5 reasons why you should never extend a counter-offer

Never extend a counter offer

When managers hear one of their top performers wants to leave to take up an opportunity at another company, many will start to put together a counter-offer. 

It’s a common reaction, and it may seem like a good idea at the time. Traditional management advice would tell you to try to hang on to the employee. You’re worried about finishing projects on time. Moreover, you’ll have to reassign the work and carve time out to recruit, hire and train his/her replacement.

But counter-offers rarely work. In fact, employees who accept them frequently end up leaving the company in relatively short order. What’s more, counter-offers can be harmful to your staff and your ability to effectively manage them. 

Here are five reasons why counter-offers don’t work:

1. It is not a long-term solution

A salary that is in line with market standards, excellent non-financial benefits, clear career paths and suitable appreciation for the work done are efficient strategies for staff retention. Making a counteroffer, however, often only becomes a costly way to delay the unavoidable. Employees who accept a counter-offer often still leave their company earlier than expected. 

2. 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.

3. Morale may suffer

A counter-offer can lead to accusations of favouritism. It 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 your employment, instead of simply carrying out their work with dedication.

4. Repairing trust may be difficult

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. Or, the employee may feel you should have given a rise earlier on and this can have an ongoing negative influence on the employee-employer relationship.

5. The employee is unlikely to start performing at a higher level

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.

Luckily, counter-offers aren’t the only way to retain your best workers. The best management advice says to check in frequently with employees and make sure they’re challenged and satisfied with their career path. Also, regularly benchmark your salaries with industry resources such as the Salary Guide from Robert Half.

For more articles on the latest retention strategies, visit our hiring and management advice.

This article originally appeared on the Robert Half Australia blog.