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In the race for talent, HR must brace for counteroffers
No HR professional likes to invest hours in reviewing a resume, conducting multiple interviews, checking references and negotiating salary—only to learn that the candidate has used a job offer to wrangle higher pay out of her current employer.
But with competition for talented employees growing fierce in today’s job market, employment experts say HR departments should brace for more of this.
“Companies should have expected this,” said Lisa Torres, a former professor of sociology who studied employer-employee relationships at George Washington University in Washington, D.C. “Firms have long used market models to explain their behavior and this is an example of workers doing the same. If the job market is tight for workers with certain skills, then those workers should, in a market model, exploit those skills to their economic advantage.”
That was a lesson, Torres said, that workers learned during the 1980s and 1990s—when many U.S. firms dismantled the traditional model of company-employee loyalty, citing “changing economics” as a reason to downsize their pools of professional, white-collar workers.
“Told that job security was gone, workers were instructed to become ‘free agents’ in charge of their careers, and to navigate constant job change,” Torres said. Rather than viewing the worker who leverages one job offer to get a higher salary at a current job as “greedy,” she said, it “could be seen as smart business.”
Prepare for Counteroffers
No one can say how often this situation occurs. But HR “should expect every employed passive candidate that accepts your offer will get a counteroffer” from a current employer, said Nate Elgert, sales manager at the Aureus Group, a staffing and recruitment agency based in Omaha, Neb., and a division of C&A Industries Inc.
“You should prepare yourself and the candidate for this,” he said. “Once an offer is accepted, or even before, tell your candidates to expect a counteroffer. You need to educate those that accept your offers on why taking a counteroffer is a bad idea. There are mountains of data to support this, not the least of which is that 80 percent of people that accept counteroffers leave their employer within six months of doing so.”
Other things HR pros and hiring managers can do to help prevent candidates from exploiting job offers, he said, include:
The HR department can also be on the lookout for clues that a candidate might try to parlay an offer into more compensation at his present company.
“Candidates that are about money will very typically ask about it early in the process, especially if they are leveraging for a better deal,” Elgert said. “If they seem more interested or engaged in discussion surrounding compensation rather than the job itself, that could be a red flag.”
Conventional wisdom says that leveraging a competitive offer is risky for workers: They may offend their current employer, their loyalty and integrity may come into question, and the new employer may view them as mercenary and hesitate to consider them for future jobs. Elgert said his firm lets candidates know this when preparing them to receive a counteroffer.
This thinking, however, annoys Victoria Pynchon, a legal mediator at ADR Services Inc., an alternative dispute resolution firm with several offices in California. Pynchon noted that during and since the recession, employers showed many long-time, loyal workers the door. Companies kept wages stagnant, she said, and even though the economy is now said to be much improved, many continue to do that, or to offer mere 2 percent to 3 percent annual raises.
She said that when the tables are turned—when there is fierce competition for talent—employers can’t expect job candidates to be any less mercenary than companies were when the weak economy hurt their bottom lines.
“I love how companies are able to call employees seeking competitive market compensation ‘greedy and sneaky’ while the employer has an entire HR department whose purpose is to keep the cost of talent acquisition and retention down,” Pynchon said. “Asking to be paid your market value is not greedy. It’s sensible. You don’t get irritated at the vendor of the new copying machine when the market price has risen 10 percent to 20 percent. Yet when the market price for talent rises, employers tend to become angered if current employees suggest they should be paid their market value, particularly if they’re overperforming—as many post-recession employees have been doing to take up the slack for layoffs” during the recession.
Can Using Outside Recruiters Help?
Employing recruiters outside the company, Elgert said, can be one way to prevent the disappointment of losing a good candidate because his current company outmatched your salary offer. Elgert’s clients tend to be passive candidates—that is, they are currently employed and not actively seeking another job. Hence, he said, they’re more likely to get a counteroffer from a current employer than those who are actively seeking a new job.
“We have simply come to expect counteroffers, and we apply a consistent approach to coaching our candidates through them,” he said. “We educate candidates that after taking a counteroffer, there is a very high probability that they will, in fact, part ways within a year of accepting it. At the end of the day, external recruiters are more effective at preventing counteroffer acceptance because we have formed a relationship with our candidates. This allows us to simply be more transparent together. We can't stop counteroffers from happening, but we can, and do, help prevent them from being accepted at a higher rate than employers working directly with their candidates.”
Dana Wilkie is an online editor/manager for SHRM.
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