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Should you make a counteroffer to retain an employee?

People Shaking Hands / Interview

So, you’ve been informed that one of your employees has accepted an offer elsewhere. Your first instinct may be to match or improve what they’ve presented to you. Whether this is a promotion, a merit increase, a one-time bonus, equity grants, or an opportunity to move to another team. The idea of the counteroffer may make a leader temporarily feel like they’re back in control of the situation and that they’re making the best decision for their team and organization.

Here’s why making a counteroffer to an employee who has resigned can do more harm than good: It likely doesn’t address the underlying issues.

Is what you’re including in the counter offer truly a magic answer that solves why your employee wants to leave? Or, is it just a band-aid that will need to be ripped off later? Research shows that 50% of candidates who accept a counteroffer are back in the marketplace looking again in two months. Your job as a leader is to explore and get to the root cause of someone wanting to leave. Is it really about a promotion or more money? Or, is this person experiencing burnout and they’re needing a change of scenery?

Additionally, the outcome of a counteroffer can ultimately become a reflection of your leadership capabilities. If you ask someone to stay after they’ve resigned, you have to be sure they’re set up for success. If this person accepts and then is offered no further means of developing, they may be set up to fail. Not only will poor performance reflect poorly on the employee, it will also reflect poorly on you and your ability to assess and coach talent. Further risk to your personal reputation as a leader can arise if the person can’t perform in their new role. Now you’re still left with an opening on your team but after you went out of your way to try to keep them. 

Lastly, It could have a ripple effect and adversely affect your team. When a colleague unexpectedly receives a promotion or a new role when they weren’t on track to receive it, this can start to negatively impact team morale. It can cause gossip among the team, with speculation as to how and why it happened. It can also erode respect for the individual if others don’t feel they deserved the promotion and ultimately devalue it. Consider the impact of stopping one person from leaving versus focusing your energy on ensuring the rest of the team is energized by their work and aren’t thinking about leaving instead. 

If The Great Resignation has taught us anything, talent will continue to reassess their employment opportunities. The counteroffer isn’t a one-size-fits-all solution to stopping good employees from leaving your organization. If people are ready to move on, sometimes the best decision may be just to wish them well in their next opportunity.

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