Why Counteroffers Won’t Work and What You Should Do Instead
Milo Johnson, June 8th 2022

The counteroffer…a much-debated topic when it comes to hiring.

A counteroffer can be the natural reflex to the reality of losing a valued employee. But in many cases, it just works to sweep the underlying issues under the rug until they inevitably resurface a few months down the line.

Studies show that 70-80% of people who accept a counteroffer leave or are let go within the year.

It’s a sure-fire way for you to lose trust in your employees commitment to your company, and a warning sign that you might need to start looking for a replacement- quickly!

 

A counteroffer might buy you 6 more months, but it’s not a long-term solution to losing talent.

Our relationship with work is changing.

Gone are the days when you would expect to see an employee stay at a company for 20+ years.

Job hopping is becoming far more common with millennial and gen-z talent. People will join a company, work for a year or two and then move on to another company for a higher salary.

And we get it- the pain of losing a valued employee runs deep and you’re likely worried about the effect this’ll have on wider team morale- not to mention the cost of replacing them.

But this instinct to hold on tighter to someone who you don’t want to lose, will end up doing more harm than good.

Let’s say they take the counteroffer- what message does this send to the rest of the team who’re likely on a similar salary package? We know money can be tight in a startup, but if you’re not offering market rate, you’re going to struggle to hire and retain the best talent.

Of course, there’s lot of other ways to compensate your employees that have nothing to do with salary (and we’ll get on to that later!) but market worth shouldn’t be a dirty secret that you tip-toe around. Your employees should know their worth and feel valued enough to want to stay and join you on your mission.

But if your prices differ dramatically from your competitors, think about why this is. Don’t lose your people because of ignorance. Your employees shouldn’t be a steal; they are an investment in the future of your company. 

And remember- a counteroffer might not just be rooted in more pay. Listen to what your employee is telling you. If they’re saying they don’t want to leave but need a role that offers more flexibility or allows them to work remotely, think about what changes you can make going forward.

We’re not saying never make a counteroffer- sometimes that extra 6 months can buy you enough time to find a replacement or train someone up to take over. But if you need to start reactively bumping up salary in order to keep your employees from leaving, there’s likely a deeper issue and you need to fix it before your ship starts sinking.

How to retain and motivate your talent to prevent a counteroffer scenario

There’s no avoiding the fact that salary has an important role to play in the motivation and retention of your talent.

But it’s by no means the only (or most important) factor when it comes to keeping hold of the people you value.

Let’s look at some non-salary benefits you can put in place:

Career progression opportunities

As a startup it can be hard to look at the bigger picture, and with a small team it might seem odd to sit down and map out a company organisational chart. But this chart will help you provide your current team, along with any new hires, clear progression routes.

It’s also a great way to spot any gaps in your team.

You need to build the chart for the company that you want to grow into. Then set long-term and short-term company goals that align with the progression routes of your team.

That way not only are you providing a real and tangible sense of progression to your employees, but you’re also ensuring that you’re all pulling in the same direction.

Your junior and mid-level people are the future of your company, it’s your job to develop them to be your next leaders.

Training and upskilling

Do you give your employees the opportunity to learn new skills?

If the answer’s no, then you’re missing a trick.

Not only will upskilling help employee loyalty and performance, but it will help you grow and nurture the talent that your business needs. This will save you valuable money on hiring down the line.

Personal development plans

Take the time to sit down with your team and talk through their personal development plans. Ideally you would talk about this during the hiring process, but if that’s been and gone, it’s never too late to check in and reaffirm these plans.

And remember, this isn’t a one-time thing; people change - and their plans change too!

Make sure to regularly check in on individual performance and development against key milestones that you put in place together. This could be in the form of regular 1-2-1’s or performance reviews.

If your employees feel they have outgrown their plans, they will look for new opportunities elsewhere.

Business improvement meetings

Business improvement meetings are a great way to introduce new ideas and promote bottom-up improvement.

We introduced business improvement meetings after returning back to the office post-covid and they have proved to be a huge success. Make sure to mix it up- include different people in each meeting and let different people run it each time.

Ask questions around what’s going well, what we need to improve etc.

Anonymous employee surveys and polls

Group feedback is great- but individual feedback is important too. In a team setting certain voices might shout louder than others and people might not feel comfortable speaking up.

Anonymous surveys, employee polls and suggestion boxes are all great ways to find out from your team what’s working and what’s not.

Obviously, you don’t need to action every single suggestion that is submitted- but regular engagement surveys will help you spot and fix potential red-flags before a resignation letter is put on your desk.

Give your employees responsibility- but don’t set them up to fail

People like to feel that they’re adding value to the team. Part of this comes down to responsibility.

Set your employees up for success by giving them a healthy amount of responsibility. If you can see someone is struggling with their workload- instead of shaming them, talk to them about the solution- this might be sharing the work with a fellow team member, introducing extra training sessions, helping with time-management, or breaking the work down into smaller, more manageable sections.

Can your team ask for help when they need it?

A counteroffer should only ever be your last resort.

If you’ve worked to promote an open and honest culture where your employees feel safe to voice their concerns, then you shouldn’t face the pain of losing people often.  

Regardless of whether these concerns are around salary, progression, workload etc. your employees should feel comfortable that they can come to you without fear of repercussion.

And when all is said and done, the sad reality is that your people won’t stay with you forever- and you’ll likely lose some valued people along the way.

But if you work to address the underlying issues as you scale, and as we enter the time period dubbed ‘the great rebound’ you might just welcome a few people back somewhere down the line.

If you’re feeling the pain of losing good people, drop us a line at: 0117 428 0600

 

 

Scaleup Diaries

Learn more

Ready to learn more? Let's talk