Like a punt? Counter offers could be your biggest gamble

It's not unexpected that employees will consider switching to a new job from time to time. So the steps taken to prevent additional recruitment costs, avoid possible training requirements for new staff and limit the loss of valuable company knowledge are critical. But, make sure you weigh up all the options before proceeding in any particular direction. There are several reasons that can lead to an employee choosing to leave a company. In general, it is essential for employers to engage with their employees to make it less likely they will switch to a competitor’s company.

All business leaders appreciate the importance of holding onto their best people – those employees who add the most value and have leadership potential within the firm.

In fact, the Robert Half Salary Guide confirms that successful employee retention is a key business focus. In response, companies are introducing fresh measures to retain their most sought-after employees and maintain continuity within their teams.

Employers can’t always match what an employee wants, but if you can, decisions need to be made about whether you should try and fight to retain your best people or let them go with your best wishes.

That’s where counter offers come in. It is often considered the ‘ace’ up a company's sleeve, and there’s no doubt that by promoting an employee or promising a salary increase, a staff member may be persuaded to stay on.

However, a counter offer can be a highly questionable retention strategy, and as an employer it could represent an expensive short-term fix.

By convincing an employee to stay, you could be delaying the inevitable, and it’s worth bearing in mind four good reasons why counter offers may not be an effective retention tactic.

Counter offers are not a long term solution

Encouraging top performers to stay with you calls for competitive salaries, excellent benefits, frequent recognition and offering a clear career path from the outset. Waiting until an employee hands in their notice to make these available is likely to be too little, too late. Making a counteroffer often only becomes a costly way to delay the unavoidable. Employees who accept a counter offer often still leave their company earlier than expected.

You are setting a precedent

Think ahead. Can you afford to upgrade the salaries of all top performers who consider leaving the company? What happens if word gets around that you have increased one employee’s pay? Other team members will probably expect you to do so for them, too, in the future. Once they know that they, too, may receive a counter offer, some may even look around at other jobs merely to be able to renegotiate their employment terms.

Staff morale can take a hit

Making counter offers to some - though not all - employees can be seen as favouritism, and this can lead to tension and resentment among the rest of your team. A counter offer may also send the message to your employees that you don’t pay attention to them – and that they won’t advance their careers – unless they threaten to leave the company, instead of simply carrying out their work with dedication.

Trust can be lost

Even if a counter offer persuades an employee to stay on with your company, your working relationship may be irrevocably damaged. After a while doubts may arise in your mind about the loyalty of this employee. Maybe he or she is not fully appreciating your efforts. There is no guarantee the employee will appreciate the gesture you have made because chances are, in their mind, the promotion or pay rise may be long overdue.

Performance is unlikely to improve

A higher salary does not always translate into better performance. When employees feel like they are ‘indispensable’ in a company, they have little motivation to work harder. What’s more, there is a risk they will become less efficient.

It can be a leap of confidence for businesses to try different benefits and options, but it can be far less of a gamble than making costly counter offers as a means of retaining good people. Have you made a counter offer? Did it prove successful in the long term for your business?

This article originally appeared as A busted flush? 5 reasons counteroffers are a big gamble on the Robert Half UK blog.

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