Counter-Offers: Should You or Shouldn’t You?

Well-managed companies never give counter-offers. What message does it send if an employee needs to threaten to resign to get an increase in pay?

A counter-offer is an inducement from a current employer to get an employee to stay after he has announced intentions to accept another job elsewhere. In today’s job market, counter-offers have become common, as employers look to retain high performers. (After all, it’s less expensive to keep you, than to find or train another like you.)

If you are unhappy with your current pay, I recommend you go to management and ask for an increase, before you start looking for a new job. Make sure you can back up why you should be paid more. If your employer doesn’t increase your compensation, don’t resort to leaving to get more pay. These tactics can destroy your career.

If an employee communicates to management that he is not satisfied with his compensation and he can back up the reasons for why he is worth more, then management should not wait to increase his salary. Take it as a sign of dissatisfaction. If the employee is a performer, then pay the market rate. Why should management do this? If the employee has to threaten to leave to get an increase, the company’s values come into question. Is this the kind of culture you want to foster and be known for: That money is the overriding factor to keep employees happy and you have to “buy back” employees to keep them?

If you are an employee who has been given a counter-offer, ask yourself:
• What kind of company do I work for if I have to threaten to resign before they give me what I want?
• Where did the money or title or promotion for the counter-offer come from? Is it my next raise or promotion just given early?
• Are future opportunities limited now? Will I have to threaten to leave again for another raise or promotion?
• Since I’ve demonstrated my unhappiness, will that be viewed as having committed blackmail in order to get a raise?
• Will my loyalty be questioned come promotion time?

Here’s a quick story:

FD was referred to me by a colleague at his company. He had an excellent background and track record of performance. He wanted to leave because he was unhappy with how management treated him and he wanted to move to a different, related area. I leveraged my contacts to get him an interview at another company–in the area of the company he was interested in.

Throughout the interview process, I gave him valuable insights and supported his candidacy with my client. He was very interested in the position. He received an offer, signed the offer letter and committed to a start date. When he gave notice of his resignation at his current employer, management asked is there anything they could do to keep him. He said, “No, I’ve committed to the other company.” The same day, the head of his group sent a counter-offer to his team manager with a 20% increase in his base salary. FD wrote me, “I am angry and shocked. It took management one day to approve this increase when they screwed me on a raise earlier this year.” I’ll leave you hanging about what happened next, but it didn’t work out well for all parties. Especially for FD. Trust was breached all-around.

The best approach for companies:
Don’t make counter-offers. If you do, you will have retained unhappy employees. You will be sending the message to others that it’s acceptable practice. The costs will far outweigh retaining a malcontent.

The best approach for employees:
Never accept a counter-offer. If you do, your reputation will be irreparably damaged. Future raises and bonuses will be lower. You will be last in line for a promotion. Word gets around that you were “bought” and lack integrity. With “golden handcuffs” you will be stuck in your career.

When you accept an offer at another company, be a person of your word. The short term gain of a counter-offer might make your ego feel good, but I assure you, you will pay a far greater price to your career and future compensation if you accept a counter-offer and stay at your current employer.

Search consultants and recruiters report that 80% of those who accept counter-offers leave or are “let go” within six months to a year. Those are odds you don’t want to play with in your career.

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