Counteroffers: Too little too late?

29/08/2017
In light of the consistent tight labour market, counteroffers were found to be a common practice in an attempt to convince quitting employees to stay. We interviewed Matthieu Imbert-Bouchard, Managing Director of Robert Half Singapore, who shares some insights on the issue of retention, if counteroffers work and why.

The process of looking for a new job is tough and people do not go through it without a good reason, which may suggest the array of reasons that resulted in intentions to leave an organisation. In other words, happy employees do not go to the trouble to even look for a new opportunity, let alone accept one. And in response to a quitting employee, a counteroffer may surface in an attempt to retain the employee.

Counteroffers as a solution to retention

Counteroffers are sometimes initial reactions, however the short-term benefits of extending a counteroffer are far outweighed by the long-term benefits of not extending a counteroffer. In a recent Robert Half survey, counteroffers were extended to employees mostly because they fit well with the team, has deep knowledge in the company or if there are concerns associated with hiring, onboarding and professional development processes.

Repercussions to counteroffering

A counteroffer can address a portion of an employee’s dissatisfaction with salary and title. But if a worker feels like they do not fit in with the company culture, lacks chemistry with the team or cannot strike the right work-life balance, a counteroffer will not solve their problems. And they will likely start looking for a job again as soon as the thrill of the salary increase or promotion wears off.

Counteroffers may not be addressing long term, deep-rooted problems. According to Robert Half’s most recent independent research, 96% of Singaporean CFOs extend counteroffers in an attempt to retain employees, and more than of the same CFOs (59%) end up leaving the company.

Why do employees leave anyway?

The truth is, pay is probably not the only reason that leads to intentions of leaving. In fact, a 2014 Morgan McKinley survey found that only 12% of employees responded that reasons for leaving an organisations was solely based on dissatisfaction with salary. The employee could be having issues adapting to the job, organisational processes, or had negative relationships with his or her co-workers. These underlying reasons have not changed with the counteroffer (Porreca, 2016). Financial incentives like a counteroffer may stall some time to encourage the employee to stay, it does not however resolve the reason behind turnover cases.

It seems that regardless of the outcome of the counteroffers, this practice may not be productive.  If the counteroffers are accepted, the company is not doing anything else other than putting a slight delay on the resignation of the employee. It is assuming of the employer to believe that financial incentives will resolve any other reasons that led up to the employee’s decision to leave. The act of providing counteroffers also shows the incumbent employees that they could potentially use resignation to get a pay raise. In any case, employers would find themselves in a better position to start the hiring process immediately once they see the resignation letter on the desk.

Alternatives to counteroffering

Offering a counteroffer can be an immediate reaction to an employee resigning. Yet a better approach is to avoid counteroffers altogether, and start the looking to hire a replacement straight away. The initial cost during the hiring process is a cost-effective measure in the long term.

As a check against intentions to quit, managers should check in frequently with their staff to make sure they are challenged and satisfied with their career path. Also, regularly assess your staff’s salary against industry benchmarks and guides, such as the Robert Half Salary guide, to ensure that fair compensation is given to employees.

References

Porreca, M. M. (2016). The Counteroffer: Six Reasons to Not Accept. Pennsylvania CPA Journal, 87(1), 20.

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