Should an Employer make a Counter Offer?

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Should an Employer make a Counter Offer?

I don’t have to tell you how difficult it is to find a great fit for your team.  Finding the right experience is hard enough but finding an employee who has the necessary soft skills and fits in well with the culture is like winning the lottery.  So what do I do if an employee comes to me to resign? Should an Employer make a Counter Offer?

If you are a seasoned employer, you likely work hard to keep employee moral high and are constantly looking for ways to improve job satisfaction.  In fact, when you get a letter of resignation from a stand out employee, it can be quite unexpected. And finding a replacement is no easy feat with an unemployment rate at an astonishing 3.8%.

With the cost of onboarding and training increasing, many employers see the financial benefit of making a counter offer in lieu of starting the recruiting process again.  However, before entering into a bidding competition for your prized employee, you may want to weigh out your options. According the latest statistics, almost 80% of employees who accept a counter offer will go on to submit their resignation six months later. The reality is, what seems like a financially responsible endeavor often ends up costing a company more in the long term.

So, how do you know if you should offer a counter offer? Here are some things to consider.

  1. Understand the problem

Although money is certainly one of the big factors an employee considers when accepting a competing offer, it’s seldom the entire story.  Employees make the decision to start looking for new employment for a variety of reasons.  Of course, there is the salary issue, but for many, income is not the deciding factor.  It often comes down to growth opportunities, workplace challenges, flexibility, and even workplace culture. If the employee does open up to you about the real reason they are considering another offer, be realistic about how well you are prepared to meet their expectations. If money isn’t the problem, countering with a purely financial offer, is sure to be a short-term fix.

  1. Team Dynamics

The second thing to consider is how a counter offer might affect the moral of the team.  It is likely that your employee has told a few of their closest colleagues of their plans to move.  If they accept your counter offer, it’s only a matter of time before those colleagues notice “John” is sticking around.  Then come the questions and inquiries as to why they decided to stay. If your counter offer is much higher than the average salary for that position, resentment may begin to spread towards both the company and the favoured employee before long. So, should an Employer make a Counter Offer?

  1. An Adequate Offer

Deciding to make a counter offer after having contemplated the pros and cons is a delicate balance.  Chances are, coming up with a counter offer is going to put a strain on your labor budget.  You want to come up with a number that is enticing, but you also need to consider that this number will need to be sustained.  In addition, you will have to account for annual raises.

Overall, it’s safe to say a counter offer is seldom the ideal solution to losing talent. However, if you are seeing a trend of quality employees entertaining other offers, you may want to evaluate your team and look into changes you can begin to implement for the sake of employee job satisfaction.  As the old adage says, “An ounce of prevention is worth a pound of cure.”

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