Do you counteroffer if your top employee quits?

Your number one staff member just quit – do you counter-offer?

Retaining great staff is vital to an organisation’s success. It is essential for a healthy culture, continuity, succession planning, costs, institutional knowledge and ultimately the organisation’s results. A tight labour market and inflation means people are starting to take stock and check if they are first happy in their role, but secondly if they are receiving the remuneration and benefits they feel they deserve. If managers start taking their eye off the ball they could be in the position where some of the best employees start leaving to greener pastures. So what should a manager do if they are surprised when their top staff member quits? The short answer is if you’re surprised then chances are you haven’t been managing your employee relationships as well as you should.
We interviewed Katie Kemp, Principal Consultant, from People&co to tell us how managers should tackle this situation.

Katie Kemp, Principal Consultant, Peopleandco.

What are we facing the current market?

What we are seeing is the impact of changes in the job market, along with inflation and cost of living on employees and their expectations. As a result, people are becoming inclined to ask for more incentives in the workplace. Employers are also more aware of retention and what they can be doing to look after their people.

From our perspective, for employers hiring, they need to be prepared for the “what is in it for me?” job seeker approach. This does not just relate to salary, but can include things such as added benefits, professional development opportunities, career pathways and work place flexibility.

It is better to be proactive and pre-empt the situation.

Employee professional development plans and growth frameworks (whichever tool employers use to shape, track and grow the careers of your team) are super important right now. For some their salary is not everything. Star employees are usually self-motivated and driven by their own performance, not simply pay cheque orientated. They would of course expect to be fairly remunerated, but for these people if they are feeling challenged, valued and progressive they are less likely to be looking at other offers – especially if they know what their next step is.

In an ideal world, the employer and employee are having open conversations. The employer is aware of their employee's career aspirations and goals, and there is a development plan in place. If that is the case, when your number one staff member quits, you already knew this was a possibility as perhaps you can't meet their goals anymore. Perhaps they have outgrown you, and need to leave with your best wishes and gratitude for the contribution they have made to your organisation.
Open and transparent relationships between managers, will often see people raising their intention of leaving with their manager before they even update their CV.

Despite the best of planning and intentions, your number one staff member just quit. So do you counteroffer?

There is some commentary around on LinkedIn and from our own shared thoughts from observing these situations, that suggests a counteroffer could at times be viewed as insulting, or in a dim light by the employee. “How come they didn’t think I was worth that much last week?”

From an employer perspective, they could also see the “I quit” as a test. Perhaps the person is not really looking at leaving, interested in the new job, but using it to signal they want a pay rise, but they did not have the courage or feel they had the platform to ask. It is worth noting that different cultures, upbringings, previous experiences, and personalities all will influence people’s confidence when it comes to talking about money! Asking for a raise and standing your ground for what you think your job is worth doesn’t come naturally to most people.

Regardless of your point of view as a manager, you are better positioned if you have a fair, mutually respected, supported relationship and package with your employees. Ensure that there is structure around their professional development and visibility to remuneration reviews.

If their resignation comes as a surprise and you feel it is not in their best interests or yours, then you will need to do something. However a knee jerk reaction of simply putting an offer on the table may not be the right approach. How you step into this conversation as an employer is very important along with recognising that some people are not comfortable talking salary. It is essential to understand the situation and the motivations for leaving clearly before you consider a counteroffer.

The best place to start would be a conversation that tells them how valued they are. “We are sorry to hear you are considering leaving us and would be really sorry to see you go.” Take the time to understand why they are thinking of leaving. Ask them what are the main reasons behind them looking to leave? People’s motivations can vary beyond salary. Is it the opportunity, differences in flexibility of the workplace offered, hours or location (maybe it is simply that the new job is closer to home). Follow this up with a discussion around “is there anything we could do to keep you?”

We recommend the employer think creatively with their employee incentive schemes to provide as much value as they can without reviewing remuneration package. This is especially the case if there isn’t much budget to go around - things like flexible working, employee wellness can all act as strong incentives.

If a counteroffer is going to be placed, then how that is framed would need to be individualised for the employee with their past and future review dates and salary bands, and expectations around future increases at the end of the financial year.

A short case study

My colleague shared an example of an organisation where a person in a team clearly had talent but was in a role a bit too easy for him. His can-do attitude caught the attention of the CE. His manager was managing the team and the outputs but did not focus strongly on personal development or thinking about the contribution a person in a team could make to the overall organisation. The team member resigned. The CE got alongside him and had a chat to say hey, we recognise your talent and contribution here, we didn't anticipate you leaving just now, could we look at opportunities for you? He stayed - moved into a new position that was being thought about at the same time, and now has a long-standing career in this new field. He didn't necessarily want to leave the organisation, he just wanted to leave that job.

What if there are no further job opportunities or career progression available and it is simply about the cash?

This is going to vary for some organisations - how much cost they can absorb for a pay increase versus bringing in someone new. It is always worth considering your star employees’ level of personal growth development. Where are they at? Is there still room for them to be challenged and grow? Or do you feel they are getting bored or complacent in the role anyway? It could be worth letting them go to the new job and consider investing your time and resourcing into someone new who has the motivation and potential to grow and develop and become your next star!

The risks and possible ripple effect of the counteroffer

Another consideration to fuel employers’ decision making is the possible risks and ripple effects. A fast counteroffer could risk a dramatic change in company culture. Let’s face it, employees often talk and if they were to hear of what they deem to be an inequitable counter offer, this could have a damning impact on team and overall company culture. Employers could also risk others asking for raises that the business cannot sustain.

Some organisations may not have the capacity to come in with a good counter offer, therefore it is worthwhile being prepared for this conversation with other potential incentives that may be seen as attractive.

The other risk of just placing down a counteroffer is they may well stay this time but leave soon after, as salary wasn’t the overall driver for them looking elsewhere. Similarly, trying to contract them in for a period of time may not be viewed in the best faith and risk souring the counteroffer and future relationships. Situations can change for the employee and employer at any time, therefore even the counteroffer itself cannot be seen as having a long term guarantee.

Lastly, salary bands should also be considered, if a counter offer is right at the top of the salary band, an employer may not be in a position to offer further pay increases at the time of scheduled remuneration reviews. Again this is something that should be made transparent as part of good employee relations.

In conclusion, establish the “why” behind the employee’s decision.

If your number one staff member just quit, do you counteroffer? Stop, think and talk to them. Establish the “why” behind their decision. It is really important to understand why they are leaving and see if there is anything you can do about it. Sometimes it is that their time has come, or they need more flexibility to meet changing family needs. A bigger pay cheque could create more risks for you, unsettling the staff member’s respect and potentially wider culture issues.

If you counteroffer they may well still go, but the learnings should help you to grow further stars in your team. And if they stay, try and make sure they are doing it for the right reasons and you are not left in the same position in a couple of months’ time.
So if all this sounds frightening, then the final words are don’t delay, start conversations early with your team. Prioritise getting your professional development and growth frameworks in place. Ensure you are talking to your people and that they are feeling valued, supported and challenged appropriately. Be sure to keep a careful look out for those people flying under the radar too who could, with a little bit more support, exceed your expectations.