Counteroffers in Focus: Risks, Realities, and the Road to Retention Success
November 14, 2024 – When hiring executives, a counteroffer is a proposal made by an executive’s current employer to retain them after they have received an offer from another organization. It usually includes incentives like a higher salary, enhanced benefits, or a promotion to persuade the executive to stay. Counteroffers are a strategic move by the current employer to avoid losing a key leader and maintain continuity. In today’s dynamic job market, the practice of counteroffers has become increasingly prevalent. As a retained executive search firm, Mississauga, ON-headquartered TSI Group Inc. has seen firsthand the challenges and impacts of counteroffers and thought they would explore their intricacies, risks, and consequences.
Counteroffers can be attributed to the competitive nature of finding and keeping talent, particularly in industries where specialized skills are in high demand, according to the TSI Group report. “Companies invest significant resources in recruiting and onboarding top talent, making them disinclined to lose valuable employees to competitors or external opportunities,” the study said. “It can be more cost-effective for companies to offer a counteroffer than to recruit and train a replacement, considering the expenses associated with hiring, onboarding, and potential productivity losses during the transition period.”
While counteroffers may seem like a win-win situation on the surface, TSI Group explains that they come with inherent dangers and complexities that all stakeholders must consider.
Effects on Candidates
“Candidates should carefully consider the long-term implications of accepting a counteroffer,” TSI Group suggests. “While it may provide immediate financial benefits, it can signal wavering commitment and lead to career uncertainty, strained professional relationships, and missed opportunities for growth and advancement,” the firm said. “It is crucial to evaluate long-term career goals, growth opportunities, and cultural fit, as accepting a counteroffer without addressing underlying reasons for seeking new opportunities can lead to prolonged dissatisfaction and career stagnation.”
Related: Here’s Why Counteroffers are On the Rise
Additionally, TSI Group explains that using job opportunities as a bargaining chip for a higher salary can backfire, and be considered highly damaging to the candidate’s reputation and eroding trust with current and prospective employers.
Effects on Employers
“Using a counteroffer as a retention strategy can create a culture of uncertainty and instability within companies,” the TSI Group report said. “Organizations should reassess their talent retention strategies and address core issues like succession planning, compensation policies/strategy, employee engagement, career development, and workplace satisfaction to reduce dependence on reactive counteroffers.”
The Rise of the Great Counteroffer
Most people have heard about the “Great Resignation” or the “Great Reshuffle,” but Grey Search & Strategy, among other search providers, say many organizations are now experiencing what they call the “Great Counteroffer.” The number of counteroffers has increased over the last year as employers are throwing everything they can (money, incentives, titles, etc.) at employees to keep them with the company, according to a new report from Grey Search & Strategy’s Brian Bjorgum. “This in turn creates a situation where the employee/candidate must decide between taking the new opportunity they originally were seeking, or staying with the company they weren’t completely satisfied with,” the report said.
Both employer and employees will experience many emotions when making a decision that has a significant impact on their life. Grey Search & Strategy offers seven common emotions of change and how they coincide with making a career change or accepting a counteroffer!
TSI Group also notes that tackling systemic problems such as ineffective leadership, limited advancement opportunities, or cultural misalignment is crucial. “If a counteroffer is presented and accepted, there is a slim chance that the employee will remain within the company for longer than 18 months, so it is never a good idea to jump at keeping someone who could be short-term,” the search firm says.
Effects on Executive Search Firms
Counteroffers can disrupt placement success rates and damage client relationships for executive search firms, increasing time and costs and decreasing client trust, according to the TSI Group report. “Firms can mitigate the negative impacts by thoroughly vetting candidates, setting clear expectations of candidates’ motives for changing careers, and ensuring their candidate shortlist is in it for the right reasons and has integrity throughout the process.”
Conclusion
“The culture of counteroffers is a complex phenomenon that impacts candidates, employers, and executive search firms, in various ways,” TSI Group says. “While counteroffers can offer temporary solutions, they often conceal underlying issues that require strategic interventions and proactive measures. As an executive search firm, effectively navigating the landscape of counteroffers requires a comprehensive approach. By fostering open dialogue, promoting transparency, and aligning stakeholders’ interests, we can navigate the complexities of the counteroffer while facilitating meaningful connections and driving positive outcomes for all parties involved.”
TSI Group is a boutique search firm that provides executive search, strategic talent acquisition and leadership development to clients throughout North America. Celebrating over 30 years in business, TSI Group utilizes a robust search methodology and strategic approach to deliver optimal hiring and succession planning results. Pamela Ruebusch is the founder and owner of TSI Group. When she started the business over three decades ago, her goal was to create a firm that delivered the best available talent and executive search services to clients throughout North America.
Related: Navigating Counteroffers: What to Know as an Employer and Employee
Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor – Hunt Scanlon Media
