As more workers get counteroffers in hot jobs market, are there risks in accepting?

September, 2018

In the Media

Rob Popovic, a software salesman and manager, has accepted three job offers the past several years.

Each time, he got a better counteroffer from his employer at the time – aimed at persuading  him to stay. The strategy worked once, but he bolted the other times.

“It’s a very rewarding feeling,” Popovic, 38, of Yorktown Heights, New York, says of the counteroffers. “My contributions were appreciated.” But the proposals can also cause anxiety. “You take all the steps required to pursue other opportunities,” he says, “so you’re invested in that path.”

With the unemployment rate at a historically low level of 3.9 percent, it’s a good time for workers, who have opportunities to jump to new jobs or get more from their current employers. As bosses grow fearful of losing valued employees, they’re increasingly making them counteroffers, a tactic that is helping boost pay for many people.

“Talent is in demand, and (employers) realize it costs a significant amount of money and time to replace somebody,” says Jeanne Branthover, co-head of the New York office for DHR International, an executive search firm.

Fifty-eight percent of senior managers are extending counteroffers to employees, according to a March-April survey of 5,500 hiring managers by staffing firm Robert Half. Resistance to counteroffers among managers is also down: Thirty-nine percent of chief financial officers and financial executives say they don’t extend counteroffers, compared with 78 percent of CFOs in 2015, the survey shows.

Some recruiters at DHR and Robert Half have more modest estimates based on their experience, saying the share of companies making counteroffers has risen from as low as 5 percent to as high as 40 percent.

Up to 40 percent to 50 percent of employees accept the proposals, the staffing companies say.

Yet many recruiting firms discourage the practice, saying it’s generally shortsighted and employees swayed by them usually end up leaving anyway within a year or so.


Lots of jobs, few workers

It’s not surprising that businesses are making last-ditch efforts to hold onto restless staffers. In July, employers posted 6.9 million job openings, and 3.6 million workers quit jobs, typically to take another one, Labor Department figures show. Both figures were the highest on records dating to 2000. There were 659,000 more job openings than unemployed people.

That means more businesses must poach workers from other firms. And many of those firms are trying to stop them.

Several years ago, Popovic, the software salesman,  accepted a job at a smaller technology company because it gave him the chance to manage other salespeople and make a bigger impact. He also got a 25 percent raise, though Popovic says, “It wasn’t about the money.”

Senior executives at his existing company quickly offered him a path to a leadership role and bested the smaller company’s salary proposal by 5 percent. “They said, ‘Give us a shot to make this right,’” he recalls. He accepted, and within 90 days was overseeing a team of salespeople.

A year later, he took a job at a startup that offered a higher-level position, a 20 percent raise and equity and stock options. The same existing employer countered again, this time with a wage that was 8 percent higher than the rival’s. 

Popovic turned it down. “For me, it was about the upside opportunity,” he says.

For workers, the counteroffers may be good. But for employers, they’re not recommended, staffing firms say.

“When somebody tries to resign, that’s almost always going to strain a relationship,” says Ryan Sutton, district president of Robert Half’s technical and creative jobs in New England. And since a higher salary doesn’t address underlying problems – such as a lack of career development – employees who stay on typically leave in 12 to 18 months, he says.

“One of my concerns” about accepting the first counteroffer “was, ‘Is this going to be weird?’” Popovic says. It wasn’t, he adds, because senior executives took responsibility for their earlier failure to develop his career.

Employees should tell their boss they won’t even entertain a counteroffer, advises Branthover of DHR. If they do accept a counterofffer and then reject it, their future relationship with the old employer will be harmed, she says. And if they accept and back out on the deal with the new employer, they can say goodbye to any future job possibilities there.

Michelle Fish, CEO of Integra Staffing of Charlotte, North Carolina, says that for the past year, her company has trained job candidates to turn down counteroffers. Among other things, firm officials warn they’ll be the first to be laid off if the economy weakens because their bosses believe they have one foot out the door. The share of candidates accepting counteroffers has been halved, she says.

But Tom Gimbel, CEO of LaSalle Network, a Chicago-based staffing firm, says, “If your current employer gives you what you want, if you respect your manager and you like your company, you should absolutely accept a counteroffer.”

Some employers say counteroffers work

Mehtab Bhogal, founder of Karta Ventures, a Vancouver, Canada-based private equity firm that owns six American e-commerce companies, says he makes counteroffers to virtually every employee who has accepted another job.

“People make up the company, and if you are not able to retain the right people you’ll never grow the company,” he says. “People are less hesitant (these days) to shop around for a job.”

He says he almost always provides the workers a road map for their careers, along with a raise or the prospect of one, acknowledging the conversation should have happened earlier. “We tell them there really is more opportunity” than at their prospective employer. He says the approach works 90 percent of the time, though his track record is more mixed if staffers are simply seeking more money.

Jilted companies are at their wit’s end

Meanwhile, counteroffers are driving prospective employers crazy.

Michael Hobbs, president of Chicago-based PahRoo Appraisal & Consultancy, says he lost four job candidates to counteroffers last year. The company spent four months vetting and interviewing one, a senior appraiser who was working in government and was poised to bolster the company’s nascent business of challenging government property appraisals. PahRoo offered her a 25 percent raise and met her goal of largely working in the field instead of behind a desk.

“We were thrilled to have her,” Hobbs says. “In our mind, it was a done deal.” But when company executives presented the offer in writing, she didn’t get back to them. “We honestly thought she died.”

Hobbs later learned her government employer topped Hobbs’ salary offer and threw in a bonus.

“We invested all this time and effort,” he says. “She stayed at a job she hated. … It’s really tough.”

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