The sudden rise of the counter-offer

As economy improves, employers should be prepared for restless employees
By Gary Huggins
|Canadian HR Reporter|Last Updated: 05/06/2011

Counter-offers, which virtually disappeared during the economic downturn, are back with a vengeance as companies desperately try to retain employees who have been offered positions at other organizations.

But this is not a positive trend — employers are overpaying with counter-offers and, in some cases, making ad hoc promotions and organizational shifts in an attempt to hold on to staff.

Before the economic crisis, companies considered it their mandate to help employees manage their careers through training and career planning because this was good for the bottom line.

But when the economy collapsed, firms made drastic staff cuts — which increased the workload for remaining employees — while also cutting back budgets for training, development and other initiatives.

Employees who have been working through this very stressful period have typically assumed greater responsibilities with minimal — if any — improvements in compensation. They are more than ready to move if the right opportunity presents itself.

Counter-offers rarely positive over longer term

The game changes once an employee has accepted another offer and then resigns. Employers, faced with losing a critical employee — not to mention the cost of replacement and training — often panic and react with a counter-offer.

This reaction can be chaotic, unplanned and inconsistent with the organization’s objectives. On the one hand, the employer does not appear to know what to do with its talent. On the other hand, it doesn’t want to lose them either.

Counter-offers are rarely a positive move. A company overpays individuals only when they threaten to resign. Employers may also give the employee, in some cases, more responsibility, which can adversely impact organization structures, not to mention signal to other employees they can receive more money and responsibility if they threaten to resign.

For the employee, accepting a counter-offer seldom works out in the long run. The same reasons for leaving still exist but they are now buffered by more money and increased responsibilities. Loyalty is always valued in an organization and when things get tough in the future, an employer won’t forget the individuals who wanted to leave, forcing the employer to counter-offer.

Avoiding the whole situation

So what should companies and employees do to avoid this situation? First, companies must ensure employees’ basic needs are being met. Employees want attention and they want to be given opportunities to expand their skills. With the economy slowly recovering, employers need to renew their focus on proactive talent management. That means going back to basics with respect to good HR practices that include honest conversations, succession planning, training, employee feedback and rewards programs.

Second, employees who receive counter-offers should think carefully before accepting them. Companies often use counter-offers as a stop-gap to address a short-term pressure point, but trust in the employee is often lost as a result of the process

Employees should carefully review their options and decide whether they are seriously looking for advancement in their careers and whether their current employment can meet both their present and future needs.

Despite what some may think, recruiters don’t take people out of companies — it’s the employees who consider other opportunities when their current situation is somehow lacking. So, once an employee determines the factors he is looking to improve, employers should be prepared to have a conversation in frank terms about what is and isn’t working. And then they should carefully consider what is being offered.

Gary Huggins is the managing director for Canada at DHR International in Toronto. He can be reached at

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