“I’ll meet that and raise you”

Do you play or do you fold? The art of the counter-offer.

Friday afternoon. Everything under control. You’re just about to leave for home to spend a quiet, stress-free weekend with your family. Then it happens. The CEO storms into your office in a panic. A key executive has just told him that she’s leaving. A terrific opportunity has come up, out of nowhere, and it’s too hard to turn down. She starts in three weeks. “Put something together that will get her to stay,” shouts the CEO.

Here is the dilemma: as head of HR do you recommend a big salary increase? A retention bonus? A promotion? Or, do you hold your ground and suggest to the CEO that a counter-offer might not be the best thing to do?

There may be a real temptation to do whatever is necessary to hold on to key human resources. But, is that the best solution in the long run? It is not surprising that companies would try to hold on to their best and brightest.

Many U.S.-based companies fly in heavyweights to talk middle managers out of leaving. Company presidents calling people they’ve never heard of to try to convince them to stay.

And, counter-offers are making the lives of professional recruiters — whether in executive search or HR — much more difficult.

You can’t blame the CEOs. It’s always expensive to replace key people and the search always requires a substantial amount of executive time, effort and money. Once the new person comes on board, it still takes time to orient and train the employee. If the new hire does not work out, all that time, effort and money gets written off, plus severance payments to boot.

The case has been made that most counter-offers are doomed to failure. Why? First, the bond of loyalty that connects employer and employee has already been cut.

The boss has a hard time forgetting the original resignation, even after the employee who is about to quit decides to stay. The boss remembers that this person had to be bribed to stay in an organization that prizes loyalty. The employee is marked for life. And the company has asked the employee to break a solemn commitment she has made. What kind of start is that to a bold, new era of trust and performance?

But it is a two-way street. The employee will always wonder why it took a resignation to make her superiors cough up that long-deserved promotion. It could open eyes to the lack of proper planning or decision-making in the organization. It sends a clear message to others that doing a job well isn’t enough to earn recognition.

Counter-offer accepted, the employer has significantly increased expectations. Once a company has bent over backwards to keep an employee, the boss will expect much more from the employee than they did before.

And in fact, knowing the boss has faith in them may help some employees perform at a higher level. However, many managers break under the pressure of premature promotions and heightened expectations. Imagine the demotivation that kicks in if the employee realizes that she just isn’t happy in her new role within the organization. She backed away from a promising new opportunity and destroyed her credibility with the other employer. For what?

It’s not surprising that one survey, conducted in the United States, found that most people who accepted a counter-offer left the organization within a year anyway.

So, what do you recommend to the CEO when a valued employee announces she is leaving? Here are some points to consider:
•Try to assess, dispassionately, how important this person really is. Is she the
only person who can do the job properly? Others may bring new perspectives, initiative and enthusiasm to the position. Perhaps this potential vacancy is an opportunity, not a crisis. Every vacancy provides a chance to rethink the way things are done and to realign the team. Perhaps it’s time to move people into more appropriate challenges, or to adjust the changing demands.
•If you make a counter-offer, promise only what can be delivered. Does your organization really mean all the nice things it’s saying about this person? Does the company really intend to follow through on all of the commitments it’s making? And, how will increased pressure and expectations affect this person?
•Maybe the best person to replace the incumbent is in the office next door. Don’t assume you have to go outside to replace someone. Look carefully to see whether there are internal people who deserve a chance at the job. You might fill the vacancy in-house and in so doing give employees a huge morale boost, all in one fell swoop.
•Ask yourself, “What kind of signal do counter-offers send others in the organization?” Does it tell employees that you are more reactive than proactive? Or, will employees think that holding a gun to the boss’s head is the only way to gain the recognition and reward they feel they deserve?

Michael Stern is president of Michael Stern Associates Inc. (www.michaelstern.com), an executive search firm based in Toronto and a partner in the IMD Search and Consulting Network.

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