The Curse of the counteroffer

Advice for employers seeking to prevent the demise of their employment offers.

Counteroffers are on the rise. We experienced this first hand: our firm matched exceptional candidates to incredible companies — and yet, some placements never came to fruition. In the end, our carefully selected candidate accepted an offer from their current employer.

‍Why the surge in counteroffers? Let’s face it, the labour market for quality talent is tight! In Ontario, the unemployment rate is hovering around 5.6% and fewer people are looking for work. British Columbia has the lowest unemployment rate at 4.1% in October 2018, and employment in the province grew by 2% year over year. Quebec is tight too at 5.2% unemployment. That means that qualified resources have many employment options, and are being actively recruited. The cost to replace an experienced employee is generally 9 months of their salary. Add it all up – high employment, many career options for skilled talent and the high cost to replace – and employers are scrambling to retain their best people.

‍Were the Counter Offers Preventable? Research has shown that the top reasons why candidates accept a counteroffer are:

1. A significant increase in salary, or total compensation
2. A promotion, or career development plan
3. Greater work-life balance
4. A new purpose or personal value proposition (e.g. “making a difference”)

Here we establish some guidelines for preventing the acceptance of counter offers based on lessons we’ve learned over the past 30 years.

12 Ways to Prevent the Acceptance of a Counteroffer

1 – Know What Motivates The Candidate

The hiring company must know what the key motivator is and keep this top of mind during the entire employee attraction process. During the interview stage, ask the candidate to list what is important to them, and then discuss what they have in their current role and don’t. That way, you’re clear on their goals. For example, are they motivated by money; is there a particular skill they want to develop; is corporate culture important to them or are they looking for more flexible work arrangements? Fill in a Motivation Matrix with what they want, what they have, and what has to happen for them to leave their current role to work at your organization. Ask them to rank their priorities so your offer is on point.

2 – Slow Down Before You Speed Up

Often, we get excited about an applicant’s skills and personality – and we invest emotionally in the future employment relationship a little too fast. We don’t truly understand the candidate’s reason for seeking an alternative employer and position, or their long-term motivation. We jump in too quickly. Despite the hot job market, and your need to fill that job as soon as possible, slow down in the interview and selection process.

3 – Help The Candidate Overcome The Fear Of Change

One reason candidates accept a counteroffer is their own fear of change (that they have not even acknowledged!). In particular, if they have been in the same organization for a long time, they may be afraid of taking this step. Help them accept change by introducing them to their potential team and by inviting them to job shadow for a half or full paid day. This will help them get excited and make connections before they receive a formal offer – and be more likely to decline a counteroffer.

4 – Address Tough Questions Head On

Refer back to the Motivation Matrix when speaking with a candidate and listen for cues. For example, the candidate may say they are seeking a new employer for more advancement, but really it’s that they don’t feel appreciated. They may say it’s about money or total compensation, but it’s really about fringe benefits or the chance to work from home.

‍ASK THE REAL QUESTIONS

• If your employer offers you $10,000 more, will you accept it?
• What medical/dental and total benefits, does your current employer provide and what benefits matter to you?
• Do you see yourself in your current role for the next two years? What would have to change in your current position for you to stay in it? If not, what role can you imagine yourself in?
• How important is your job title?
• When is the last time you felt valued/recognized with your current employer? What recognition matters most to you?
• What are your thoughts on your current manager? What type of management style do you like to work with?
• How close is your current job to your home?
• Does your current position rely on your education or academic credentials gained?
• What are your thoughts and observations about the culture of your current firm? What would make the culture better?
• Do you have flexible work arrangements now, and if so, can you describe what you rely on?

Document all they say, and retain it. When you make the employment offer, refer to the reasons they said they would leave and provide clarity on how this role or environment is different and exciting.

5 – Deal With A Potential Counteroffer In Advance

Understand the possibility of a counter offer so you can shut it down in advance. Do this by asking:

• Does your firm provide counter offers?
• If yes, why would they not have offered you their best offer now?
• When employees have been given counter offers, do you know what has been offered?
• If you were offered a counter offer, what would it take for you to accept it? OR, what would your current employer have to offer for you to actively consider a counteroffer from them?
• Would you provide us with the opportunity to meet with you again before accepting a potential counteroffe?
• If you are leaving for more responsibility, do you think your current employer will be able to offer that responsibility?
• On a scale of 1 to 10, how interested are you in this position? What would make it a 10?
• On a scale of 1 to 10, how interested are you in this company? What would make it a 10?
• If we offered you 5-10% more than your current role and one extra week of vacation, would you accept this offer?

6 – Hurry Up with the Offer

Slow down during the selection process, but hurry up with the offer. We have many clients taking weeks to make a decision and get to the final offer. In the meantime, the candidate has continued their job search and interviews with other possible employers. Further, their current employer gets a whiff that they may be looking, and they make a counteroffer before you even came up with your first offer! If you want this candidate, make a decision. Let the candidate feel your excitement.

7 – Make A Solid Offer

Here’s the thing – you may have constraints. Perhaps you have a salary band to work within, or maybe you can’t offer top dollar for a hard-to-find skill. Just make the best offer you can. Don’t hold back at the offer stage to hope for a negotiation. Many employees find it hard to negotiate and are even fearful to even broach it, perceiving negotiation as conflict. So make it your best offer. Explore all elements of compensation including vacation, paid benefits, elements of the benefits package (i.e. vision care), bonus or commissions, hours of work, overtime and overtime pay, paid training and education plans, paid annual subscriptions, other types of paid leave, improvement in job title, improvement in office or working conditions, clear advancement potential. Focus on culture as an element of total value. A positive work environment may be worth more than money, status and hours.

Dealing With Internal Restraints

• If you are constrained by a salary band, and the candidate’s skill is nearly impossible to find, consider a signing bonus or a bonus after 3-6 months of employment. A good rule of thumb for a signing bonus is 10% of their annual salary. This is infrequent so don’t read into this imagining it happens all the time, it doesn’t. But sometimes when employers absolutely need the talent, this is a good option to get the offer acceptance.
• If you know that a compensation review is possible after 6 months, let the candidate know about this so they can look forward to a potential increase.
• If you have limitations on vacation, and the prospective new hire has a vacation planned, consider offering free or unpaid days, as they may not have accrued enough vacation.
• If they need time off before they start and can’t afford to take time off between jobs, consider paying them a few days early. Although there is the potential risk that they never start, your goal here is to bring this offer to fruition.
• If they have experience, consider offering them benefits as of the first day.

8 – Always Make A Verbal Offer Followed By A Written Offer

In the verbal offer, show excitement and create a connection. Don’t rush the call in your verbal offer – take the time to review the key elements and why you’re thrilled to make this offer. Immediately listen for areas of concern. Respond to questions and listen for hidden meaning in the questions; perhaps they have had second thoughts. Address concerns as you hear them – don’t shy away. If you need to change the deal, do so – especially if this is a hard-to-fill role and you don’t have a second candidate in mind. Send the written offer promptly, and not to their work email address. Many firms will check their email log to see what the “other employer” offered and you don’t want to show your hand. Keep your offer confidential. Make sure the written offer is clean – no accidental mistakes like someone else’s name in the offer, or wrong job title.

9 – Keep A Short Timeframe Between The Offer And The Start Date

In our experience, the longer the lag time between the offer and start date, the higher the chances are that a candidate will accept a counteroffer – or that they accept another role altogether. Of course, take into consideration a notice period so that the candidate can leave their role on good terms, but avoid trying to fit the start date into your company’s best date if it’s too far out. Ideally, 3-4 weeks keeps the offer hot enough. When there is 5-6 weeks before the start date, the fall-off rate grows considerably. Ask the candidate if they will remove their resume from online job sites once the offer has been accepted. The answer may give you a clue to how committed they are to your offer.

10 – When Feasible, Allow For A Short Break Before Start

Despite item 9 above, try to find a way for the candidate to get a few days off before they start. The candidate is often keen to have a few days to themselves – for appointments, kids, and other personal matters, or they want to do a big getaway before their new job begins. They may want to start with you to get that needed time off! So offer the shortest time between offer and start, specifically keeping the notice period to what is essential, and make room for personal time or extended vacation if it’s very clear this is the prospective employee’s goal.

11 – Don’t Play Dirty, But Do Brag A Little

This is not a time to be shy and make a pleasant offer with minimal details. Don’t be humble, share all of your assets with the potential hire. Tell them why you are a great firm – you have an established business, you are financially stable, you offer terrific social activities, you provide an engaged culture, you offer great learning and growth opportunities to all employees, your office is at a good location – anything that will set you apart.

12 – Help Them Resign

It’s really hard to go tell someone – even an employer – that you don’t want them anymore. It’s like a break-up. Help the candidate you are hoping to hire by suggesting they:

• Resign on a Monday morning. This prevents their employer from having a weekend to think about a counteroffer. They are often too busy Monday morning to get to a counteroffer on time.
• Give their current employer a written letter of resignation with a thank you, and a clear last day of employment.
• Provide as little information as possible about why they are resigning – the more their current employer learns, the more they have to work into a counteroffer. Suggest to the resigning employee that they offer few details about their new offer, they can say: “I’d like to be confidential about my new offer until I start.”
• Call you before they resign if they need support.
• Reach out after they resign to let you know it was done, and you can reassure them they made a good move.
• Let you know if they are presented with a counteroffer. Say: “If you are offered a counteroffer, please remember the reasons you provided for leaving and call me.”

Doing this shows the candidate that you genuinely care about them and want to help them through this transition period. Remember, salary is rarely the only reason an employee leaves their current jobs. Here are a few other areas you can “brag about”:

1. Learning and development opportunities
2. Flexibility (in hours of the day and location of work)
3. Making an impact in the work they do
4. Opportunity for growth
5. Recognition of achievements
6. Working with good leaders and teammates
7. Good benefits and vacation time

Case Studies

CASE 1

The employee is in an intermediate CPA role earning $79,000 in a large firm. They are seeking a change to obtain a more senior role and have more impact in a smaller firm. The offer was $86,000 with a more senior role and responsibility. The employee received a counter of $90,000 and a promotion. The employee would also have to pay back $10,000 in maternity leave benefits earned while off if she decided to leave. The prospective employer countered with $95,000 and $5,000 of the employee maternity leave pay back covered at 6 months, and the rest at 12 months. In this case, the counter was countered and the employee took the new offer to have more impact.

CASE 2

The Employee is a Senior Account Manager making $80,000 and wants a promotion of some sort but isn’t exactly sure what - they also want less hours of work (44 hours per week on average). They accept a role at $66,000 for 35 hours a week with a role they have not done, but it may offer a new career option. The employer does not counter because the role is dissimilar (can’t be overcome) and the hours are significantly less (can’t be overcome). The employee wants an overall change of pace and job.

CASE 3

The employee is a manager making $110,000. They want a bigger role in strategy. They accept a role at $120,000 with increased responsibility and job status, no waiting period for benefits and an extra week vacation. The current employer counters with compensation of $120,000 and an extra week of vacation. It’s the best they can do. The prospective employer offers $120,000 and a signing bonus of $9,000 paid in 3 instalments, plus a clear path to executive management. The employee takes the new offer.