Counter Offers

Should companies use them as retention tools?
By James Del Monte, CERS. CPC, JDA Professional Services, Inc.

Another key employee has resigned, and the timing could not be worse.  You're worried that you won't meet your project deadlines without this employee, and you’re concerned about the morale of the team.  In this situation you may be tempted to make a counter offer.  If you offer the employee a raise or promotion, maybe he or she will decide to stay.  At least it will stop the bleeding for now, but will it really help or hurt in the long run?  

The Problem with Counter Offers
Counter offers are rarely successful in solving long-term turnover issues.  Studies have shown that although 50 percent of employees accept counter offers, 90 percent of those who accept ultimately leave the company within a year.  The reason is that bandage fixes like money or making promises that you cannot keep do not deal with the real issues of why the employee is leaving in the first place.  

When counter offers are made, they typically make employees feel unappreciated.  Employees realize that they had to threaten to leave in order to get what they feel they really deserved in the first place.  Additionally, counter offers are extremely disruptive to the other staff.  If employees are successful at getting what they want by tendering resignations, others may decide to use this strategy as well.  As a manager, if you are really looking out for the best interest of both your company and your employees, a counter offer would never be an option.  

A Better Alternative
It is amazing to see how much money and effort companies put into recruiting new employees while very few invest as much into retaining their existing staff.  Studies show that while most companies have a formal recruiting plan in place, less than 50 percent typically have an equally comprehensive retention plan.  By focusing strongly on the initial “sell” but not on the maintenance of the employee relationship, companies are simply spinning their wheels.
  
Many studies have shown that it is considerably cheaper and less disruptive to retain employees than it is to replace them, so it only makes sense for companies to start thinking in terms of protecting their assets.  Rather than using counter offers as a single event at the acute crisis stage, as a manager it is best to have an on-going retention strategy that helps you to understand and deal with an employee’s issues as they arise.      

How to Develop a Strong Retention Strategy
To be successful at retaining your employees, you must continue to present them with incentives such as exposure to new projects or technologies, additional training, bonuses, and recognition or other non-monetary rewards for outstanding work or success in reaching important milestones.  Since employees are constantly being recruited from outside the company, you should consider scheduling quarterly meetings with your staff on an individual basis to report progress, show appreciation, and reconfirm your commitment to their future.  Keep in mind that these are not formal reviews.  They should be simple and comfortable such as an informal lunch or breakfast meeting.  Be sure to really listen to your employees, get to know them, and take an interest in their future.  Ask probing questions so you'll understand their problems and concerns, and know what factors motivate them to want to stay with your company.  Most employees will not initiate communication with you because they fear that it will be too confrontational. Therefore, it is up to you to ensure that the lines of communication remain open.  

You may be surprised at what you find once those lines of communication are open.  Quite often what attracted someone to your company to begin with and what is motivating them to stay are completely different.   While many employees may join your firm simply for the money, very rarely do they leave for purely monetary reasons.  

In many cases, you may find pre-emptive measures to be very easy and inexpensive to implement.  For example, you may have an employee who prefers to leave early on Thursday afternoons in order to attend her son's soccer games.  You may have an extremely reliable employee who feels he has gone years without recognition for his work.  In that situation, the answer could be as simple as treating the employee to lunch or giving him a gift certificate to his favorite restaurant every once in a while to show your appreciation.  Another employee may wish to take a training class that you have already budgeted for, but have been too busy to schedule.  Perhaps you have a star employee who is yearning to take on more responsibility, which could free up more of your time for other things resulting in a win/win situation.  In a rare instance, you may have a long-term employee who wants to take a sabbatical to write a mystery novel.  It may sound like a lot to ask, but it's a small price to pay when compared to the cost of replacing a top employee.  

Sometimes managers will avoid having direct communication with their staff because they fear what they might hear.  Would you not prefer to deal with issues as they arise as opposed to going through the trouble of coercing your employees to stay or replacing them in the long run?  

Retention programs are not always easy to implement.  They take time, and they require you, as a manager, to take an honest look at yourself.  They also involve taking risks and making compromises.  However, when developed and implemented effectively, successful programs can reduce turnover by as much as 50 percent.  Knowing that other companies are constantly targeting top performers, managers should use the same tactics to "re-recruit" employees every day as they did to attract them in the first place.  The time, effort, and possible money invested will provide big returns in the end.  
 

About the Author
James Del Monte, CERS, CPC
From modest beginnings in 1981, James Del Monte founded JDA Professional Services, Inc. which today is one of Houston’s leading IT staffing firms according to the Texas Association of Personnel Consultants (TAPC).  Over his career, James has helped hundreds of companies build great IT departments by finding key individuals and providing excellent strategies for employee retention.  In addition, he has helped thousands of professionals find great IT careers through direct placements and by providing valued advice and guidance. In November 2007, James joined an elite group of professionals becoming a Certified Employee Retention Specialists (CERS).  

James is a board member of both the TAPC and the National Association of Computer Consulting Businesses (NACCB).  He is a former president of the Houston chapter of the Association of Information Technology Professionals (AITP) and a founding member of the Open Door Education Foundation which provides scholarships to IT students.  In 2006, he was awarded the TAPC community service award for his commitment to the community and charitable contributions.

As part of his commitment to the advancement of IT training in Houston, James is a regular speaker at various colleges/universities, trade groups, and job ministries, and he is often quoted as a subject matter expert for the IT staffing industry.  Additionally, James serves on the advisory board for technology departments at the University of Houston Downtown, Westwood College, and ITT Technical Institute.