the offer. “If I wasn’t valuable before why was I valuable now?” he said to me. ”But I have to admit, at first I was tempted.”
An Industry-Wide Phenomenon
What Tom experienced is similar to what is happening to many employees in this highly competitive atmosphere in which distributors, manufacturers and other employers are fighting to recruit and retain top workers. Formerly these counter offers were made only to executives but that has changed as lower-skilled workers are also receiving these offers.
A report last year by Madison Wells, a search firm that focuses on recruiting quantitative marketing professionals, pointed out the challenges employees and employers are facing in today’s challenging market.
“Employers are finding that candidates are juggling multiple options. And even when they get to ‘yes,’ they see that their new hire’s current employer is often upping the ante, creating a new kind of bidding war between the old and future opportunities,” the report said.
But is it in the best interests of the employer to offer a counter offer? Some companies in recent years have adopted a policy that it will not give exiting employees a counter offer.
And for those employees who are given counter offers, it may not always be in their best interests to accept them.
Nearly 40% of senior executives and human resource leaders believe that accepting a counter offer from a current employer will adversely affect one’s career, a 2019 survey by executive search firm Heidrick & Struggles found. The firm surveyed more than 600 senior executives who voluntarily left their employers and more than 100 senior human resources officers.
Asked to check off negative consequences of accepting a counter offer, nearly 80% of senior executives and 60% of HR leaders cited “diminished trust and compromised reputation” among the executives of the employee’s current company. And 71% of senior executives and 67% of HR leaders said, “Superiors in the current company would question the employee’s loyalty going forward.”
What is certain is, generally, counter-offers don’t result in employee longevity. The average employee stays with a company less than one year after accepting a counter offer, and half of them re-initiate a job search within 90 days, according to a national survey.
Is It Worth It?
Many recruiters note that the trust with your current employer will be broken and your previously untarnished loyalty will be questioned. Most employers promise great things if you accept the counter offer, but often do not follow through.
A construction superintendent found that out first hand when he accepted a counter offer with a substantial raise and stayed on to complete a major project. Four weeks later, when the project was finished, he was terminated.
What is surprising is the percentage of employees who are accepting counter offers. In fact, one survey estimates that more than 50 percent of employees accept counter offers.
Why do some employees agree to accept them? Some say that it is much easier to stay with a company than work for another where new relationships will have to be made and they are already familiar with their job and the company.
But some job experts say these employees should remember why they decided to leave in the first place. Was it working conditions, a low chance of career advancement or poor management? Many of those conditions won’t change if an employee decides to stay.
One recruiting firm suggested that employers have been known to make a counter offer to create a stalling tactic until a suitable replacement can be found.
And then there is the issue of compensation, since studies show that only 12% of employees resign due to money. So, chances are an employee is looking for a new job for other reasons and those difficulties won’t simply go away with a higher salary. Experts say the workers need to carefully think about their original motivations and whether the pay increase is worth it to make them stay at their current company.
“While a counter offer may speak to the financially oriented issues, it does not change the other circumstances,” said Madison Wells in its report. “While increased pay will be an attractive option, which may compel many to accept the offer, it will not address the other underlying reasons that spurred a job search in the first place.”
Those underlying reasons can be lack of career advancement, an unlikable immediate supervisor, lack of training or company culture.
Despite the many negatives associated with accepting a counter offer, recruiters admit a counter offer can sometimes work out. But one thing is certain: If you, as an employer, are surprised by an employee resignation you may not have been listening or watching to what is happening in your workplace. Experts say that regular communication between employers and employees is critical to outline goals, objectives and opportunities for career advancement.
Jack Keough is President of Keough Business Communications and was the editor of Industrial Distribution for 26 years. He can be reached at [email protected].