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Beware the Counteroffer, Part 1: Advice for Current & Future Employers

CSA1403In the world of executive recruiting and top-tier talent acquisition, the counteroffer can be one of the best defensive tools in the arsenal of a current employer and one of the greatest challenges to a future employer. Furthermore, it can put a candidate in an untenable position between the two (which we will discuss in our next newsletter) and can result in a “no win” situation for all the parties concerned. While best practices for dealing with counteroffers differ greatly between current and future employers, the basic principles are the same across the board: invest heavily in the best employees or candidates, expect competition over those top individuals, and plan accordingly for that competition.

For current employers, especially in our industry, one thing is certain: your best senior employees are well-known and are highly sought after by other organizations. It is a basic fact in today’s modern economy that in a talent shortage, proven individuals will be recruited by other companies. So it’s your job to not only expect competition for those individuals, but to convince them to stay put. And, you simply can’t do that by waiting until they get an offer from a different company as it will be perceived as being purely defensive in nature and designed to benefit solely the company or the direct supervisor. Protecting your most valuable assets – your best employees – is a preemptive, long-term process that must take shape early and be evident throughout the employees’ tenure with your organization. You must be willing to continually invest in those individuals in various ways to ensure that they are aware of their importance to the organization and minimize their desire to go elsewhere.

The fact remains, however, that even if your company does everything it can to proactively prevent your best employees from being recruited away, you could still be faced with competition for those individuals. In such a situation, you must be prepared to make a judgment call on whether or not to make a counteroffer and how it will impact both the employee and others in the organization. If an individual is truly invaluable to the company and is seriously considering leaving, you must face the reality that they must be dissatisfied with something (or someone) in the organization. Then you need to decide if you want to do what is necessary to ensure that the person remains with your organization. If the answer is yes, you must then consider constructing a counteroffer that is not only based on compensation, as money is often not the motivator, but also takes other factors into account, such as reporting structure, titles, benefits, workload, physical location, and travel requirements. And just as importantly, these decisions need to be made as objectively as possible as the costs to the company are often great. Counteroffers may work for the short term, but in most cases they do not work for the long term as an employee’s real reasons for dissatisfaction with an employer are rarely addressed by a counteroffer.

On the opposite side of the equation is the prospective or future employer, whose job it is to entice those top-level talents away from their current jobs. If you’re on this side of the table, you should know that the natural advantage over the short term is with a job candidate’s current employer. It is typically easier for an individual to accept a pay increase and stay put than to resign and leave for a new position, so it is incumbent upon future employers to be strategic and precise when dealing with both their initial offer and, subsequently, a counteroffer.

To guard against losing your top candidate to a counteroffer from his or her current employer, you must first understand what the candidate likes (and doesn’t like) about their current organization. In working with a qualified recruiter, either internal or external, information regarding a candidate’s “motivation” should be well known and fully taken into account in constructing the initial employment offer. Then, it is incumbent upon the new employer to find out how their company is structured and what leverage they could use over the candidate in a counteroffer. It’s also important to discuss the very likely prospect of a counteroffer with the candidate early in the process. Prepare them for the emotions involved in leaving their job and give them a realistic expectation of the counteroffer process and the fact that it often leads to problematic situations, irrespective of the ultimate decision they make. Constant communication with the candidate is critical as well. Find ways to engage the candidate with your company by asking their opinion on a forthcoming business decision or simply calling to say hello or to see if they have any remaining questions about the offer, the company, the benefits program, etc. Finally, develop the ability to act quickly in the event of a counteroffer proposal. Momentum with a candidate is one of the most important aspects of sealing the deal.

Whether you are a current employer fighting to keep your best executives or a future employer competing for their services, managing the counteroffer process is a complicated task. That’s why Schaffer Associates prides itself on understanding both sides of the conversation and effectively representing your company in top-level talent acquisition or retention. Competition will happen. Counteroffers will come. Schaffer Associates can help you make the most of both and take your organization to the next level. Call us today.