Counter-offer: The Definition
When it comes to hiring jargon, it's worth defining what we are talking about when we discuss counter-offers.
A candidate decides to leave an organisation (we will cover the reasons why a little later on), and the individual in question will usually either:
Work with a recruiter to secure a new role
Or apply to the company themselves.
The candidate is made an offer and then proceeds to resign. Their current company then asks them to reconsider leaving; as a general rule offering additional benefits, including a salary increase.
The candidate is then left with a decision to accept the improved offer from their current employer.
The Current 'Talent Market' Dynamics
Counter-offers have happened across all parts of the workplace for many years through the current hiring climate post the pandemic, and Brexit has created added pressure.
Here are a few data points that go some way to explaining the volatile recruiting and staffing market.
Data from the Office of National Statistics in the UK (ONS) confirms that, on average, around 9% of people changed jobs each year between 2000 and 2018; this ranged from a post-recession low of about 5.7% in 2010 to a high of around 10.9% in both 2017 and 2018.
People didn't change companies in 2020, so logically, pressure is building in the system as candidates now consider moving.
As a recent workplace report from Microsoft reveals, these figures are mirrored in most parts of the western world.
The forced move towards hybrid working encouraged Microsoft to create their own Work Trends Index. The study outlines findings from more than 30,000 people in 31 countries and analyses trillions of productivity and labour signals across Microsoft 365 and LinkedIn. It also includes perspectives from experts who have spent decades studying collaboration and social capital.
This revealed that over 40 percent of the global workforce are considering leaving their employer this year.
As the economy bounces back and organisations are on a recruitment drive to recover from last year, it is predicted that there will be a mass movement of people.
So how will this impact the hiring triad? Let me share what we are seeing as experienced recruiters.
The Hiring Triad and Counter-offers
Counter-offers are complex, and depending on the role, a valued and talented individual could be counter-offered to stay.
There are three parts of a triad with or without a recruitment expert like us in this scenario.
We have a client who is either filling a vacancy or building a team
The candidate who wants to move organisations to develop their career
The candidate's current employer who wants the candidate to stay.
Each has their own story about their motivations to hire, move or counter-offer; let's explore these in more detail.
Why Companies Make Counter-offers
I know it's logical, isn't it; a company doesn't want to lose a staff member! A counter-offer generally happens when someone decides to resign; often, their hiring manager has no idea their employee was considering a move.
Picture the current scene from a manager's eyes looking at a resignation letter, especially post the pandemic.
Last year was a challenge, and many organisations did lose revenue, and their growth was stalled, which they now want to recover with help from their 'A' team.
Remote working, staff being under increased pressure, a pause on development and training has led to many individuals not exactly being as sharp as they used to be when it comes to specific skills.
Some individuals are only now returning to the workplace or are entering an office for the first time in months. No matter what, any of us thinks this can impact confidence and consequently performance.
Then, of course, the economy is starting to recover with many companies having an excellent year winning new contracts and projects that need to be delivered.
It is logical then that if Amanda or Andrew resigns, a manager's first reaction is to ask them what it might take to stay.
With no one to fill their place, a full order book and some team members only just starting to perform again, it would be a logical reaction.
It makes complete sense to make a financial counter offer in the manager's mind, particularly for senior roles.
The challenge is this short term fix often has longer-term consequences.
You will find lots of data online suggesting candidates who accept a counter-offer will leave after 18 months. Examination of our data here at Magpie Recruitment suggests this might happen even sooner.
Though money is a motivator to move, it's rarely the primary reason, which is where the problem start. Let's explore this in more depth as we move onto the candidate.
A Candidate’s Career Journey and Counter Offers
Now, let's discuss the person in the middle; the candidate. Why does the candidate want to move in the first place?
A presentation at a recent recruitment industry event from Bullhorn, an industry software supplier, revealed that people move for various reasons.
The geography isn't ideal, and travel is a challenge
Lack of development and training
No career progression
Their line manager
The company culture
With the majority of the workforce now falling into the Millennial category, expect to see a lack of diversity and inclusion cited as a reason for moving on.
Though the data may change over the next year or so, the ability to work remotely, flexibility on working hours and consideration of an individual work-life balance will make an impact.
So what about the whole money conversation, which counter-offers often revolve around?
Let's Start With The Money Conversation
Unless someone is being paid significantly under the going rate for the role, money is rarely the main motivational driver for a move.
As a recruitment professional serving the sector, the first question we ask is the candidates ‘why’. In essence, why do they want to move?
If money is the main driver, we check that the individual has had a conversation with their manager; not always something they are willing to do. The truth is a conversation like this can be a win-win for the candidate, and let's face it, their current employer too.
Increasing an individuals salary can stop issues on all sides though the reality is it's rarely just about money.
What's Not Working in Your Current Situation
As recruitment professionals, people are open and give us many reasons why they want to move.
They have met a significant other who lives in a different part of the country;
They have an unlikable boss;
Their goals post-Covid have changed;
There is no development or training available;
On top of no opportunity for career advancement.
Their co-worker gets all the great projects, not them.
The organisation isn't diverse and has no DEI policy in place.
All of these reasons differ for every individual, and logically, an extra few thousand pounds/dollars on a salary won't make up for a stale company with a toxic work culture where a candidate's face doesn't fit.
That being said, employee retention is squarely in the domain of managers, and the majority of employees quit their jobs for reasons that are under the control of managers.
For individuals considering a move, you would be advised to read the seven reasons we outline here. Now let me explain why.
The Downsides of a Golden Handcuff
If you think of the line of least resistance, it is relatively easy for a manager to reallocate some budget to increase a salary; they might even take it from their future recruiting budget.
Easy for them to action and yet in the long run rarely good for you.
It's like adding a sticking plaster to a deep cut; it will work for a little while, and yet eventually, you are going to need a trip to the hospital for a few stitches.
Stand back and analyse the situation.
It's much harder to create development plans and new projects or increase sales and revenue fast, so the latest promotion you are promised appears.
Company culture takes time to change. DEI has been around for years, and yet some organisations still don't have a diverse range of people in their workforce.
And that unlikeable boss is highly unlikely to change.
Here is something else a candidate who accepts a counter-offer has to deal with. You have now demonstrated that maybe you aren't bought into the organisation. Your desire to move can sometimes backfire on you, and strangely you still aren't given projects or any development.
The challenge is you are now overpaid for the role you are in. You moved house and have a bigger mortgage, and moving would mean less money, at least for the next few years, yet the culture hasn't changed - you might have more money though you still aren't happy.
There is a common theme here, isn't there, with both parties feeling the unease.
Finally, let's look at the company that thought they had made an excellent offer to an ideal candidate.
How Hiring Managers Can Prepare For Counter-offers
There is nothing worse than making an offer to a great candidate who then says no. However, there are ways to prepare for t
Working with a recruitment company that understands the market is a game-changer here which I'll cover a little later. First though:
1. Be Proactive
Once you've gone through identifying and interviewing the ideal candidate and extending your offer, it can be demoralising to hear they've received a counter-offer from their existing employer. However, if you address this possibility early, you can potentially avoid a battle.
Ask your candidate whether they think their existing employer will try to keep them around and what they're likely to do if a counter-offer does appear. This is your opportunity to discover what might tempt the person you want on your team to stay with their existing employer.
For instance, if your candidate tells you that they would like to be offered more money, but they feel their existing employer can't give them the company culture they want, you can highlight the benefits of your own culture and offer to introduce your candidate to some of the people they'll be working with, so they can begin to develop bonds as they get an initial experience of how different a culture can be.
If you know you're offering a similar salary and benefits package to your candidate's current employer, then adding more money to the pot might not be the best way to respond. Instead, think about what convinced your candidate to start looking for new opportunities in the first place.
2. Focus on Your Strengths
During your initial interview with your candidate, ask them what drew them to this job opportunity. For instance, can you offer the chance to get in on the ground floor of some exciting new projects/technology/client account.
What kind of mentorship and training opportunities can you provide to give your employee more chances to expand their skills?
When a counter-offer arrives, knowing what sparked your candidate's decision to look for a new role can help you sell your position based on the factors you know matter most to that person.
3. Work With A Specialist Recruiter
There are plenty of reasons why working with a specialist recruiter can make your life easier when you're looking for new talent. Recruiters help you find likely employees to be drawn to your specific role and company. This means that you have an increased chance of attracting employees with the same values as you.
When your recruiter finds candidates specifically suited to your position, your chances of selling the role as the "ideal" opportunity go up. Your recruiter can also help you with strategies to advertise your position effectively. Because they have a deep knowledge of your industry and its people, so they can advise you on which benefits to highlight during interviews.
A recruiter may also be able to give you some background knowledge on how to respond when an existing employer jumps in with a counter-offer. They'll help advise you on when you should give up and look for another employee and when you should offer more to keep your employee. This extra assistance can prevent employers from making decisions based on emotion rather than logic.
4. Keep in Touch
This particular strategy is something here at Magpie Recruitment we recommend to all our clients.
When this happens, you can arrange additional meetings to discuss what you might do to convince them to join your team. During follow-up conversations, you can showcase all the features that make your role so exciting by introducing candidates to staff, taking them on a tour, and more.
Invite your candidate to come and join you for lunch one day at the office, so they can see what it's like to connect with the rest of their team. Set up a conversation with other employees who have had similar roles, so the candidate can ask questions about what their job might entail and quell any concerns they might have.
If you can't meet face-to-face with your candidate as they consider your offer, make sure you keep in touch through email, phone calls and video conferences again. Let them know that you're on hand to answer any questions that may make the transition easier.
5. Stepping Back
Even in an environment where it's becoming increasingly difficult to find talent, it's important not to get stuck in a battle for a single employee. If your candidate decides they are not ready to leave their current employer, you or your recruiter may not be able to convince them otherwise.
Having a conversation about the possibility of a counter-offer in the first interview should help determine which of your candidates aren't 100% sure about leaving.
If you know that your top choice for a new employee is still attached to their existing employer, your recruiting partner will have other suitable candidates to choose from.