When a candidate is in the process of transitioning from one company to another, a variety of situations can arise during the interview process and offer stage. One of these possible outcomes, is that of the counteroffer. Counteroffers are often a double-edged sword and are not as simple as they appear on the surface.  

Why Avoid counteroffers

After weighing the pros and cons of counteroffers, there are usually more negatives than positives for both parties involved. A national study, concluded that 40% of Senior Executives and HR Leaders believe that accepting a counteroffer will have a negative impact on an individual’s career trajectory. Although accepting a counteroffer may solve one issue, it can lead to the creation of another. It is important to consider the status of relationships after a counteroffer has come into play. When a counteroffer is accepted, trust is often broken, and leadership may now be skeptical of the commitment to the company.  

A study done by The Harvard Business Review, revealed that 80% of senior executives that were surveyed say that the trust is now broken after a counteroffer is accepted. There can also be unfortunate situations where an accepted counteroffer can be used against an individual. We have seen scenarios where individuals are let go soon after accepting a counteroffer. In this situation, a counteroffer was most likely used by leadership to buy more time to replace the individual that once considered leaving. While situations like these are rare, they display the complex situations that arise when a counteroffer is on the table. Lastly, the candidate must ask himself/herself, will the counteroffer truly solve the issues at hand? Most likely, the desire to look for another opportunity was not only driven by compensation, but other factors including culture, leadership, and career growth.

The Solution to My Problems?

It is imperative that an individual takes the time to consider if a counteroffer is going lead to happiness in the role. Also, an employee should question why they were rewarded or more highly compensated only when they were ready to walk out the door. If a lack of compensation was not the only issue at hand, then there is a great chance that a counteroffer won’t resolve those other lingering issues. Generally, compensation is only one element that prompts the candidate to explore new opportunities. Other factors include limited career path, lack of challenge, a poor culture fit, and more. 

If an employee is seeking a new opportunity, it is often beneficial to both parties to make a change. By the time an employee begins to explore new opportunities, the employee likely has diminished engagement and excitement for the company. An employee/employer relationship is truly a two-way street. If you have approached the stage where a counteroffer is being presented, odds are that employee/employer relationship will never get back to where it needs to be.

how to Avoid counteroffers

At the end of the day, it is best to simply avoid counteroffers all together.  Be proactive in maintaining an open line of communication. One great practice is to have monthly performance reviews. Make it a priority to have regular discussions with your employees and to foster a culture of trusting and open communication. This lets both parties know where they currently stand with one another and will provide a clear opportunity to highlight any need for change or improvement.

It is imperative that both sides take one another’s open dialogue and requests to heart. Performance reviews and encouraged dialogue is only effective when both sides follow through. Furthermore, if an employer truly values an employee, make sure the compensation and benefits are where they need to be in the first place. If an employee feels undervalued, they will likely start an active search for change and a counteroffer situation could be on the horizon.

The Purple Squirrel Take

Purple Squirrel Advisors take great pride in providing both clients and candidates with transparent communication and advice. We normally advise candidates who are in an active search and entertaining a new opportunity to weigh a counteroffer from the current employer very carefully and advise against the practice of a counteroffer, due to many of the reasons stated above. The transparent and clear communication that we value so much with our clients and candidates, is just as important between an employer and employee. Staying in constant communication and encouraging open dialogue is a not only a great way to avoid a counteroffer situation, but a great way to keep a successful and beneficial employee/employer relationship.

When we work with candidates, we encourage them to consider the possibility of a counteroffer long before the situation arises.  This can help the candidate to fully come to terms with the reasons he/she is looking to leave and consider these factors before the stress of a counteroffer comes along. For most people, a job change is very stressful and scary.  A counteroffer situation adds to the stress and can cause people to to make a short-term decision for the wrong reason.