Retention: When Should You Make a Counteroffer?
One of your most valued employees comes to you with the news that she's been offered a job elsewhere -- with a substantial salary increase. Should you make a counteroffer? In most cases, probably not. But that doesn't mean you should resign yourself to losing a top performer. "Unless employees have been grossly underpaid, money is usually not the real issue," says Richard Pinsker, an executive-selection consultant in Saratoga, Calif. More commonly, personality conflicts with direct supervisors or a perceived lack of opportunity drives employees to seek greener pastures. "Your first step is to determine what the real issues are," says Pinsker. If it turns out that money really is the driving factor, Pinsker cautions against "distorting your compensation scheme" with a counteroffer. "You don't want to be bombarded by employees saying, 'I've got another offer, match it," he says. We spoke to several CEOs who put their own spin on Pinsker's advice:
? "I don't believe in making a counteroffer right away," says Carolyn Faulk, president of A&C Plastic Products, an $11.3-million wholesaler and distributor of plastic products in Houston. Since she believes that many employees are lured away by higher salaries that may then remain static for a year or more, she starts out by explaining to the employee her plans for A&C over the next several months and how the company's growth and incentive program are likely to affect compensation in the future. "I try to help them decide whether the offer they've received is just good up front, or good for the long term," she says. "They should take the best deal."
? When Laura Henderson, president and CEO of $13-million Prospect Associates, senses that an employee is ambivalent about leaving her consulting firm, she tries to "find out what they're not getting from their job and see if we can fix that. Is the reason they're leaving something we can change?" Unless an employee's departure would seriously jeopardize a project, Henderson refuses to engage in bidding wars for staff. "When someone leaves, you definitely lose something, but you also gain an opportunity to re-create that position," she says.
? "Once someone has gone through the interview process and is standing in your office with an offer letter, they're gone, and they've been gone for a long time," says Kathy Ericksen, president of Capsco, a $26 -million electronics distributor in Sunnyvale, Calif. Ericksen doesn't make counteroffers at all, but she does try to gather as much information as possible through exit interviews with departing employees. "We'll also have a going-away party for them," she says. "But if they're getting a really good salary from someone else, they may have to pay for it themselves!"
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.