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Think Before You Counteroffer Because Only 10% Succeed

Businessman holds out money

Competition for top talent has reached epic proportions. So, when a great employee puts in their notice for another job, it may seem smart to try to counteroffer, right? Not so fast. Counteroffers rarely work out. In fact, recent studies show fewer than 10% of employees remain on board one year after a counteroffer is accepted.

We dug deeper into the subject and came up with these three signs a counteroffer will eventually fail:

  1. You’re completely surprised by the news. Lisa Quast, author of Your Career, Your Way!, explains why an employee willing to accept another job without ever indicating a problem is already lost to you: If the employee felt underpaid, they’d have asked you for more money. If they were bored, they’d have asked for more challenges. If the commute was too long, they would have already asked about telecommuting or flex time options. If none of these issues have ever come up before, the employee is likely leaving because of what Quast calls “the deal-breakers.” Deal-breakers can’t be changed. They can be forgotten for a few weeks or months thanks to a raise, but they’ll re-emerge with a vengeance.
  2. It’s not about the money. A counteroffer is an effort to “throw money” at a situation that may not be financially driven in the first place. Sure, plenty of employees leave because they just want a raise. But it’s usually about something more. “The best way to retain employees is to stay in touch with what they’re thinking,” offers HR expert Susan M. Heathfield. “Are they happy with their work? Are their needs for a challenge, belonging, development, and meaningful work being met? Do they have the communication, problem-solving, feedback, and recognition that they need from their boss?” If they give you any of these reasons for leaving, offering a raise won’t keep them happy. Instead, you can prevent future turnover by putting processes in place that will mitigate these issues in the first place. “But, you must think about employee retention every day,” she adds.
  3. You’re doing it for the wrong reasons. Your employees are savvy (or you won’t have hired them in the first place). They’ll soon figure out if you’re keeping them around just until a replacement is found. Their work and morale will certainly suffer. What’s more, as SHRM’s Roy Maurer explains, counteroffers can set poor precedence. “Counteroffers can wind up being costlier than losing the employee after the message is sent that threatening to leave can result in a raise,” he says. HR expert and author Paul Falcone adds, “Don’t make a counteroffer strictly for your own benefit. Even if it’s accepted, the selfish reason underlying this tactic would show itself in no time. A counteroffer must stem from a genuine concern for your subordinate’s needs. Money is important, but it’s less important than individuals’ perceptions of their own career growth and development.”

Now, all this being said, there is a potential sweet spot when it comes to successfully negotiating a counteroffering. It’s when your employee comes to you before they accept the other job offer. This move shows that they may prefer to stay. It offers you wiggle room that, if everything else feels right, can lead to that 1 in 10 successful counteroffer. As Forbes writer Liz Ryan explains, the wakeup call may have just been what you needed to pay attention, especially if the employee had asked for a raise previously.  “Sometimes we all hit the Snooze button and need to be jostled awake by reality,” she admits.