5 reasons why counter offers don’t work the way you think they do

By Robert Half on 29 August 2022

It’s inevitable that employees in Japan will look to change jobs from time to time.

But are counter offers your best bet in retaining your star talents?

It can be expensive for the company when talent leaves – not just in terms of recruiting a replacement, but also through the loss of skills, enthusiasm, productivity and output.

Even with a new employee onboard, it could be some time before the new hire can match the performance of their predecessor.

Where staff retention is concerned, the counter offer is often considered the ‘ace up the sleeve’ for employers.

The theory is that, by promoting an employee or promising them an improved salary, they can persuade them to withdraw their notice to leave.

Counter offers may look like a great hand to play, but all too often they can end up a busted flush.

Here are five reasons for why counter offers may not be an effective retention tactic.

1. No long-term solution

If your organisation wants to encourage top performers to stay, you need to provide a competitive salary, excellent benefits, frequent recognition and clear career paths from the outset.

These are the sorts of factors that see employees embrace their role with enthusiasm and energy.

Making these available when somebody decides to leave is likely to be too little, too late.

Once an employee has started looking for new roles, their mindset has changed and the chances are they will eventually leave.

Even if they accept your counter offer, it probably won’t be long until they start applying for jobs again.

2. Counter offers set a bad precedent

Once you start making generous counter offers to prevent people from leaving, it won’t be long until word gets around.

Can you afford to adjust the pay of every staff member who considers leaving?

Some employees may start exploring the job market as a re-negotiation tool.

If they bag a new role elsewhere, they have the opportunity to move on.

At the very least, they should be able to secure a better deal from their current employer – you.

3. Morale can take a hit

You want your team to love what their job and be engaged in their work but making a counter offer can be seen as showing favouritism to certain individuals.

This could lead to tension and resentment within your team, as employees become jealous of the individual you went to great lengths to keep.

Employees may also interpret your actions as a sign that it takes a resignation threat – as opposed to dedication and hard work – to get your attention.

Rather than seeing employees focus on their own performance levels, you may receive a series of ‘resignations’, as employees give notice in the hope of securing a better deal.

4. Trust can be lost

Even if you manage to persuade an employee to stay with your organisation, will you ever be able to trust them again?

Your first reaction may be relief that they have opted to stay, but there’s a danger that your relationship with the employee has been irrevocably damaged.

There isn’t even any guarantee that the employee will appreciate the gesture you have made.

In their mind, a promotion or pay rise may have been long overdue – the very least they deserve for their efforts.

5. Performance won’t improve

There’s little evidence to suggest that paying employees more yields better work.

Once an employee comes to believe they are indispensable to an organisation – which is the message counter offers give – there is little incentive for them to try harder.

In fact, there’s a real danger the employee may go into cruise control, having the notion they are irreplaceable because of their skill-set and experience.

In summary

In cases where your organisation simply can’t afford to lose a particular individual, you may feel there’s no other choice but to make a counter offer.

While this can help retain people for the short term, there are a number of obvious dangers associated with the tactic.

Whether or not the potential benefits outweigh the risk is for each employer to decide, in each individual case.

There’s little doubt that the best employee retention tactic is to make staff feel valued from the very beginning – ensuring they are challenged, suitably remunerated and supported in terms of career development.

To make sure you’re compensating your staff reasonably, you can download the Robert Half Salary Guide to find out more about the prevailing rates in the job market for talents in the financial services, IT and accounting sectors.

This will help you determine if your salary packages may become a key push factor, even before anyone on your team considers an exit.

Counter offers aren’t the only way to encourage employees to stay. At the end of the day, it’s just a matter of playing your cards right, in order to secure the engagement and loyalty of your talent for the long term.

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