The US Economy is very strong. Currently there is a 3.7% general unemployment rate, which drops to 2.5% in the tech sector (according to Dept of Labor December 2023- Current Employment Statistics). The media talks about well publicized layoff’s at tech companies, though the numbers tell a different story. With virtually full employment, many companies are making counter offers to try to keep people from leaving. My advice to managers is that they should NOT make a counter offer when an employee resigns.
There are many articles written on why the employee should not take a counter offer. Here are 4 reasons not to make a counter offer:
1. Trust IS the Most Important Factor
The main reason counter offers don’t work is that once trust is broken, the relationship is broken. Work relationships are different from our personal lives, though they are also deep relationships. We spend a lot of time on our work, and with our teams. We are continuously developing and nurturing relationships with the people we work with. Trust is built from our shared experiences working towards the same goal. The trust built with your colleagues allows you to feel confident in reporting, customer interactions, sales, troubleshooting, in everything we do. Once you realize that the employee who said they had to go to the dentist was actually out interviewing, the trust is lost. How can they ever be trusted again? This leads to second guessing and doubt, which hurts the whole team. Eventually, the person who accepted the counter offer will leave because the environment has becoming uncomfortable.
2. The Reason They Were Looking Remains
Money is important, though there are many factors that lead to satisfaction at work.
When speaking with candidates, issues that rank highly include:
- working with interesting technology
- remote work
- career growth (typically this means a path towards management, or learning something new)
- believing in a product or company mission/values
- instability in their current position (financial, management changes, outsourcing, etc)
- deadlines
- quality of life
- recognition
Additional money from a counter offer won’t change any of these, a few months down the line the person will be interviewing again.
3. Is Money the ONLY Factor?
If additional compensation was the only reason an employee started looking, did they ask for a raise before they started looking? Is this position compensated at the appropriate level? If people keep leaving the same group over comp, it might be time to evaluate internal compensation packages. The reality is that there’s always another company who will pay more. Money can’t be the only factor as to whether someone wants to be part of a team.
If a particular employee is critical to an operation, rather than a counter offer, they might be open to a longer notice period at a higher rate. As an example, a firm could offer a 25% increase in their rate if they agree to give 8 weeks notice and help find a replacement. Potentially the employee would be willing to help find a replacement as a contractor if compensated.
4. Most People Who Accept Counter Offers Will Leave Within 6 Months
Reporting says that 90% of people who accept counter offers leave within 6 months. With this knowledge, if a firm does counter and it is accepted, they should immediately start looking for a replacement. That way when the person does leave, at least there is a replacement already up to speed.
As a recruiter and manager with decades of experience, I know these scenario’s well. I’ve still made counter offers twice, and it did not work out for the reasons outlined above. For me, both times the employees resigning were people I had invested a lot of time training, and thought I had a really strong personal relationship with. Both were starting to become successful, but wanted to work in a different industry. With hindsight I understand the position wasn’t the right fit for them, and I respect that they wanted to pursue other opportunities. In the moment, I let my emotions cloud my judgement, and I made counter offers, both were accepted. I assured myself I wouldn’t treat them differently and let things get ‘weird’, and I didn’t. The money initially made them happy, but shortly thereafter both resigned again because the industry and position was not the right fit. I then lived through the resignations twice. I would have been better off wishing them well the first time.
Summary:
A counter offer may seem like a solution, but it typically prolongs a problem. In rare circumstances it may make sense, though generally the person you’re countering is likely going to leave in the near future anyway. There’s someone else for every job, none of us are irreplaceable. When someone feels it’s time for them to move on, wishing them well and making the transition easy is the best path for all parties. The person you hire as a replacement may be your next great hire!
