They say offence is the best form of defence, but is retaining a valuable employee with a lucrative counter offer really the best strategy?
One of the consequences of our tight labour market – and something we’re seeing more and more of – is an increase in counter offers. On top of that, we’re seeing a significant increase in the size and scope of some of these offers too. In fact, some have surpassed anything we’ve seen before (and we’ve been working in the industry a long time!)
Is making a counter offer the right thing to do?
Keeping an employee may outweigh the time and money spent attracting and training new talent. But if you are going to present a counter offer, it will pay to do some homework.
First, ask some key questions to gauge their thinking.
If money is the only/key motivator, it’s a red flag. And there’s a good chance the offer will be a quick fix. But if you find a person is frustrated by a lack of responsibility, or is seeking a new challenge – a counter offer that helps improve job satisfaction may have a much higher long term success rate. If your counter offer is only financial you may find your employee moves on within the next few months in any case.
It’s also important to consider what is best for your employee. If moving on to a new opportunity will benefit their career and personal development, perhaps wishing them well for their next adventure will be the right approach.
Do counter offers actually work?
A Hays survey of over 2,700 organisations found, of those counter-offered, on average 46 per cent left anyway, 4 per cent accepted the counter offer but stayed less than three months. And only 29 per cent stayed longer than 12 months.
With those numbers in mind, it makes even more sense to do due diligence on who you’re making an offer to.
Proactive communication is key.
If there are underlying reasons why employees want to leave, taking a proactive approach to understanding their motivations is key.
An effective way to create this dialogue is with Stay Interviews.
By regularly sitting down and proactively exploring the parts of a role that motivate or frustrate an employee, a company will have the insights they need to create a more engaging work experience.
Stay interviews are a great way to build trust and taking this step may reduce the number of employees wanting to leave in the first place!
Read our article about Stay Interviews.
www.progressionhr.co.nz/stay-interviews
How should employees handle a counter offer?
From an employee point-of-view, a counter offer can look very tempting.
But there will still be pros and cons that should be weighed up before making a final decision. At the very least, a candidate should think about the following…
Why leave or look for a new job in the first place?
If the main reason is higher pay, a lucrative counter offer may make the decision to stay easy. But in most cases, other factors are at play – lack of career advancement, toxic culture, lack of flexibility etc. If these factors aren’t addressed, a jump in salary won’t improve job satisfaction.
What will you gain if you leave?
A new job could promise excellent benefits such as an easy commute or different work schedule. You may be looking to move for greater flexibility, or perhaps the opportunity to work with a bigger team you can learn from. In the longer term, the new company may also offer more potential to advance your career, so think about where you’d like to be in 3-5 years.
Final thoughts.
Navigating the tight labour market is a challenge for everyone, but employers looking to make a counter offer do need to think through the consequences.
If one or two team members are getting paid significantly more than everyone else, this could have a negative impact on team culture. A large salary increase may also be an expensive way to paper over the cracks – if the employee is struggling with other aspects of their job, they may leave anyway.
In our experience, the best companies have an open line of communications with their employees – talk, talk, talk – find out what people are thinking and then act!
