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Counteroffer Culture: Striking a Balance

Finding good people is always a challenge. But, once you find them, keeping them is another matter altogether…

With 77% of businesses reporting issues with attracting top talent compared to 49% in 2021 (CIPD Recruitment and Talent report 2022), it’s clear that, across the board, hiring is becoming increasingly difficult. Current market conditions in the Professional Services Sector are seeing an increasing number of businesses having to use unusual, but not unprecedented, tactics to meet both the challenge to hire and to retain.

As recruiters, we see a cross section of what is being offered by employers to win talent and what responses are being made to retain top performers. Counteroffers aren’t new, but they are certainly more prevalent now, and the size, scale and frequency are at levels we haven’t seen in a long time.

If there is an article written about counteroffers by a recruiter, it is usually written from a candidate perspective. Some quote questionable statistics about the number of counteroffered candidates who eventually move within a set period of time, suggesting that from a candidate’s point of view a counteroffer is, at best, a temporary fix and that the candidate should consider the motivation behind the offer and simply reject it as they will more often than not move anyway.

But what are the benefits and potential pitfalls from an employer’s point of view?

Economics

Sometimes it is just about the money. Whilst this is rare, money is usually in the top 5 reasons why people move. So it’s better to pay an increased package for a known commodity, as you can bet that it will cost you the same or more to replace them. You then need to factor in the additional costs, agency fees, management time in running the hiring process, opportunity cost, and impact to the business. If the individual is in a management role the total cost to the business can amount to multiples of their annual salary.

Change

Whilst some staff turnover is good, in the current market and uncertain economic times, stability and consistency are key. Most will favour the status quo over change and having the same faces in senior roles can be reassuring.

Optics

Fighting to keep your staff by counteroffering promotes the fact that you will look after your people even if they are unhappy and are looking to move on and shows that you value your team; the proviso being that you fix any underlying causes if there is a common theme.

Hiring a replacement

As every hiring manager and business leader is aware of by now, hiring a replacement is never simple nor straightforward. In a talent-short market, this process is going to be challenging, resource heavy, and potentially expensive.

So far, the case for a counteroffer is looking overwhelmingly positive. But is it truly? Consider the following points.

Testing Commitment

Once an employee has decided to make a move to a new company, you could argue that the seed has already been planted. They may accept the counteroffer, but how long will the employee then stay? Have you truly fixed the issue or is it a sticking plaster on a gaping wound? Their commitment to the role and the company has undeniably been tested.

Setting Precedents

Be warned that no matter how much the individual is sworn to secrecy, the details of the counteroffer will usually leak out and spread to other members of your team and can lead to other individuals who may not necessarily be as valuable to you seeking the same type of deals. You must consider the potential impact this may have on your team, and whether you are prepared to offer an increase or lose some of these individuals. Equally, your existing loyal staff may need salary reviews to bring them in line with those you counteroffer, so it can ultimately prove to be an expensive move.

Consider a new approach.

Emergency can be the mother of invention. Perhaps it’s time to start thinking outside the box: can you re-engineer the role? Could you promote internally? Looking at things differently and finding an alternative solution to counteroffering could be a catalyst for change if you decide not to make the offer.

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