Three Reasons NOT to Make a Counter Offer

by
March 30, 2016
Three Reasons NOT to Make a Counter Offer if an Employee Threatens to Leave

One of my favourite articles from Raconteur’s 16-page Talent Management report has got to be “Should You Let Them Go or Counter-Offer”, by Peter Crush.

The article basically discusses how good – or bad – the common practice of offering potential leavers a pay rise in the hopes that they decide not to leave your company. So does a counter offer help or hinder employee retention?

“Use in Case of Emergency”

I think this quote sums up how many people feel about making a counter-offer – i.e. it is a last resort, and only to be used if you really can’t handle somebody leaving, and a pay rise is the only way to make them stay.

But according to Gareth Mann of executive headhunting firm Barrington Hibbert Associates, “nine times out of 10, firms should never try to keep staff who clearly want to go”.

So why is this? Here are a few reasons the article discusses – and I think they’re onto something:

1. They Will Still Leave Regardless

According to the same Gareth Mann of Barrington Hibbert Associates, 71% of people given counter-offers to stay end up leaving within six months anyway. In other words, you’re not actually paying a premium to retain them, you’re actually paying a premium to extend their stay a little.

This is thought to happen because pay isn’t the issue in the first place – it is the employee’s need for a change of scenery.

2. Everybody Else Will Want a Raise

Further into the article, Simon Gott – organisational development programme director at leadership institute Roffey Park – chimes in to warn that the moment word gets out that big pay rises are being given to employees threatening to leave, everybody will start doing it.

This is a bad habit that you probably don’t want your workforce to get into, and is another good reason to avoid the practice of making a financial counter-offer to prevent employees from leaving!

3. The Money Could be Better Spent Elsewhere

Towards the end of the article, Mr Mann suggests that the money would probably bring better results if you put it into something else – such as training new staff.

His reasoning makes a lot of sense, as he says that instead of paying somebody to stay for six months who is disengaged and unproductive, you could instead spend time and money training somebody new who is really “keen and willing to learn and contribute”.

You can read the full article here. What do you think about paying potential leavers more to encourage them to stay? Have you ever done it? Did it help or hinder your business?

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