The Rise of Counteroffers in Executive Search
August 23, 2018 – The last thing any company official 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. And they would hardly be alone in thinking so, according to a report just authored by Slayton Search Partners’ John Nimesheim.
“Although a thousand articles exist telling candidates not to accept counteroffers, the truth is we’ve seen a significant rise in counteroffers as well as the number of executive candidates who are willing to accept them,” said Mr. Nimesheim, who is a managing director for Slayton. “For companies looking to hire top talent, knowing how to ensure your candidates won’t be tempted by counteroffers is critical to successful executive hiring.”
There is a seismic shift occurring in the marketplace. With the national unemployment rate sitting at a low 3.9 percent – which is significantly lower among executive ranks – and an astronomical 6.7 million positions open nationwide, the massive disparity between supply and demand of the most talented professionals continues to widen.
“Demand is higher than we have seen in years, and many top candidates are juggling multiple job offers as a result, holding the keys to their future careers in their hands,” said Mr. Nimesheim. “This challenge is made worse by the reality that a predicted 10,000 Baby Boomers are retiring daily. This is a generation that has built robust leadership skills over the years, occupying C-suite positions across the nation.” Their retirement means that many companies are scrambling to fill open executive positions.
In light of these realities, some companies are prepared for the retiring executive. Companies that lack a bench of talent ready to take over the role of their departing executives, however, will do most anything to maintain their current talent. “That includes presenting handsome counteroffers,” said Mr. Nimesheim. “It’s easier – and faster – to put together a counteroffer than face the reality of losing key leadership and spending months recruiting an outside executive.”
But what about loyalty? In the past, companies may have questioned an employee’s loyalty to the company, using the counteroffer as a stop-gap measure before being able to recruit someone new. But in the current market that is abound with attractive opportunities, few companies are taking offense at employees for looking elsewhere.
In short, the war for talent has created a new standard in the practice of counteroffers. “It’s becoming increasingly acceptable to use them as a solution for retaining top talent against an intensely competitive candidate market,” Mr. Nimesheim said. “Simultaneously – and unfortunately for companies who are actively hiring – it’s also becoming more acceptable for employees to accept them without fear of stigma or of a negatively impacted reputation.”
Ensuring Best Candidates Don’t Accept Counteroffers
The Slayton report said that for those hiring for open executive positions or seeking talent for their leadership bench, the rise of counteroffers demands that they be strategic. Though the companies presenting them are becoming less worried about loyalty, companies recruiting candidates who are tempted by counteroffers should be worried about their motivation. Yet there are some preventative measures that are available.
“The most critical factor to ensure top talent puts your offer above the rest is to do your market research first,” Mr. Nimesheim said. “As the candidate market continues to get more competitive, it’s inevitable that salaries rise accordingly. Accepting this reality now will protect you against the cost of losing top candidates and leaving those positions open for far too long.”
How do your compensation packages compare to industry and regional averages? How do you sweeten the deal with bonuses, benefits and retirement contributions? “Although you want to avoid a money-motivated candidate, the fact is that talented leaders have worked hard to get where they are, and they expect to be well compensated in return,” said Mr. Nimesheim.
Having said that, it’s not all about compensation. “Make sure you know exactly what motivates the type of talent you’re looking for,” he said. “Executive leaders want to work for great companies where they can thrive and make an impact. They need the tools and resources that will enable them to succeed.”
As Job Market Favors Candidates, Companies Must Adjust
Not that many years ago, national labor market conditions favored the employer. There were few good jobs, and many good candidates, so employers had little incentive to try very hard to hire top talent or to focus on the candidate experience.
Mr. Nimesheim pointed out that candidates tend to look for a culture and environment that will motivate their efforts. They want the benefits and flexibility that will prevent them from burning out. How can your company stand out in these areas? How do you measure up against the market?
“Ultimately, it’s time to recognize that the stigma once attached to accepting counteroffers is becoming a thing of the past,” Mr. Nimesheim said. “Talented professionals and leaders are now realizing that they won’t necessarily be branded with a scarlet letter for taking that path. As such, recruiting and attracting executive talent requires a competitive, creative and proactive approach, backed up by in-depth market insight and a nimble hiring process.”
Related: How to Find Executive Leaders in a Candidate-Driven Market
Mr. Nimesheim has more than 17 years experience in the retained executive search industry, all with Slayton. He primarily serves manufacturing and distribution clients across the consumer/retail, industrial and medical products industries. Mr. Nimesheim has recruited top talent across the entire executive suite, including P&L leaders and heads of HR, finance, strategy, supply chain, manufacturing, research & development, IT, and sales and marketing for large and mid-cap public, private and private equity backed companies.
Top Search Consultants Weigh In
“The old adage to never accept a counter seems to be yet another commonly accepted view being cast aside,” said Rob Tillman, founder of executive search firm TillmanCarlson. “While it’s still true that the vast majority of candidates leave within 12 months after accepting a counter, this doesn’t seem to matter in this market. So, it’s never more important to begin the process of ‘counter-proofing’ at the onset.”
“The best candidates continue to be employed and do well, so starting the discussion of why someone wants to leave their current company needs to begin in the first meeting,” Mr. Tillman said. “If it’s only about making more money, companies can more easily succeed with a counter. Knowing the key drivers of why someone wants to make a move and establishing a strong personal connection with the candidate will improve your odds. But another truth in recruiting is also important to remember in this market, ‘always have a back-up strategy.’”
Related: 10 Ways Business Leaders Can Improve Their Appeal to Candidates
Lisa Peacock-Edwards, partner at London-based search firm Wilton & Bain, said that the role of the headhunter becomes even more valuable in this counteroffer era. “Having a link to the candidate’s motivations and emotional responses to a tough and turbulent part of the process is key to the success of the hires,” she said.
“Clients who truly partner with their search partner, mapping out an offer and counteroffer strategy, taking it in turns to mentor the executive through the process will be more successful in the end,” Ms. Peacock-Edwards said. “This is the part of the process where the time and effort put into developing a relationship with the executive pays off. A good headhunter knows more about their candidate than their experience and has built trust and empathy with them. Don’t cut the search firm out at offer stage as this insight will help stop the counteroffer being successful.”
How to Develop Candidate-Centric Recruiting Strategies
The recruiting world is changing. Candidates expect to engage where they live – on their mobile devices and through whatever channel they’re currently engaged with, from video to chat platforms to social media networks. But it’s not just about the channel; it’s about the approach.
Regardless of the industry or global location, the best way to handle a counteroffer is to simply not except it, said Julia Scheffer, global director of business development at AltoPartners. “The reality is that industries are small, and when dealing with top talent, people talk, and this has the potential to negatively impact the candidate’s reputation as it raises questions about the person’s character, particularly if the counteroffer is accepted after the new position had been agreed on,” she said.
Related: Bringing Today’s Candidates Into New Talent Pipelines
During the search process, companies can protect themselves from losing top executives to counteroffers by making the candidate a compelling offer that is based on more than just financial compensation. “Instead of highlighting just the financial aspects, we advise our clients to also position the role in terms of how it will appeal to an executive looking for new challenges, the strategic growth of the person and how it will help that person attain their specific goals,” said Ms. Scheffer. “Showcasing the company in terms of culture, values and brand will also help the candidate see the fit or alignment with that company.”
“We advise our clients to be decisive and not delay or prolong the decision-making/offer negotiation process,” she said. “Understand the industry and market-related salary bands, understand the factors that will appeal to the person beyond just the financial aspects and be decisive in showing that top executive how their specific goals will be attained with this business. This is how we believe counteroffers can be successfully counteracted. And, if the person is only motivated by money and is using the search process to leverage for an increased counteroffer, then that isn’t the person you actually want in your business….”
Jim Zaniello, president and founder of Vetted Solutions, said these are extraordinary times as it relates to recruiting top talent. “Employers need to be extremely focused in their recruitment efforts as well as their interview process and exceedingly clear about their employer brand,” he said “Top talent receives multiple offers, including counteroffers, in a market this tight, and organizations must do everything they can to differentiate themselves as employers of choice.”
John K Anderson, managing director at Allegis Partners, said that avoiding counter offers with candidates starts with trust. “Trust with me, and trust that candidates build with my clients through the interview/recruiting process. If we do that right, we lessen the chance of a bidding war,” he said.
“Even with trust established, when I get to the offer stage, I will ask candidates how they will respond if their CEO counters,” he added. “I like to hear from them how they might respond, and then use those cues to better understand where they are at mentally and emotionally. Understanding those factors helps me guide their conversation with their CEO/Leadership team.” Through all of this, he added, “I stay close to my candidates, staying in close contact through their resignation, during the notice period, and up until their start date.”
Related: The Importance of Candidate Referencing During the Search Process
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media
