What is a counter offer?
A counter offer is any enticement or incentive to get you to stay in your current organisation given in response to an offer elsewhere. The counter offer could be with an increase in salary, wage or a new job title.
Why do employers counter offer?
In today’s dynamic job market highly skilled professionals are in demand, especially in sectors like Science, Engineering and IT. Employers don’t want to lose their talent, it can also often be cheaper to give an employee additional benefits or an increase in salary as the costs to finding new talent, training them and bringing them up to speed can slow down organisational goals.
What are the pros of a counter offer?
1. Increase in Salary/Wage:
One of the main reasons employees accept a counter offer is a monetary incentive. If you are inclined to take such an offer you should take the following into consideration. Once you are happy with other aspects of the job, such as the work life balance, the relationships with your colleagues, you feel valued and there is a good organisational culture and you are truly content on where you are, then there is no real reason to leave. For those in this situation it could be in your best interests to stay in your current position.
2. More opportunities and responsibilities:
Employees who are in a situation of a counter offer by their employer, monetary incentives are usually not the matter. If you don’t feel valued or appreciated in your current position a counter offer by management can help them realise the importance and the value you can bring to an organisation. This can also provide avenues for more opportunities and responsibilities and the ability to grow in the organisation. This can be very important to individuals looking to progress in their career.
3. Progression Road-map:
During counter offer discussions, employees can state their ambitions to grow in their current organisation. It gives both the employee and the employer a chance to sit down and look at the career path, how things are going, responsibilities and a career roadmap based on meritocracy. A prosperous career could be built within their current organisation with a detailed progression map discussed in the counter offer.
4. Changes can be made in the organization:
An employee may have decided to leave because of a work environment they find unpleasing such as poor relationships with colleagues or management. If this is the case, discussions can be made at the counter offer stage where the employer can help improve working conditions and take initiatives and steps in order to make things right.
5. You’re not a newbie:
Starting a new job can be tough, the organisational culture can be unfamiliar, relationships between co-workers are just beginning and you’re definitely not settled in. That process alone can take months before you are fully comfortable in your position. Since the employee is not a new guy they do not lose their seniority or friends.
What are the cons of a counter offer?
Unfortunately when it comes to counter offers there are more cons than pros.
1. High levels of dissatisfaction:
If an employee isn’t truly satisfied in the organisation, be it that the work isn’t challenging enough or poor relationships with superiors, a counter offer with a pay rise is one which will end up in a lose-lose situation. Studies have shown that employees who accept a counter offer based on monetary incentives alone actually only stay in the organisation another 18 months before they resign.
2. Doubts in loyalty:
If an employee explains to their manager that they have accepted a new opportunity then they accept the counter offer by their original employer it may tell the manager that the employee is only interested in financial gain, and their loyalty can be put into question. Trust is very important in an organisation and is one of the key factors in organisational success.
3. Unreasonable counter offers:
A hiring manager could offer an employee a counter offer if they are going to one of their direct competitors with the sole reason being that their competitors could get some inside information which could lead to a loss of competitive advantage. This is never a good reason for your employer to produce a counter offer. It often breeds suspicion and resentment and also won’t change the reason why you decided to leave in the first place excluding an increase in salary.
4. Realistic expectations:
It is important for employees who are thinking of accepting a counter offer to understand that although the employer has offered some new changes to the workforce environment or improvements on relationship building, one must have a realistic expectation on what can and can’t be done in relation to promises made. This includes changes and the time frames for the new shifts in aptitude or general changes put forth by the company. What are the remedies if some of the counter-offer details are not delivered either on time, as promised or at all once they’ve decided to stay? The employee has by now, already cut off any opportunity to have the now- rejected company give them serious consideration even if the position is still open.
5. Opportunities to progress internally may be halted:
Employees who are provided with a counter offer to stay back in the organization should make sure that they work with commitment and loyalty. Another drawback which such employees can face is that they may be overlooked at times of promotion.
6. Retention tool:
Counter offers can be a practice which helps in earning little respect, but many organizations accept that they follow counter offer as a retention tool. Statistics show that 60% of managers and recruiters mention that counter offer is not accepted personally. In the same manner, 90% who has accepted counter offers mentions that they do not like these practices of hikes and promotions just for status quo.
7. Organisational culture must fit the employee:
There is no point for an employee to accept a counter offer when they are not happy with the organisational culture. Studies have shown that 84% of terminations take place due to unfavorable workforce cultural dynamics between the organisation and the employee. If an employee stays on due to monetary incentives as a result from a counter offer, both the employee and the employer may struggle to work in a mutually beneficial environment.
8. Low Morale:
It’s amazing how quickly this kind of thing gets out. When your colleagues discover you managed to receive a pay rise by threatening to resign, don’t be surprised if they view your tactics as unfair. The reality of the corporate world is that word typically gets around when anything significant occurs. When everyone in an organization is aware that a co-worker had the intention of leaving, it causes a shift in the workplace atmosphere. Those who feel strongly about the success of the organization might feel slighted and treat you differently.
9. Organisational cutbacks start with the employee who is likely to leave:
If an organisation finds itself in the unfortunate situation of cutbacks, the employer is likely to start with employees who have demonstrated that they are willing to find employment elsewhere.
Should you take a counter offer?
When it comes to negotiating a counteroffer, each case is different. For some employees salary is most important, while others may be focused more on moving up the corporate ladder. Before you make any decisions ask yourself the following questions to help you decide the right path for you and your career.
• Why you applied for this role in the first place? And has this changed?
• What were you initial reasons for leaving your current company?
• Look at the bigger picture - what do you want as your career? Where do you see yourself in 5 years? If you stay will you achieve these goals and salary expectations? Is this a step in the right direction?
• Also bear in mind you just handed in your resignation, how do you feel about returning to a role that you possibly may have demonstrated a lack of loyalty for handing in your notice in the first place?
• If you decide to accept the counter offer, have you jeopardised future opportunities with the other company?
• If I'm so valuable, why hasn't anyone acknowledged my contributions before?
• Does this counteroffer really mean that my company will put me on a management track? Or are they just buying time until they can find my replacement?
• Which job offer will do the most to advance my career?
• Should I take the new job, or stay where I have established relationships and a good track record?
• Is there anything I should do differently to advance my career, either in my current job or the new one?
All in all, participating in a counter offer negotiation with your current employer can be a quite a personal process. You have to make sure to understand all the potential benefits and opportunity costs of accepting a counteroffer. Its best to ask yourself: “Which choice feels right?” You can dissect the potential benefits and opportunity costs as much as you desire, but if one just sits better in your gut, it’s likely the right choice. Alternatively you’re likely to be constantly thinking about “the one that got away” which can hamper your career development (not to mention your personal well-being) for years to come.