Copyright 1999 by Workforce
Magazine
Magazine: Workforce
Magazine, 1999
Topic: Counteroffer or
Counterproductive?
Byline: Scott Hays
link
East Coast advertising sales rep Lisa
Kramer had absolutely no idea her supervisor
at Santa Ana, California-based Advanstar
Communications would make a counteroffer
when she announced back in February her
intention to leave for another publishing
company virtually down the street. She
had become disillusioned for various reasons,
not the least of which was management’s
shortsightedness to increase her salary
to reflect her four years with the company.
“We had just changed the name of
our magazine. Sales-wise it was tough,
and I wasn’t happy with the way
things were going, especially when they
started hiring new people with less experience
for more money,” Kramer says. “I
wanted out of all the negativity.”
But Advanstar group publisher Michael
Forcillo wanted her to stay. Although
he was happy for Kramer that someone else
had recognized her talents, he quickly
realized it would have cost his company
more money to replace her than to retain
her with a modest salary increase. “As
a manager, you do what you can to keep
turnover low,” he explains. “In
truth, Lisa’s compensation package
hadn’t kept pace with her performance,
and I was concerned about our ability
to replace her in such a tight labor market.”
So he offered her a 21 percent increase
“above and beyond” the competitive
offer.
And Kramer accepted. “When Advanstar
made me the counteroffer, I still hadn’t
let go of my emotions, and I hadn’t
signed anything with the other company,”
she says. “So I decided to stay,
expecting things to get better.”
Roni Arnold is Advanstar’s manager
of corporate recruiting and human resources.
She says there’s no policy at her
company regarding counteroffers, only
that each business unit operates within
its own budget. “It’s up to
each manager to decide how he or she wants
to handle a situation. If an employee
is truly looking elsewhere for more money,
and that’s the main reason for her
wanting to leave, then a counteroffer
makes sense when you consider the high
cost of turnover. However, I’m not
convinced most employees look for another
job simply because they want more money.
Oftentimes, there are other underlying
issues that money just won’t fix.”
In fact, some human resources managers
have found that individuals who accept
counteroffers usually leave the company
within the first six months, either on
their own accord or because the fundamental
reasons for leaving in the first place
haven’t changed.
Counteroffer or counterproductive?
Depending on whom you talk to, a counteroffer
either sweetens or poisons the whirlpool
of emotions between employee and employer.
At its best, a counteroffer induces an
employee to stay after she’s announced
her intention to leave. It may involve
more money, but increasingly it involves
such benefits as flex time, more vacation
time and/or telecommuting. Success, then,
is easily determined by whether both parties
walk away with a recommitment to each
other. It’s the passive retention
strategy of the 90s, says one human resources
professional. And mostly because it’s
easier for an employer to give a little
than to conduct an exhaustive, expensive
search for new talent.
But while counteroffers on the surface
may appear to be a win-win situation for
both employee and employer, there are
downsides. (1) Many times, an employee
is simply playing one company against
the other for a new, better deal; (2)
What you gain over here with a counteroffer
may cause resentment and low morale over
there with another employee who also wants
more money and better benefits; and (3)
Counteroffers wreak havoc with internal
pay structures.
The extent to which a counteroffer becomes
counterproductive depends largely on whether
you’re just throwing money at staff
to solve existing problems, or whether
you’re engendering loyalty, interest
and commitment to the company and its
objectives. “I’ve seen it
go both ways,” says Arnold with
Advanstar. “We’ve had some
employees who have accepted counteroffers
and remained here for years, and others
who have accepted counteroffers and left
after six months. Managers should be in
tune enough with each employee’s
commitment to the company so that this
type of thing doesn’t come as a
big surprise.”
As recently as two years ago, Cisco System,
Inc. rarely made counteroffers when one
of its 20,000-plus employees gave notice.
But today, as the battle for workers remains
fierce, the San Jose, California-based
computer-networking company is rethinking
its strategy. “When key talent is
being courted by the competition, you
want to make sure your people are tight
in the saddle,” says Norm Snell,
the company’s director of global
compensation. “That doesn’t
mean we make a counteroffer to every employee
who wants more money. But if they’re
critical to the long-term success of this
company, we try to educate them about
what they’re leaving on the table.
We’ve found that in many cases,
an employee doesn’t always think
about things such as future assignments,
benefits, options grants and bonuses.”
Within the last year, Snell claims he
has made a handful of successful counteroffers
simply because he “increased their
awareness about the benefits of working
here, and the possible pitfalls about
working there,” he says. “It’s
not a money issue, in most cases. It’s
lack of challenge, disinterest in job.
If you don’t change these underlying
issues, it’s going to be revisited
again and again, and you’ll end
up with a less than positive situation
for both employee and employer.”
Defection from the ranks.
Should you or not make someone a counteroffer
depends first and foremost on whether
a defection in the ranks will create a
problem for those who remain behind. Counteroffers
are common when a company’s operating
with a reduced staff and during a time
when the labor market favors employees.
Otherwise, most human resources experts
say it’s best to make counteroffers
on a case-by-case basis. Is this particular
employee a truly valued member of the
team? Does she possess knowledge or skills
that would be particularly hard to replace?
Does her past performance warrant the
additional compensation? Will she recommit
herself to the organization?
A 1998 survey of 1,400 chief financial
officers points out a rift between those
who believe in counteroffers and those
who don’t. Conducted by the financial
staffing firm Robert Half International,
Inc., in Menlo Park, California, 56 percent
of respondents said they would probably
use counteroffers to keep valued workers,
but many of those CFO’s believe
counteroffer rarely work. “We’ve
seen an increase in counteroffers over
the last several years, mostly because
it’s becoming more difficult to
attract and retain employees,” says
Lynn Taylor, vice president and director
of research for Robert Half International.
“Companies these days can’t
afford a series of good employees leaving.”
According to Robert Half International,
human resources managers need to remind
themselves and their managers that counteroffers
can be risky business, and they should
take a deep breadth and review whether
this candidate or that candidate is valuable
enough to the organization by considering
the following:
- The employee’s state of mind.
If an employee is unsatisfied and ready
to leave anyway, it’s doubtful
more money will make a difference.
- Financial factors. Trying to match
your competitor’s compensation
package could upset your organization’s
entire salary structure.
- The impact on morale. In some cases,
employees who accept a counteroffer
may be perceived—rightly or wrongly—as
disloyal to the company. As a result,
the bonds of credibility that keep your
operation running smoothly may be severely
challenged.
The best time to make a counteroffer
is at the point of resignation, says Charlie
Dawson, director of Alliance Teams for
Raymond Karsan & Associates, and author
of “The Complete Guide to Technical
Recruiting” (Management Advantage,
1998). If the employee accepts, present
your package as a raise or bonus that
was inevitable anyway, and assure him
or her that there’s no ill-will.
Perform an impromptu employee satisfaction
survey to determine the issues that caused
such a great degree of dissatisfaction,
and then develop a plan to begin addressing
those issues at work—even if a resolution
isn’t possible. And educate everyone
in your company about why making a decision
based on money is never the best reason
to make a job change.
“I would even encourage managers
to caution employees about a sales pitch
they may be getting from another company,”
says Dawson. “Employees need to
know the grass isn’t always greener
on the other side. Talk openly with them
about the other offer and why they’re
thinking about leaving. If nothing else,
it’s important information for the
next time you try to keep an employee
from changing jobs.”
Steven Mitchell Sack is a New York City-based
labor/employment attorney, and author
of “Getting Fired” (Warner
Books, 1999). He says you can discuss
a counteroffer verbally, but always commit
it to writing so there’s no room
for misinterpretation. “As long
as you clearly specify that the counteroffer
does not imply job security,” he
says, “you can fire the employee
on a second’s notice if it shouldn’t
work out.” He also recommends the
following: (1) Never make a counteroffer
you don’t intend to honor because
if the person accepts, you will have legally
bound your company to the terms of the
verbal contract, provided it can be proved
the offer itself was sufficiently clear;
and (2) Make sure the counteroffer is
consistent with the company’s budget
and polices, otherwise it may appear as
though you’re favoring one person
over another, and that could lead to charges
of discrimination. For example, you wouldn’t
want to offer more money to a man than
a women in the same position, or more
money to younger workers than older workers.
Should you decide to let the employee
pursue another job, take time to conduct
an exit interview so you can learn more
about ways you might prevent additional
staff from defecting. And remember that
while you may be losing a valued and productive
employee, you also now have the opportunity
to fully reassess the position’s
responsibilities and restructure it before
you fill it again.
Bullish about business?
Two months after Advanstar’s East
Coast sales rep Lisa Kramer accepted her
company’s counteroffer, she started
looking for another job. “Management
told me there would be changes, but if
anything things just got worse,”
she says. So in June she went to work
as a sales rep for the San Francisco-office
of internet.com (stet), an e-business
and Internet technology network. “It’s
as if I got two raises within six months:
the counteroffer from my old company,
and the new offer from my new company.
And all I ever wanted from the beginning
was to be treated fairly and with respect.”
As it turns out, Advanstar group publisher
Michael Forcillo, the manager who made
Kramer the initial counteroffer, also
is no longer with the company. He’s
now president of the Internet division
for the Santa Barbara-based ACEPlantet.com,
a technology-based education company for
children. “I’ve found that
counteroffers are successful in retaining
employees only when the company is bullish
about its business prospects,” says
Forcillo. “In other cases, making
a counteroffer just prolongs the inevitable.”