3 Ways to Determine if you Should Counteroffer

Posted on August 22, 2012.

Recently, a former colleague accepted a job with a competitor.  He gave his notice, said it wasn’t up for negotiation and went to leave. The company dragged him back him, gave him a new job and a significant raise to retain him. Did they do the right thing?  Time will tell, but here’s some tips to help you decide when to let them walk and when to try to keep them:

1.     Determine their long-term contribution to the organization. If you don’t see the person moving into roles of increasing responsibility, you don’t want to pay too much over market to have them keep doing what they’re doing.  It’s not fair to your other top performers, and it’s likely that eventually, you’ll come to resent them for not contributing significantly more than he or she has traditionally done. Let’s face it, paying them more doesn’t mean they’ll actually do more.

2.     Determine why they spoke with the competition in the first place. Feeling frustrated enough to think about leaving isn’t always about money. It fact it rarely is. So don’t automatically think that throwing them a huge raise will increase their satisfaction. If you don’t get tot the bottom of their reason for leaving and fix it, you’re just buying time.

3.      Determine the impact that retaining will have on the rest of the team. In addition to the unfairness that paying more than the peer group may create, what happens when others find out about it?  And believe me they will.  Do you run the risk that every other top performer comes in with competitive offers to get more money?  You need to make sure that you are willing to defend your position and why it was right for this one person, but not everyone. 

I had a former client who never had this problem for one simple reason. He had a policy of never hiring back. So employees that wanted to see if the grass was indeed greener were gone for good.  Needless to say, he has very low turnover.  Not sure that’s the right decision for every company, but you need to be thoughtful about the person you decide to fight to keep and what will happen if you win