Counter Offer: Yes or No?

In my 25 years of recruiting, I can't remember a happy ending to a case where an individual resigned and then accepted a counter offer to stay at his or her current employer. Why is that? Counter offers usually don't address the underlying reasons why people want to leave their current positions.

Individuals change jobs for a variety of reasons. Their current role may lack intellectual stimulation, career development or progression opportunities. He or she may lack a cultural fit with the manager or organization or be tired of a long commute or an intense travel schedule and want more of a work-life balance. Compensation is usually the last reason people leave their current positions or not even a factor at all. Ironically, counter offers are almost always only about money. Companies may match or even go beyond the new offer to try to convince the person to stay. However, most other "promises" to address the driving force behind the decision to leave are simply "false promises," and the reasons the employee had for searching for new employment in the first place do not go away. If the reason was cultural fit, the company will rarely change its organizational structure or culture for one person. Even if management sincerely wanted to, effecting organizational change is a challenge that takes a great deal of time and effort. If the reason was lack of intellectual stimulation or professional development opportunities, the company would have promoted the person before he or she resigned and on its own terms.

Statistics show that individuals who accept counter offers end up leaving, often just a few months later. The Wall Street Journal reports that over 50 percent of individuals receiving counter-offers after turning in their resignations accepted them. Within 18 months, 93 percent of those accepting counter offers had left, some voluntarily, and some terminated once the company identified the person's replacement. The remaining seven percent were actively seeking new employment. Once a person resigns, word spreads throughout the company and the individual is often perceived as being disloyal, which impacts an open and collegial work environment. Counter offers are nothing more than a quick fix, a band-aid that gives a company time to assess the situation and determine the best action to take. Ultimately, the end result is the same; the person is replaced or leaves.

Given the unfavorable odds for a counter offer working out, many companies have policies against even making them. A national survey of human resources executives (at companies with more than 50 employees) recently conducted by The HR Team, Inc. found that less than 20 percent of those responding made counter offers. For the minority that do make counter offers, the criteria is dependent upon the employee's contribution to the company, the value of the employee, the skills of the employee, the position, and the employee's previous performance.

So, if you are the recipient of a counter offer, be aware and follow your gut. If your instinct is to leave for another opportunity, stick to your decision and go. Be excited to look ahead. Of course, resign with grace and always keep the door open. Times have changed over the years and it is now acceptable to return to a former employer in a more senior role after having gained additional experience elsewhere.

If you are the employer contemplating extending a counter offer, be sure to think through the long-term implications. If you really desire to retain the individual for the long term, how will a restructured role or compensation package effect the organization? Will it positively or negatively impact your succession planning process? Will it upset internal parity? Can you sincerely address the fundamental reasons that caused the person to resign in the first place? If not, then congratulate the individual and keep the lines of communication open. This way, if an opportunity presents itself at some point in the future for the person to be invited to come back, he or she may do just that.

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Jane Howze

Jane S. Howze

Managing Director