Counter Offers–Effective or Comp Structure Killers?

Compensation Administration
by Stephen Bruce, PhD, PHR
"Bob, a valuable employee, has just resigned! A counteroffer is always an option, but what will the effect on your comp structure be? Exercise caution, says consultant Chuck Csizmar CCP; you may succeed in keeping the employee, but you may not like the result."

It’s important to recognize that if you’re considering a counteroffer, it means that you missed the opportunity early on and head off Bob’s resignation. And it’s an indication you didn’t know this employee as well as you should have, says Csizmar, founder and principal of CMC Compensation Group.

Other Players Are Watching

One thing’s for sure, if you do nothing, Bob, the valuable, will soon be gone.

Meanwhile, everyone who knows how valuable Bob is will be watching to see what you do. Once you make a counter offer, word will range far and wide. If nothing else, the news will come from Bob himself, who will likely confide in some colleagues.

Then the office buzz starts:

  • They offered how much?
  • Should I threaten to resign so I get my own counter offer?

And so on, says Csizmar. There might even be a pool.

And it’s not only other employees watching; bosses and peers are watching as well. How did you let this valuable employee get away? Can you reel Bob back in?


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Pay Is the Easiest Reason

Blaming it on pay is the easiest way to leave without burning bridges, says Csizmar, and it usually is about pay, but not just about pay. And that means if you focus only on cash, you might be missing the target.

If your offer doesn’t hit Bob’s sweet spot—the core of his discontent—you might as well not bother.

Some Decisions You Can’t Fight

Sometimes an employee’s decision to leave is over things you can’t control, for example:

  • Bob took a job across the country to follow his spouse to her new job
  • Bob’s been offered the ”job of a lifetime”
  • Bob is going to start a new business

In these situations, if you make a counteroffer, you’ll face all the downside and engender all the negative feelings associated with a counteroffer, but you’ll not succeed in getting the person to stay.

How Did You Get to this Point?

Whenever a valuable employee resigns, and especially if you are surprised by the resignation, take the time to figure out how you and the employee got to this point, says Csizmar.

“I had no idea Bob was unhappy” is a sad commentary on the relationship between the employee and the manager, Csizmar says. Ask yourself: How effective are our reward programs? If valuable employees were being well rewarded and had good possibilities for growth, they probably wouldn’t be attracted by an outside offer.


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Do You Have a Strategy?

  • Do you have a retention strategy? If nothing else, loss of a key employee may be a good catalyst for developing a comprehensive strategy.
  • Do you at least have a list of key employees that you’d not want to lose?
  • Do you have a succession plan?
  • Do you have a counteroffer policy? The policy is helpful, Csizmar says, because time is of the essence and if there’s no process outlined, it will be hard to get required approvals in time.

Minimize Your Vulnerability

A counteroffer is almost always made because there’s no one waiting in the wings, says Csizmar. The best way to avoid counteroffer situations is to develop the backup employee. How will you keep the department going if you lose a key employee? Succession planning is the key.

In tomorrow’s Advisor, more of Csizmar’s tips on counteroffers, plus an introduction to the all-comp-in-one website, Compensation.BLR.com

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  1. Barb        
    December 22, 2012 4:46 pm

    What do you think about asking for evidence of the employee’s other offer?