When key people quit, are counter-offers a good idea?

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New research from Microsoft suggests that the Great Resignation is far from over. In its latest Work Trend Index, which surveyed 31,000 employees in 31 countries, 43% of respondents said they were “somewhat or extremely likely” to consider changing jobs in the coming year. , compared to 41% in 2021.

One way employers can stem the flow of talent is to offer competitive compensation and support employees’ preferred work arrangements. However, what should you do if it’s too late and your valuable employee quits? The temptation may be to make a counter-offer in a last ditch attempt to persuade them to stay, but is that the best long-term strategy?

This is a tough call for employers in today’s short-term candidate market. Should this person be let go since their commitment to the company is now in question? Or should you offer them an incentive to stay because it will be less disruptive and less resource intensive than having to hire and train someone new?

arguments for
In the short term, a counter-offer can be effective. This helps retain talent and knowledge when companies can ill afford to lose either. It also eliminates the cost and effort of recruiting a suitable replacement from a competitive market and upgrading them. However, it can be argued that holding back someone who may feel disillusioned or undervalued is only a temporary fix.

Arguments against
Research and experience show that counter-offers rarely have a happy ending. Offering someone a raise or extra benefits may persuade them to stay for a while, but often their reasons for wanting to change jobs don’t go away and they’ll leave the company anyway. Most often, candidates call us within six months of accepting a counteroffer wishing they had taken the opportunity to move on.

Sometimes not earning enough is the reason candidates give for wanting to jump ship. In this case, we always recommend that they raise the subject with their line manager before applying for jobs as it is an issue that could be resolved through an honest conversation.

However, people rarely leave a job just for the money. Microsoft research confirms this, finding that salary is at the bottom of the list of reasons people quit. Personal well-being, work-life balance, lack of trust in upper management/leadership and lack of flexible working hours or workplace are more likely to push your employees out – problems that a higher salary cannot solve.

Even if the employee who accepts your counteroffer defies the odds and sticks around for the long haul, can you trust them and their loyalty again?

Training effect
An employee who accepts a counter-offer can also have a negative impact on the wider business. A disgruntled staff member can spread negativity around them and affect morale. Also, once it is learned that a co-worker was able to get a raise, other employees may feel encouraged to ask for more money. The result is more counter-offer negotiations and pay raises, resulting in more costs than you originally anticipated and creating an imbalance in your pay scales.

What to do?
Given the shortcomings of counter-offers as a long-term retention tool, what if an employee quits?

Your first step should be to understand their motivation for wanting to leave.

If they believe in the business and, beyond their immediate concerns, can see a future in it, it is worth trying to find a solution.

However, if you feel like they’ve already left, it might be time to say goodbye. This approach might seem counterintuitive if you’re already short on staff and value their skills, but it’ll be better for your business in the long run. Managing and motivating an employee who doesn’t have the heart to work can be exhausting and unproductive, so it’s best to focus your energy on finding a replacement.

Give them a reason to stay
Ultimately, however, your goal should be to make sure employees don’t come to want to quit. This means providing competitive salaries, benefits and career opportunities that are consistent with what today’s employees demand and, in fact, expect.

The key is to create an environment where employees feel valued and are willing to stay. So do regular salary reviews to check you’re paying the industry rate, chart clear career paths to help employees progress, and offer flexible working to support employees’ desire for a better work/life balance. personal life. That way, if you need to replace a departing employee, you’ll be in a better position to attract the brightest and the best.

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