Why Counter Offers Never Work

We've seen it happen time and time again: an employee resigns after being offered a higher-paying job elsewhere, and the manager scrambles to make a counter offer to keep them. It's an understandable reaction - replacing a great employee is tough, projects are underway, and the timing is terrible. As managers, sometimes we're just more comfortable with the people we know. 

But here's the truth that anyone with experience in tech recruitment has witnessed firsthand: counter offers are a trap. They might seem like a quick fix, but they're rarely a smart long-term business decision. We'll break down why and a few alternative strategies for holding onto your best people. 

First, Look at the Triggers

Before considering a counter offer, take a step back and ask: why is this employee unhappy enough to resign in the first place? Understanding the root causes is key, as a counter offer rarely addresses the deeper issues that drive someone to quit. 

Here are some common reasons employees decide to move on:

Feeling undervalued or underpaid

If someone has felt underpaid for a long time, a sudden pay increase might feel like too little or too late. Virtually every employee who receives a counter offer salary figure will think, why didn't you bump up my pay earlier?

Limited career growth

Without clear opportunities to learn new things or climb the ladder, people often feel stuck and start looking elsewhere for growth. Sometimes, there is no practical scope for them to grow. 

Desire for change

Whether it's a fresh challenge or a complete career change, some resignations are fuelled by an intrinsic need to try something new - to drive off into the sunset. In these cases, there is even less you can do to lure that person back with a counter offer. 

Frustration with culture or leadership

If the company environment or management style isn't working for them, a counter offer won't bridge irreconcilable differences. In situations where an employee regards their manager or team as toxic, keeping them around won't exactly do wonders for your team's productivity and engagement.

New personal priorities 

There may be a big-picture life change or commitment the employee needs to make. Factors like leaving New Zealand forever or changing family priorities can outweigh any financial incentive to stay. In these cases, countering a job offer could work, but only if you address the employee's central concern in a way that is practical for both parties (e.g., flexible hours, the option to work remotely full-time). 

Most resignations stem from more than one of the above factors. The more layered the reasons, the less likely a counter offer will resolve the underlying problems. 

Why Counter Offers Fail

Broken Trust and Awkwardness

Resignation is usually a signal that an employee's optimism has fizzled out. Offering more money or a new title might only reinforce their feeling that they weren't valued until they decided to leave. This is a recipe for brewing mistrust, which can make working with that employee a little, well, awkward. 

Countering a job offer can introduce another unwelcome scenario: feelings of resentment or inequality amongst the team. When team members realise a colleague has received a counter offer, they could feel like that person has gained an unfair advantage. You also risk incentivising others to resign so they can negotiate better deals. 

Temporary Fixes Are Just That

When an employee's reasons for leaving run deeper than salary, the limits of countering a job offer become even more obvious. If the issues are related to a conflict in intrinsic values, motivations or other intangibles, these are beyond a manager's basic powers to keep an employee happy. Take the hint and let them go. 

Resignation Risk Will Only Increase

Statistically speaking, most employees who accept counter offers will quit again within 6-12 months. Those pesky underlying issues strike again - it's not a matter of if, but when! That time you spent holding on to a disengaged employee blocks the chance to hire fresh talent eager to grow.

Alternative Strategies for Employee Retention

For managers keen to avoid counter offers, there are better strategies to retain talent without being reactive. Bonus: by addressing employee retention risks before they arise, you're also in a better position to recruit for the right reasons.  

Proactive Retention Plans

In regular one-on-ones, make it clear that you're acting on employee feedback before they start job hunting. Regularly explore career development opportunities and possible pay increases or other incentives. These are the easiest ways to get ahead of potential resignations. 

Exit Interviews

When handled right, these are goldmines for honest feedback. Digging into why people leave can reveal patterns you might otherwise miss, like a recurring management issue or a lack of flexibility. Use what you learn to make meaningful changes that keep the rest of your team engaged and loyal.  

Succession Planning

It's better to plan for the inevitable than get blindsided when it happens. Organisations with effective workforce planning will usually have people waiting in the wings, making a sudden departure no big deal. By preparing your existing talent to step up, you will also motivate employees with genuine career progression. Consider that a win-win.

Talk to Us

As a dev, product and data specialist recruiter in New Zealand, Digital Garage has solid experience in helping employers survive an unexpected resignation or two. We can assist you with finding excellent candidates for a permanent role, or more agile solutions with IT contractors ready to start within days. 

A quick message or phone call is all it takes to help you hire someone great for your team, without the guesswork and delays. Get in touch with us today for tech recruitment tailored to your needs.