OSBORNE SUNDAY BUSINESS POST COLUMN : COUNTER- OFFERS AND SALARY GAZUMPING
29 November 2023
DAVID WALSH – DIRECTOR OF COMMERCIAL DEVELOPMENT
‘It was like being dumped’, my client told me over coffee last week. She had gone through the process of recruiting a candidate directly, exchanged contracts and was all set for this person to come on board, when she got the ‘it’s not you, it’s me call’. This candidate was offered a 10% increase by her current employer, so opted to stay put. ‘Why did she waste my time; we could have been great together’, my client said. She was left with a broken heart, and a Financial Controller position to fill.
We’ve all seen infographics appear on social media sites, (complete with stats condemning the effectiveness of counter offers!), showing how 92% of candidates who accept a counter offer are back on the market within 18 months. Attitudes to work and employment practices are constantly changing and evolving, and research has shown that millennials, who currently make up the bulk of the workforce, will change roles more frequently. In real terms, that’s every 18 months and three times more than Generation X. So, if this workforce generation is statistically going to move on anyhow, why set the precedent of a counter offer? How effective are counter offers in retaining staff and when should a candidate accept? (Here’s a hint, it’s never!)
The attraction of gazumping a new employer and retaining an employee may seem self-evident. However, it can reflect poorly on a company’s talent strategy and highlight the lack of succession planning and staff management. Is it ever an effective tool in retaining top staff?
Common sense dictates that if a candidate is worth keeping, they are worth counter offering in order to hold onto them. At first flesh, offering a candidate an extra few thousand is not too bad a price to pay, but overall the effects of a successful counter offer are papering over the cracks. Counter offers can set actions in motion across the organisation and create doubts about loyalty. Ultimately, the vast majority of people move on after a short while anyway. Questions about employees’ levels of engagement are obvious if they have gone through a recruitment process with a different company, albeit without a definitive outcome. For candidates who are fishing for a raise by courting a new employer, the downsides are also obvious. Institutional memory sees candidates who waste time in this manner remembered.
Early in my career as a recruiter in New Zealand, I had a candidate interview with a bank for a position a few stages up the career ladder than where he was. All went well and the offer was initially accepted. Then, suddenly the candidate stopped answering calls or emails. I had to revert to the hiring company with the news, and we ended up rescinding the offer. A few months later I bumped into the candidate at an event and asked him what had happened – he said he received a significant pay rise to stay where he was and didn’t feel the need to tell us, delivering the words, ‘It’s not show friends, its show business’. The way he managed the situation came back to haunt him, as years later after I had returned to Ireland, I received a message from my old client telling me about a certain candidate who had reached out for a position with them again, and was promptly disregarded from the process due to questions regarding integrity. At Osborne, we counsel our clients on whether candidates who take the approach of risking their career for a pay rise are the right candidate at all.
To candidates, I would ask the question, why threaten to resign to get a pay rise that you feel befits your status? If you feel that you are being so underpaid that you need to resign to scare your boss into a higher salary, I would doubt that your career goals are being met where you currently are. When we are talking with prospective candidates about their careers, one of the first questions we ask is what are you going to do when your current employer offers you 20% more to stay; the answer is invariably move on. When we talk about what their new role must have, it is always with scope and fit, rather than salary and benefits. Money is important, but if a match can be made between fit and culture, the package rarely if ever gets in the way.
Over the last 18 months there has been a huge shift in hiring. It is now all about aligning the values and motivations of candidates with the employer’s company culture, and we have seen that when there is a direct connection in this regard, salary and package become secondary. We know that for candidates a higher take home is important and a nice to-have, the benefits of this quickly evaporate if the underlying conditions which prompted them to move on remain unchanged.
The only time Osborne has seen counter offers work is when the scope and responsibility of the position has changed. In this case, money is often a false flag and the actual scope of the position itself is the real problem. Salary surveys enable candidates across all industries and sectors know the market rate for their role, so it is very rare that we come across someone being grossly underpaid relative to their contribution in a position.
Osborne’s advice to employers is – if you are faced with losing an employee you would like to keep, sit down and find out what they are looking for in a new role, salary aside, and whether you can help them through training and development to meet these requirements. Do this before automatically countering with money. This approach has multiple benefits – keeping your best people, but more importantly keeping them motivated, challenged and happy.