Make a counteroffer-but make sure it's not just about money

By Paul Falcone March 3, 2008

After three years of malaise, the U.S. economy seems poised for a rebound, and a robust job market may not be far behind. Unfortunately, even though the overall economy may be improving, many companies may still be operating under a hiring-freeze, and that can spell disaster for line managers who start losing key staff members to competitor organizations.

If a key employee's resignation hits your desk and your company is still in a hiring holding pattern, you may want to consider making a counteroffer. That's not to say that counteroffers should become common practice. Most employees who have gone through the mental process of deciding to terminate employment have experienced an attitudinal separation that can't be overcome readily.

Yet there are times when a counteroffer makes sense. The key lies in knowing how to structure the counteroffer to help the individual reconnect with the organization and gain an opportunity to reinvent his or her job in light of the company's changing needs. One warning: Don't make a counteroffer strictly for your own benefit. Even if it's accepted, the selfish reason underlying this tactic would show itself in no time. A counteroffer must stem from a genuine concern for your subordinate's needs. Money is important, but it's less important than individuals' perceptions of their own career growth and development.

Here's how you might initiate a counteroffer discussion:

"Janet, I was so surprised to hear that you're considering leaving us after three years. You joined us in 2000 just as the economy was beginning to tank, and there have been so few opportunities available internally. We haven't been able to promote people, make market equity adjustments to their pay or otherwise find concrete ways to reward our key employees. But I want you to know that the management team considers you a 'keeper,' and we certainly would do whatever we could to make you happy and have you stay with us. I respect the fact that you may ultimately decide to leave us, but I'd like to ask what prompted you to consider looking elsewhere. Also, if you wouldn't mind, would you share some of the specifics regarding your proposed title and salary? I'd like to know what we're up against."

After listening to the employee's explanation, continue along these lines:

"This is simply a fact-finding mission for now, so I can't make any promises right now. Still, it's important for me to relay to you that we'd like the chance to provide you with some of those same opportunities at our company. Let me share this with you: I recognize that this is about more than money, but if we were able to match your proposed salary, title and/or new responsibilities, we'd like you to consider remaining on board. If we can't develop an overall career development strategy and growth path that would motivate you to stay with us, then we'll certainly support your transition to the new firm. After all, losing key employees isn't ever fun, but we're always happy to see people developing their careers and facing new challenges."

Such a selfless approach to a counteroffer discussion will almost always be met with flattered acceptance. After all, the employee will see that your company sees the bigger picture of career rather than the immediate lure of money. This broader approach to career building will also help your company avoid the No. 1 error that organizations make when engaging in counteroffers: assuming that money alone is the issue. Many a disgruntled employee has walked away from a current employer's insincere attempts at keeping the individual on payroll, concluding: "They just don't get it. Why are they throwing money at me now? If I'm that good, they should have offered me that money two years ago. No thanks."

Your counteroffer proposal probably won't meet the terms of the competition, particularly if a promotional title increase won't be available until someone else in the organization leaves. In the context of such restrictions, you'll need to structure your counteroffer more creatively and include other benefits that the individual may not have considered. For example:

"Janet, I'm happy that you're willing to allow us to explore a counteroffer with you in order to keep you aboard. We've looked at the opportunity that you've been given by XYZ Company, and we'd like to discuss some of the ideas that we've come up with. First, I just wanted to let you know that I'm sorry if I've let you down. I never meant to take you for granted or fail to recognize your work and your contributions to our department. That may have been how you interpreted things in light of the economic challenges that our company, like all other companies, has been facing, but that was certainly never my intention.

"Second, we can't match everything that XYZ Company is offering you. I need to tell you that up front. Based on what you've told me, they're offering you a director title at $75,000 a year with a staff of six. If you remain with us, you would have to retain your current manager title, we could raise your salary from $63,000 to $68,000 without breaching any of our internal equity guidelines, and we could reassign one headcount to bring your staff up to a total of four people.

"In addition, we would consider enrolling you in a graduate-level two-year marketing certificate program at the company's expense as well as assigning you to the corporate office in Houston for two one-week trips next year. This way, you'd get to know personally the people that you spend so much time with over the phone and maybe open a communication channel that could lead to a job opportunity at the headquarters office in the future. And don't forget: As a three-year employee, you're only two years away from being fully vested in your 401(k) as well as the company's defined benefit pension plan. Of course, you'll have our commitment that as any internal opportunities surface, you'll be the first in line for consideration. We would politely ask that you think about this, discuss it at home with your family or significant other, and then get back to us in a day or so. What are your thoughts?"

With such a respectful, selfless and well-thought-out counteroffer strategy lined up, you'll no doubt have a chance at retaining this individual. Even if you're not successful, you can at least rest assured that word will get out that you handled the whole matter professionally, that you put the individual's career interests above your own needs and that you were a professional.

Paul Falcone is director of international human resources at Paramount Pictures in Hollywood, Calif. He is the author of four books published by AMACOM, including The Hiring and Firing Question and Answer Book (2001) and 101 Sample Write-Ups for Documenting Employee Performance Problems: A Guide to Progressive Discipline and Termination (1999). This article represents the views of the author solely as an individual and not in any other capacity.

Terms of Use: Advice for Supervisors from the Society for Human Resource Management © 2004 Society for Human Resource Management. Members of SHRM are authorized to distribute copies, excerpts or e-mails of this information for educational purposes internally within their organizations. No other republication or external use is allowed without permission of SHRM. The information is not intended to serve as a substitute for legal advice.

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