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To Counter Offer or Not to Counter Offer? By Anna Mathieu, Redfish Technology
Whether a prized executive has been actively looking for another opportunity, or is unexpectedly recruited for a new position, should you make a counter offer to keep him or her? There are pros and cons, wouldn’t you know?
Every situation will be different of course, but here are some things to consider.
On the one hand, …
The cost of recruiting is considerable. Estimates we’ve read vary from 100 to 300% of annual salary. Costs will vary based on the industry, position, job market, and internal processes. Besides the obvious hard costs such as recruiting fees (internal or external), job advertising, and interview travel, legal contracts, there may also be relocation expenses and sign on bonuses involved. But don’t under estimate the costs of your time, especially if you are not able to rely on a specialized third party. The time involved from your team and other decision makers is also an important cost element in any hiring process.
The cost of bringing a new hire up to speed can be formidable too. There are internal costs and time commitments. There are administrative tasks such as setting up benefits, and taking care of various HR and legal tasks. There are strategic and tactical processes: You, your team, others in the company will need to spend time acquainting the new person with your business goals, processes, work methodologies. Your company may have a formal training process internally or externally, either way it takes a combination of time and money.
The cost of a bad hire exacerbates the situation. If this is the wrong hire, unfortunately the company may find itself needing to pay out severance and benefits to remedy the situation. There could be a legal dispute over expectations. You may need to bring in outside consultants to mitigate the situation, champion a project, coordinate a team, and keep things going. There is lower productivity, damage to employee morale, and potential loss of intellectual property that result as well.
The opportunity costs of late or lost business can mount quickly too. If the departure of your valued executive leaves you in the lurch and project deadlines are missed, product launches are delayed, sales meetings and client relations neglected, strategic planning put off. These missed opportunities can put you behind the eight ball in a time when competition is acute. Not only immediate sales dollars are at stake but good will and reputation can suffer causing negative economic consequences now and in the future.
On the other hand, …
Was this prized executive completely engaged and invested in your company’s mission and objectives? Really? If he was actively looking for another opportunity there must be a reason? If an opportunity came out of the blue and has enticed her away, why isn’t the current employment situation competitive with the new opportunity?
What specifically is better about this other opportunity?
Does the new opportunity represent career advancement, additional training or an upgraded title and responsibilities?
Was your executive seduced by a better company culture, a healthier work environment, a smoother politic? If your company culture and environment don’t engage and motivate your employees, you don’t have anything to counter with. Especially in times of economic downturn, the company culture can make a huge difference in how invested and productive your employees are, from the top to the bottom of the pay scale. Discern if this is a one-off misfit with your company, or a general feeling shared by others. If the former, the company will be better off without this person. If the latter, you’d better address this now as an improving economy will only increase opportunities for current staff elsewhere.
While the costs of a new hire and lost opportunities in the wake of an important executive’s departure are significant, the costs of alienating or upsetting the remaining team may be even greater. Whether the employee is overtly leveraging another offer, or not, a company that tries to outbid on a one-off basis is likely to cause itself problems down the road; systemic issues must be considered and addressed. If this executive can be lured away by money, career advancement, title, culture, all these factors may lure others away. Exit interviews and evaluating the reasons for the voluntary separation by your prized executives are key to understanding how to strengthen the company’s talent management.
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Redfish Technology specializes in locating talent in the High Tech and Green Energy sectors. Recruiting since 1996, the company offers nationwide coverage and offices in Silicon Valley, the East Coast, and the Intermountain West.