Navigating Counteroffers: What to Know as an Employer and Employee
July 20, 2022 – The last thing any organization wants to hear is that one of their key executive leaders is resigning in favor of a better career opportunity. If the company is unprepared, making a counteroffer might seem like the only way to keep that executive and the best way to address the woes of a highly competitive candidate market. A recent national survey about best practices when leaving a job showed that nearly 40 percent of HR leaders and senior executives agreed that accepting a counteroffer from a current employer will have an adverse impact on one’s career. But on the other hand, some 80 percent of senior executives and 78 percent of HR leaders shared that it is sometimes all right to say yes to the counteroffer.
As an executive search firm with over 44 years of history, EFL Associates says that counteroffers were rarely an issue. It seemed as though a candidate would, upon accepting an offer from a new employer, walk in and resign and that would be the end of it, according to a new report from Jay Meschke, president of EFL Associates and CBIZ Talent & Compensation Solutions. “Employers would never even consider issuing a counteroffer and might even show the employee the door that very day,” he said.
More recent entrants into the industry have encountered a markedly different landscape, as this scenario has changed drastically over the last decade, according to Mr. Meschke. “Social scientists may have a better understanding of the changing dynamics, but it is now a fact that employees are not only susceptible to counteroffers but will actually take them and stay with their existing employers more often than not, especially in this hot market,” he said. “Plus, rather than showing the departing employee the door, employers themselves are readily willing to issue counteroffers because they understand the cost of backfilling a key position.”
Mr. Meschke points out that it’s also interesting that people nowadays are swayed to stay at their present employer when that organization showers them with more money, more responsibility, a bigger title, a visit from the CEO, and other perks that were not offered just moments ago. “We have seen a multitude of candidates who have signed or verbally accepted an offer from a new organization only to renege on their promise without a second thought,” he said.
Buyer’s Guide to Executive Search
In today’s hiring environment, recruiting senior or C-Suite level talent can be a daunting task—especially when you have little to no knowledge of the executive selection process or experience making decisions like this.
Not only is the executive hiring process complex, but it’s also filled with risk. Putting the wrong person in charge of a company can be detrimental to its bottom line. In fact, those at the senior or executive levels tend to have disproportionately high turnover costs as a percentage of salary (up to 213 percent). But in most cases, the cost of the wrong leadership placement extends well beyond monetary value and can have devastating effects on overall productivity, company culture and reputation.
To ensure the right seats are filled, companies increasingly turn to executive search firms to navigate the selection process. This type of specialized recruitment service is used to help organizations identify, attract and secure top-tier candidates for senior, executive or other highly qualified leadership positions for clients.
Buyer’s Guide to Executive Search
Download the Buyer’s Guide to Executive Search if you’re ready to gain access to valuable data and insights that will help you navigate the executive hiring process, select the right recruitment partner for your business, and ultimately, prevent poor hiring decisions.
- Answers to the most common questions regarding executive search.
- An overview of the executive selection process and your role in it.
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For employers, especially those actively recruiting, anticipate the counteroffer. “It should come as no surprise – top talents are in high demand,” said Mr. Meschke. “Therefore, it is dangerous not to be planful for this situation.” He offers a few other tips to consider when combating counteroffers:
Prepare to Counter the Counteroffer
Be prepared to stretch your compensation ranges and have a counter-to-the-counter offer, according to Mr. Meschke. “Ask candidates specific questions in the interview process that provide you with insight into their biggest motivation for leaving,” he said. “Leverage their answers and remind prospective employees about why they decided to seek a new position in the first place.”
Evaluate Your Existing Hiring Processes
Also, Mr. Meschke notes that employers would be well served to evaluate existing hiring processes from beginning to end to portray their organization as an exciting and welcoming place to work with loads of upside opportunities.
Related: The Rise of Counteroffers in Executive Search
According to EFL’s The Road to Recruiting Executives? Use the data to quickly evaluate your hiring process and ensure it’s on the right track.
Offer Comprehensive Compensation Packages
Culture, innovation, and impact are all incredibly important factors behind attracting talent in a candidate-driven market, but compensation is the determining element, according to Mr. Meschke. “Organizations must stay competitive with their compensation structures,” he said. “This requires due diligence and market research. Know what your local and national competitors are paying and seek guidance from a compensation consultant. Run a compensation analysis on base pay, annual performance bonuses, retention incentive bonuses, stock options, retirement plans and contributions, health and life insurance benefits, and miscellaneous perks. If your total package doesn’t live up to market standards, you are in for disappointment and frustration.”
Counteroffers: Advice for Employees
For employees, EFL Associates issues some words of caution. “If one accepts a counteroffer and remains at your existing employer, that relationship is forever changed,” said Mr. Meschke. “Next time there is a promotion opportunity or a plum, sought-after project to be divvied out, you may be subliminally removed from the roster because you held your employer ransom. People remember disloyal employees, especially if you consciously or subconsciously used an outside job offer to improve your situation. People have long memories.”
Counteroffers: How to Avoid Your Offer Being Turned Down
The last three companies that Juli Smith, president of The Smith Consulting Group, spoke with shared a similar frustration about the candidates they had recently extended offers to: They lost out to a counteroffer. “They were so frustrated with the fact that their candidate who they had identified on their own, interviewed, screened, and had taken all the way through their process had left them at the altar,” she said.
Despite employees’ increased willingness to jump on the counteroffer carousel, there is growing evidence that things do not go as expected after a counteroffer is accepted. It has been estimated that 80 percent of people who decide to accept a counteroffer and remain at their employer end up leaving in the next 12 months anyway. Why? “It is not always about the money,” said Mr. Meschke. “Many times employers make promises at the counteroffer stage that they do not keep. No amount of money can change a loss of trust; a poor workplace environment; or a toxic boss. Loyalty is loyalty, promises are promises, good faith is good faith, but talent acquisition has evolved into a Free Agent market – just like professional sports.”
Founded in 1978, EFL Associates provides executive search services from offices in Kansas City, Denver, St. Louis, and Raleigh, NC. The firm specializes in the following areas: finance and banking, higher education, non-profit, life sciences, energy, construction and engineering, consumer packaged goods, manufacturing, public pension organizations, chief financial officers, and board services.
As president of EFL Associates and CBIZ Talent & Compensation Solutions, Mr. Meschke has completed nearly 700 successful senior-level search assignments in the financial services, non-profit, technology, aerospace, energy, agribusiness/food, manufacturing, and professional services industries. These searches include positions such as president/CEO, COO, CFO, CIO, CHRO, and board members. During his 25-year history in the executive search field, Mr. Meschke has been quoted in numerous publications, including The Wall Street Journal, US News & World Report, CNN.com, Fortune.com, Human Resource Executive, Employee Benefit News, SHRM.org, and Business Week.
Related: Hiring Top Talent In Unprecedented Times
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media