The disadvantages of making a counter-offer to retain an employee

During the Great Resignation, millions of Americans said “I quit” and left their organization. As the talent pool shrinks, leaders are willing to do just about anything to keep good employees from walking out that door. The counter-offer is a retention tool available to managers. In fear of losing an employee, a leader may counter with a promotion, merit increase, one-time bonus, stock grants, or an opportunity to move on to another team. But leaders, beware of the perceived power of the counteroffer. Based on his experience leading teams, the author presents a number of downstream consequences that you probably haven’t considered if the employee agrees. Here’s why counter-offering an employee who quit can do more harm than good.

“If you think you should be promoted, you should go get another offer on the market,” a former boss once told me. “It’s the fastest way to get promoted and get paid more,” they added. “And right now, that’s the only way to get promoted.”

During my career, I’ve seen counter offers play out in different teams. I remember the associate brand manager who jumped two levels in less than two years after “resigning” to two different bosses. I remember the colleague who told everyone the news of his resignation, only to stay and get the role for which I was a candidate. I remember the woman who got one of our organization’s most coveted vice president positions. A colleague later revealed to me, “Oh, she pretended to quit. She used another offer to help her get the promotion.

During the Great Resignation, millions of Americans said “I quit” and left their organization. In this job market, employees continue to hold tremendous leverage as leaders scramble to fill positions and find talent with the necessary skills. As the talent pool shrinks, leaders are willing to do just about anything to keep good employees from walking out that door.

The counter-offer is a retention tool available to managers. In fear of losing an employee, a leader may counter with a promotion, merit increase, one-time bonus, stock grants, or an opportunity to move on to another team. The idea of ​​the counter-offer can temporarily make a leader feel like they have regained control of the situation and are making the best decision for their team and organization.

But leaders, beware of the perceived power of the counteroffer. In my experience leading teams, there are a number of downstream consequences that you probably haven’t considered if the employee agrees. Here’s why counter-offering an employee who quit can do more harm than good.

This probably doesn’t fix the underlying issues.

Ask yourself if a counter-offer resolves the issues underlying why the individual quit in the first place. Is that enough to keep them happy and successful on your team? Or is it just a temporary band-aid to avoid solving a bigger problem?

“If you’re making a counter offer to an employee, it needs to be well thought out and not just a moment of desperation to retain talent,” says Jill Katz, Founder and Chief Change Officer at Assemble HR Consulting. Katz continues:

A counter-offer must make sense for the employee and for the company. You have to wonder if this counter offer explains why they quit in the first place. Is it really a promotion or more money? Or is it an excessive workload and their interest in managing more direct reports? Often a counter-offer doesn’t address the real reason the person is quitting. Your job as a leader is to get to the root of the problem.

Katz also has a warning for leaders who use the counteroffer instead of having difficult or uncomfortable conversations. “If they accept the counter-offer, it is very likely that they will resign again in the future. Research shows that 50% of candidates who accept a counter offer are back in the market and looking again in two months. The novelty of this solution may wear off and they may be a leak hazard. And then you’re back in the same place looking for talent again.

This can sow doubts about your leadership abilities.

The outcome of a counter-offer can ultimately become a reflection of your leadership abilities. If you’re asking someone to stay after they quit, you need to make sure they’re set up to succeed.

For example, if you are offering a counter-offer promotion, you need to ask yourself if the person is ready for the promotion. If they are not offered any additional support or training to step into the new role, you can fail them. You need to be able to defend your decision with HR, your boss, management, and other key stakeholders. Not only will poor performance reflect poorly on the employee, it will also reflect poorly on you and your ability to assess and coach talent.

Additionally, if the person cannot perform in their new role, they may end up leaving the organization by choice or being asked to leave. Either way, you end up with an opening in your team again, and now damage to your brand of leadership within the organization.

This can have a negative impact on team morale.

Not all elements of a counter offer will be known to other team members. Unless the individual shares the details (of a merit increase, retention bonus, additional stock awards, etc.), others will not know what they have been offered for encourage them to stay. But if the counter-offer is a promotion, it will be immediately known to everyone on the team and the entire organization.

When a colleague unexpectedly receives a promotion or a new role when they weren’t on track to receive it, it can start to have a negative impact on team morale. This can cause gossip within the team, with speculation as to how and why it happened. It can also erode respect for the individual if others feel they are undeserving of the promotion and ultimately devalue it.

“What leaders don’t realize is how much the counter-offer can backfire and have a ripple effect on the entire team,” says Felicity Hassan, Talent Advisor at Core Innovation Capital and board member of Women Business Collaborative. “It can be a driver for others to start looking outside the organization, and then you might face more quits than expected.” Hassan advises leaders to consider the impact of stopping someone from leaving versus focusing your energy to ensure the rest of the team is energized by their work and not at risk of flight.

. . .

Remember that during the Great Resignation, talent will continue to re-evaluate their job opportunities. The counter-offer is not a one-size-fits-all solution to prevent good employees from leaving your organization. If people are ready to move on, sometimes the best decision may just be to wish them luck in their next opportunity.

Leave a Comment

%d bloggers like this: