What would you do: Counter offer for a star employee?
October 29, 2008 by Jim GiulianoPosted in: Behavior, Communication, In this week's e-newsletter, Latest News & Views, Money, Pay and benefits, Retention and turnover, What would you do?, policies
Periodically, we ask three HR managers how they’d handle a difficult situation at work. Today’s problem: A nearly irreplaceable star performer is leaving for more money. Should you counter?
The scene
VP Tom Harper leaned back as he spoke: “I’ll take full responsibility for the situation with Maria Diaz, but for now we should focus on making a decision about how to handle her wanting to leave.”
“I agree,” HR manager Jan Cropper nodded. She had warned Tom several times about training a replacement for Maria, but Tom had said he was always “too busy.”
“It still bothers me,” Tom said. “We hired her right out of school, invested loads of time and training in her, and now she’s leaving us for a better offer. She probably knows more about her end of the business than anyone here.”
“You have to admit, a 30% raise is a great offer from that other employer,” Jan said. “She’s done a great job here, so I guess it’s not surprising that others want her.”
“The problem now is that not only would we lose an excellent employee, but that we also won’t have anyone to replace her,” Tom sighed. “What do you think? Should we hit her with a counter offer?”
Answer within 24 hours
“If we do and word gets out here, that could cause lots of problems,” Jan noted. “If we don’t, we lose a good employee and suffer the costs of recruiting and training a replacement for her.”
“That about sums it up,” Tom concluded. “I told Maria we’d get back to her within 24 hours as to whether we would match the other offer. We have that long to decide on it.”
If you were Jan, what would you recommend to Tom?
Patty Mauro, HR manager, Winston-Salem, NC
What Patty would do: Considering the costs of replacing this person and the fact that she’s an outstanding employee, I’d work up a counter offer.
Reason: If she’s able to go out and get an offer that’s so much better and we think so highly of her, why not? I wouldn’t be too worried about other employees’ getting wind of it. My feeling is that counter offers should be done on a case-by-case basis, and I wouldn’t be too concerned about the effect on what other employees think.
Rose Suter, controller/HR director, Lancaster, PA
What Rose would do: This situation calls for a conversation with the person to learn what else she considers important besides money. Depending on what’s said in that conversation and whether we could put together working conditions that really appealed to the person, I might make a counter offer.
Reason: Rarely is the problem only about money – usually there are other issues involved. Making a counter offer may be part of the solution, but you have to make sure you can respond to the person’s other reasons for leaving, too, or else just countering will fail in the end.
Gary Lane, CEO, Cutler, ME
What Gary would do: I would consider making a counter offer, but along with it I’d work something out to move the person up to a position with greater responsibility.
Reason: It sounds as if this person hasn’t advanced at the rate she should have – if someone else thinks she’s worth 30% more, they probably also think she’s capable of taking on more. Maybe we haven’t moved her along fast enough, and she’s ready for a bigger job to go along with the bigger paycheck.
Tags: counter offer, HR, Money, recruiting
November 3rd, 2008 at 3:23 pm
Great employees are hard to find these days, so I would also work up a counter. I agree with Rose, that it is rarely just a money issue, and it is critical to her continued longevity and growth with the company to find out what else is bothering her. We shouldn’t make assumptions with this, as it’s too important. It may not be advancement, and it could be a lot of other things. The counter offer will need to address the full situation.
In hind sight, she should have been training “her replacement”, just as everyone should be. It is remiss on the companies part, to be caught without a viable plan B. With almost all employees, there comes a day when things just don’t “fit” like they used to, and the employee wants/needs to move on. A company must be ready for this day with all key positions!
November 3rd, 2008 at 3:32 pm
I don’t think that I would counteroffer with more money. If you think that the employee is worth more, then why were they not being paid that amount all along? It is almost an insult.
November 3rd, 2008 at 4:12 pm
Tom the VP is an idiot. He is responsible for this department and should have been more attuned to what was going on. He sounds like he was blind-sided, yet in reality he should have been aware of the situation. Having to make a counter-offer at this late stage is really his fault. I say fire him and move maria up to his position.
November 3rd, 2008 at 4:13 pm
I also agree it is not usually just money, there are other underlying issues that need to be addressed before the counter offer. I also would look at the salary ranges to see if we are paying competitively for this position in today’s market. 30% is a large jump for hiring a person in the door unless they were grossly underpaid.
November 3rd, 2008 at 4:22 pm
I would like to know what the manager has to say about this situation. A good manager should know when an employee is considering jumping ship. there is always something “lurking” in the background that was probably apparent but never considered or discussed by the manager.
Managers miss out on important information by not spending enough “quality time” with star employees.
It is usually not just money – benefits, relationships, responsibility, standing in the company, training, flexible schedule, etc tend to carry more weight than just the compensation issue. However, if there is a huge jump in the offer – it may spell trouble with the company’s entire compensation plan for employees. Are they outdated and out of touch with what the market bears?
Why doesn’t the manager know what the employees “hot button” is? Are there any other employees looking? I think it’s too late to offer more now. It sends the message “If employees don’t ask for more – don’t offer more, unless they are ready to quit”. I wouldn’t stay if I were the employee.
November 3rd, 2008 at 4:44 pm
Making a counter offer doesn’t resolve the vulnerability of the company even if she accepted it. Assertive and star employees want and seek responsible positions they can promote into. In this case money, benefits and, maybe the possibility of advancement is hook and line that is drawing the employee away.
I’d counter offer her with a promotion, with a salary that matched the responsibility of the position and have her train her replacement.
November 3rd, 2008 at 5:36 pm
It’s not always about money, and I agree that 30% is quite a jump. She was obviously underpaid at her job, and as HR Tennessee said, it’s almost an insult to counter with just a monetary offer. If you can suddenly afford to pay her 30% more why weren’t you from the beginning? You could counter with just money, but I guarantee she’d keep looking for outside employment. Nine times out of ten people leave because they aren’t appreciated (underpaid) and because they have no opportunity for growth. I bet if an exit interview was done the company would see that a pay increase is just a band aid fix for a bigger underlying problem.
November 4th, 2008 at 12:47 pm
I don’t think I would offer the counter for this employee. I would sit down with her and see if there are other underlying issues. She wouldn’t have known about this other job and the 30% increase if she didn’t start searching for some other reason first. I’d try to determine what that reason was, and use it as a coaching opportunity with her Manager. I’m a firm believer that once someone has decided to leave the company, you should let them go. Offering more money likely won’t resolve the underlying issues. Keeping them in the organization when they’ve indidcated they’re ready to move on often leads to discontent and “presenteeism.” Often times, people leave one job for a higher paying position, even when things aren’t terrible at their current job. They either thrive in the new position, or they realize they should have thought less about the money and more about the details of the job. If the higher paying position doesn’t end up meeting her expectations, be sure she knows the door is open for her to return if the position is still open. She will return more appreciative of the time and money your company has invested in her, and will bring with her a new skill-set from the other company, and is less likely to leave again. With this being her first job out of high-school…let her go, and by all means don’t get the company into this situation again. By setting yourself up to be so reliant on one person, you’re basically in a position where the employee is holding you “hostage” waiting for the big pay-off in the end.
November 4th, 2008 at 12:50 pm
I would counter and make sure there is cross training done immediately. Sooner or later she will end up leaving because I agree that it is not a money issue. The threat of her leaving again will surely come up and there would be back up for her position.