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4 reasons why counteroffers don’t equal retention

09 July 2021 2 minute readShare

Attempts to retain employees by making a counteroffer are falling short, according to new research, which found that of two who do accept, one leaves in less than a year.

New research by Robert Half has pinpointed the ever-increasing struggle companies have in retaining staff.

According to the findings, 82 per cent of business leaders surveyed are concerned about retaining employees in 2021. 

To combat the issue, many are finding themselves extending counteroffers in an attempt to retain employees (82 per cent).

Despite their attempts, however, 52 per of employees who accept a counteroffer leave in a year or less, the research found. Of this, one in five leaves in less than six months.

“Counteroffers are more often a tool to help the employer. Particularly in a competitive market, it can be tempting to make counteroffers in order to retain institutional knowledge and avoid the resource-intensive exercise of recruiting, onboarding and training a new employee,” said Nicole Gorton, director, Robert Half.

“However, the fact that it’s designed as a tool for the employer, rather than the employee, is exactly what makes counteroffers an ineffective retention strategy.

While offering a salary increase may seem like a cost-saving initiative, a counteroffer doesn’t necessarily advance the career of the employee, so — more often than not — the employer is still left with a dissatisfied employee who was motivated to leave the organisation in the first place.”

Although a counteroffer might seem like a logical retention strategy, Ms Gorton advised employers against it, noting the long-term effect is worse than a short-term hassle.

“Counteroffers are an additional employer expense, yet for more than half of employees, the return on investment is just 12 months or less of additional employment. In a competitive market such as this one, that 12-month delay can substantially diminish the availability of skilled talent to replace the role. Moreover, it simply delays — rather than saves — the costs associated with recruiting new talent to fill the vacant position,” she said.

“Rather than relying on reactive counteroffers to address staff retention, business should be looking at their existing retention strategies as a proactive mechanism to ensure employees feel satisfied, valued, and therefore less likely to court competing offers.

“This includes conducting regular salary reviews to ensure their compensation is competitive, establishing clear career paths with individual employees to help their progression and reduce the appeal of a competing title change, and offer flexible working arrangements to support employee work/life balance.”

To further the point, Robert Half outlined four reasons why counteroffers aren’t an effective retention strategy for businesses:

1. A salary counteroffer isn’t a long-term remedy

“Even a valued and rewarded employee can be ready for change. A higher salary won’t address if an employee feels disinterested in a role or industry, unmotivated to pursue growth, or out of touch with the company culture or management style, so a counteroffer often simply delays the inevitable.”

2. It can have a negative ripple effect

“Once one employee leverages another job opportunity for a raise, it opens the floor for others to do the same. This can result in staff dissatisfaction among those not receiving salary increases, more counteroffer negotiations, and salary increases for employees who follow suit and can even catalyse more departures as the alternative job offers materialise into new opportunities.”

3. A counteroffer can cause a dip in morale

“By tendering a counteroffer, businesses send the message that threats of leaving are a means of climbing the ladder, rather than outstanding performance and dedication. When the news of a successful counteroffer negotiation and salary increase gets around — and it will get around — it can generate feelings of favouritism or dissatisfaction.”

4. It could cause a rift in trust

“Using counteroffers as a negotiating tool can send a message of disloyalty which can tarnish employee trust — both within the team and among leadership. Moreover, an employee who is motivated by salary alone may not develop or evolve their skills as quickly as one who is pursuing career growth and new challenges.”

4 reasons why counteroffers don’t equal retention
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