Why HR should never counteroffer

When your star employee says they’re leaving, it’s fairly common to respond with a counteroffer – however, one new study suggests the practice may be entirely pointless.

According to recent research from Robert Half, the vast majority of New Zealand CFOs – 89 per cent – have made a counteroffer in an attempt to retain an employee.

Twenty-three per cent said they ‘always’ or ‘often’ make a counteroffer, 35 per cent said they ‘sometimes’ extend a counteroffer, eight per cent said they ‘rarely’ make a counteroffer and just 11 per cent said they ‘never’ apply the practice.

Despite the apparent popularity, the same study showcased just how ineffective counteroffers really are with 64 per cent of CFOs admitted the employee left the organisation anyway.

Twenty-three per cent of those said the staff member left within six months, 27 per cent said the employee stayed for less 12 months and a paltry 14 per cent said they stayed for over a year.

“The reasons why people resign from companies often go far beyond salary,” said Megan Alexander, general manager of Robert Half Australia.

“For an employer to offer a higher salary as an incentive to stay with the company often just delays the inevitable,” she continued. “Counteroffers rarely prove to be a long-term solution for staff retention.”

Lee Caraher – who recently penned ‘The Boomerang Principle: Inspire Lifetime Loyalty from Your Employees’ – agreed. She said she quit giving counteroffers years ago, even though the market at the time favoured job-seekers.

“It felt like every day was a revolving door of someone coming in saying they’d got another job offer and then I would counter,” she told HRD.

“They would stay at first but six months later they would come back into my office with another job offer and it was so demoralizing, morale was terrible.”

Eventually, Caraher – who is the founder and CEO of communications firm Double Forte – decided to give the practice up cold turkey.

“One day, I just thought I’m done, I’m so exhausted by this, I’m not doing it anymore,” she told HRD. “The same day, someone walked into the office and said they’d been offered another job and I wished them good luck. He was incensed and couldn’t understand why I wasn’t countering.”

Instead, Caraher said she came to accept that some employees would have to look elsewhere to further their careers but encouraged departing employees to reach out if they ever wanted to return.

“When people leave, they become more valuable, they go and learn other things and perhaps down the line they will be a good fit for your company again,” she explained.

“If you have a mind-set that people could return then your recruiting just got a lot easier and your option pool got a lot bigger,” she continued.