Counteroffers are often Counter Productive 

By Bill & Chris Sitter

Doubts and bad feelings can be the byproducts of renegotiating after a sudden resignation.

In recent columns we have addressed creative ways to attract, recruit, hire, motivate and retain top performers – the impact players who can help a dealer or manufacturer survive in tough times (like 2009), and help drive profitable growth whenever possible. However, there are times when, as a top executive, you are unpleasantly surprised by the resignation of one of your good people. Ideally, your senior management team will be so close to the organization that surprises like this are very few and far between; but we live in a changing and unpredictable world and sometimes, despite best efforts, “stuff happens” and people decide to change companies.

Many HR resources are available on how to properly deal with employee departures, including surprise resignations. Many companies have defined procedures for exit interviews which, if properly handled, can be a worthwhile learning experience for the employer and can ensure a clean and friendly separation. This is important for many reasons, including the fact that we live and work in a tight-knit industry that places high value on positive, personal relationships.

Let’s explore a scenario in which a valued employee, perhaps a genuine “impact player,” tenders a surprise resignation to pursue a new opportunity. Career enhancement and/or money may be the change motivators. If that’s the case, an employer may entertain thoughts of offering an inducement for the person to stay – maybe more money, perhaps the promise of a promotion, or maybe both. Doing so enters the employee and employer into the realm of counteroffers, and this can be a “slippery slope.”

You might ask: “What could possibly go wrong if our company is using more compensation or the promise of a promotion to keep a solid performer from departing?” Let’s assume that he accepts your counteroffer, decides to stay, and notifies the prospective employer that he has changed his mind and will now be rejecting the employment agreement he had accepted, because (like a pro athlete) the company they’ve been working for “upped the ante” with a new and better deal.

Several years ago, the Wall Street Journal published a comprehensive article dealing with counteroffer pitfalls. Based on Jordan-Sitter Associates’ 30 years of experience, and Bill Sitter’s personal experience leading AED dealerships, we can validate negative aspects surrounding counteroffers from three perspectives: The employer whose counteroffer convinced the potentially departing person to stay; the employee who accepted the counteroffer; and the company who thought they had made a fair offer and obtained a new hire, only to be rejected after an agreement had been forged.

  • The employer who felt compelled to tender the counteroffer (to retain the employee) will perhaps always have doubts about loyalty. They may wonder if there will be future resignation threats as a leverage tool. Doubts may arise about the advisability of giving this person more responsibility in the future because they may pick another inopportune time to seek greener pastures and leave you high and dry.
  • The employee may be excited about the new compensation package and or increase in status; however, there will likely always be the questions: “Why did I have to threaten to leave, to get things I felt I had really earned by my past performance?” “Did my employer extend the counteroffer just so I can help them get by until they can find a qualified replacement?” “Will I be viewed as a long-term team member or will my loyalty always be in question?”
  • The company who thought they’d reached a hiring agreement may have already reorganized to accommodate the new hire, thus disrupting one or more impacted people. And, they will feel that a trust has been violated, and may conclude that their sincere hiring efforts have been abused, just so the employee could bargain for a better package.

It would be inaccurate for us to suggest that a counteroffer tactic never works. There are no doubt examples where a (potentially) departing employee was induced to stay, with a sweetening of their package, and went on to be a key contributor. However, there are many cases that prove our point. We do hope that readers of this column will thoughtfully evaluate the pluses and minuses associated with counteroffers and avoid knee-jerk responses to a surprise resignation. Be aware of the potential pitfalls and that counteroffers may be counter-productive in the long haul.

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