Richie is an employee in an organization. He has started looking out for opportunities because of various reasons. He has received an offer from a prospective employer for an “X” amount. He blocks the time of his manager for discussion on his resignation and moving on from the organization. After listening to Richie’s decision to move out, the manager starts thinking of different ways of not losing Richie to another organization.
Richie is a key asset to his team, and he may have to decide to extend a counteroffer to retain Richie, which may be 10% – 20% higher than what he has received while also offering enhanced responsibilities.
So, what does a Job Counteroffer mean?
A job counteroffer is a term used to describe a situation where a current employer decides to match or exceed the compensation amount that an employee is receiving from another company – perhaps a competitor.
A counteroffer may also include one or more of the following-
- Offering a pay increase
- Extending a promotion
- Enhancing roles and responsibilities
- Offering additional benefits to the ones that already exist
There are several reasons for an employee to resign from their current organization – financial growth, career growth, mismatch with role expectations, dissatisfaction with the current organization, etc.
For example, an employee decides to move out of the organization if they receive an offer from a prospective employer. When the employee meets their manager to discuss an exit date, they may extend a counteroffer to retain the employee.
In the Counteroffer example we looked at, depending on how Richie feels, he may lean towards accepting the counteroffer from the current employer or come up with ways to decline the counteroffer.
A team manager and the organization need to have some data to understand how to handle counteroffers.
Why do organizations extend job counter offers?
Some of the typical reasons for organizations to offer counter offers to their employees are –
- To retain a critical resource whose skills are valued.
- To retain the tangible and intangible knowledge about the organization, role, customer, systems, and processes that an employee may possess.
- To ensure that the organization does not have to bear extra costs either to onboard a new executive or promote an existing employee.
- Ensure that the existing team does not have to bear extra workload due to the exiting employee.
Counteroffer – Good or bad?
There are different schools of thought on whether counter offers are good or bad.
Let us look at some pros and cons of counteroffers.
- A counteroffer may provide higher compensation, increased responsibilities, flexible working, or earn a promotion to the employee.
- It can ensure that the position and role remain filled without putting any additional effort to fill in the replacement.
- Retaining an employee through a counteroffer ensures that the team performance remains intact.
- It can negatively impact employee morale. In addition, employees loyal to the organization may question this strategy as this may put them at a lower level when compared to someone who has a counteroffer.
- Even after accepting the counteroffer, the said employee may still be a flight risk as they have already shown an inclination to leave.
- It can set a bad precedent. If the organization decides to extend a counteroffer to retain one employee, it can result in more employees wanting to quit, hoping to get a counteroffer. It can result in an increased attrition rate.
- Giving a counter offer may indicate to an employee that they were underpaid or undervalued for the amount of work and effort they were putting in.
- It may increase the cost of the function, resulting in exceeding the stipulated budget.
How to write a counteroffer?
Writing a counteroffer is always a critical activity. Certain things must be kept in mind while writing a counteroffer, such as –
- Thoroughly research the benchmarks offered for the role in the industry.
- Ensure data availability for backing up your research and the proposal.
- Continue to express interest and suggest an alternate way to discuss the proposal.
- Be ready with a response to the counter offer. The employee may want to modify the counteroffer proposal.
- Finally, be prepared for different results from the discussion. There is a 50:50 chance that the counteroffer aligns with the employee’s expectations.
How to handle a counteroffer?
In the earlier example, there are two major decision points for Richie. First, he may accept the counter offer or, the trickier one, reject the counteroffer politely so that he does not burn bridges.
How to accept a counteroffer?
While accepting a counteroffer may seem a lucrative and easy option, it indeed is not. The below points should be considered before accepting the counteroffer from the current employer-
- Seek time to evaluate the counter offer.
- Evaluate whether your reasons for quitting; are addressed in the counteroffer or not.
- Evaluate the reason for which you are receiving the counter offer.
- Compare the counteroffer with the one received from the new organization and list opportunities and threats from both aspects.
- Politely communicate the offer acceptance while also documenting the decision formally.
How to decline a counteroffer politely?
If you decide to decline a counteroffer, do that as politely as possible with all plausible reasons so that you do not burn bridges with the current employer. Some points to keep in mind while declining a counteroffer from the current employer are:
- Try and establish an appropriate communication channel for discussion.
- While formally declining a counteroffer, it is important to express gratitude to the organization for considering a counteroffer for retention.
- Articulate the reason for declining politely.
- Once the above is done, express your desire to stay in touch with the current employer and offer support for a brief duration to help the new incumbent with the transition.
Extending a counteroffer to an employee is a strategic decision for an organization. Similarly, deciding whether to accept or decline a counteroffer can be a tricky scenario for an employee who has decided to move on and submitted their resignation. While doing so, both the organization and the employee need to extensively think through the pros and cons of the steps and their reasons.