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Why Counteroffers Aren’t Always the Answer, and What You Can Do to Make Them Worthwhile

Written by: Lucy Walters
Published on: 22 Feb 2024

Why Counteroffers Aren’t Always the AnswerCounteroffers are often used as a quick way of incentivising employees to stay in their current organisation, rather than accepting a new job offer elsewhere. Whilst they may motivate employees to stay in their current role in the short-term, more often than not they fail to address the real reasons why the employee was looking for a new role in the first place.

Research has shown that counteroffers aren’t a way of retaining top talent in the long term, with statistics such as those listed below shining a light on where employers may be going wrong:

  • 20% of jobseekers decline a counteroffer from their current employers
  • Only 15% of employees who accept a counteroffer stay with a company for 2 or more years afterward
  • 20% of employees who receive counteroffers leave within 6 months
  • Only 6% of HR professionals believe counteroffers are effective

If you’re struggling to retain top life science talent and have considered using counteroffers as an incentive for employees to stay, there are things you can do to make them effective in the long term. To make them work, you need to be prepared to:

  • Dig deeper and understand the real reasons why your employees want to leave
  • Work with those employees to create long-term improvements where needed
  • Drive positive change within your organisation, and use counteroffers to trigger this change

Regardless of how much thought and strategy you put behind your counteroffers, there will undoubtedly be times when a counteroffer will not work. If an employee is looking for a fresh start somewhere else, wants to move industry, or simply wants a completely new challenge, there is little you can do to convince them to stay.

In this article, we focus on 3 scenarios for when a counteroffer may be used, along with tips on how to ensure these are effective in retaining top talent in the long term.

Scenario One: Salaries

Let’s say an employee comes to you with a job offer from another company, that comes with a higher salary. Other than receiving lower pay, your employee is happy at your company, and has no complaints about the company culture, work-life balance, additional benefits, and job responsibilities. They get on well with their colleagues and are happy with the management team but are being paid below what your competitors are offering.

As your employee is primarily financially driven, the obvious solution may be to offer them a higher salary as an incentive to stay. And whilst this may work in the short-term, there are things you need to consider if you want to retain this employee in the long-term, such as:

  • Are you certain that the employee is only looking for more money? Are there any other aspects of their role that they’d change?
  • Can you offer truly competitive salaries in the long-term? What happens if in a years’ time, the employee finds another role with yet another higher salary?
  • Can you afford to offer pay increases to employees in similar roles?
  • Is your current process for reviewing your employees’ pay clear and fair? Are employees given the opportunity to discuss their suitability for a pay increase in regular pay reviews?
  • Are there other ways you can support your employees financially?

It goes without saying that underpaying your employees is a surefire way to lose top talent. But if you feel that employees are paid fairly, and that you can’t afford to keep up with competitors who are offering above-average industry salaries, then offering a one-off pay increase will only work until that employee finds another higher-paying role.

Scenario Two: Career Development

An employee comes to you with a job offer from another company, that comes with a higher salary as a result of a promotion. Although your employee is happy at your company, they feel that they could develop their career quicker in another organisation and that they aren’t being developed as much as they had hoped when they joined.

Developing your employees is not only a crucial aspect of retaining top talent but is also vital in driving innovation and success within your organisation. You should be encouraging your employees to continuously learn, especially in an industry like the life sciences which is constantly evolving. Employees who want to develop their career and take to considering other roles to do this, are the exact type of employees you don’t want to lose. Offering them a promotion will only be effective in the long-term if you consider the following:

  • What is the employee hoping to gain from a promotion? Do they want more responsibility in terms of managing others, or do they want to be recognised for their level of expertise and knowledge in their field?
  • Do you have a clear, career development program in place? Do employees have direction over where their career is headed?
  • Do you work with your employees to create personalised development programs? Are employees given a say over how they would like their career to progress?

Even if you’re a small organisation that doesn’t have as many layers as your larger competitors, you need to find a way of recognising and encouraging the expanding knowledge held by your employees.

Scenario Three: Company Culture

An employee comes to you with a job offer from another company, that on paper, looks very similar to the role they’re currently in. After speaking to your employee and finding out what it is that has caused them to look elsewhere, they confide in you that they don’t like your company culture. They feel that there is a big divide between the different levels of management, and that the culture amongst their colleagues has become toxic.

Problems with company culture aren’t easy to fix, as they require a lot more investigation in order to identify exactly where things are going wrong. If you truly want to change things in the long term, you need to consider things such as:

  • Have you fostered an overly competitive environment where employees are left to compete with one another to gain rewards and recognition?
  • Have you invested in activities designed to bring your team together?
  • Do you collect feedback from all employees on how they feel the company culture could be improved?
  • Do you give all employees a voice when it comes to shaping the company culture?
  • Are you effectively training your senior employees in people management, as well as business management?
  • Do you ensure your employees have a healthy work-life balance?

Doing or not doing the above can foster a negative company culture. Before presenting a counteroffer to the employee, whether this be in the form of a higher salary, more desirable job responsibilities, a promotion, or the promise of a better work environment, make sure you’re also prepared to take steps to actively improve your culture. If you want the employee to stay with you long-term, you need to demonstrate that you hear them and value their experience.

Use Employee Feedback to Drive Positive Change

Suppose the reasons cited by your employees for leaving are down to things that simply aren’t working within your organisation. In that case, employee feedback will be crucial to driving positive change and creating an environment where top talent will thrive.

As we mentioned at the start of the article, there will always be reasons why employees want to leave that are down to things that you can’t change. There will also always be times when employees who have nothing negative to report about their experience will leave, and in these scenarios, your counteroffers simply won’t work.

But for those scenarios where an employee’s resignation has triggered conversations about things that aren’t working well within your company, use your counteroffers as a trigger for change, rather than a quick solution to buying yourself more time. Understand what your employees truly need from you and take the time to reflect on what you want your organisation to look like, and the steps you can take to improve the employee experience.