Counteroffers are on the rise. We experienced this first hand: our firm matched exceptional candidates to incredible companies — and yet, some placements never came to fruition. In the end, our carefully selected candidate accepted an offer from their current employer.
Why the surge in counter offers? Let’s face it, the labour market for quality talent is tight! In Ontario, the unemployment rate is hovering around 5.6% and fewer people are looking for work. British Columbia has the lowest unemployment rate at 4.1% in October 2018, and employment in the province grew by 2% year over year. Quebec is tight too at 5.2% unemployment.
That means that qualified resources have many employment options, and are being actively recruited. The cost to replace an experienced employee is generally 9 months of their salary.
Add it all up – high employment, many career options for skilled talent and the high cost to replace – and employers are scrambling to retain their best people.
Were the Counter Offers Preventable?
Research has shown that the top reasons why candidates accept a counter offer are:
The hiring company must know what the key motivator is and keep this top of mind during the entire employee attraction process.
During the interview stage, ask the candidate to list what is important to them, and then discuss what they have in their current role and don’t. That way, you’re clear on their goals. For example, are they motivated by money; is there a particular skill they want to develop; is corporate culture important to them or are they looking for more flexible work arrangements?
Fill in a Motivation Matrix with what they want, what they have, and what has to happen for them to leave their current role to work at your organization. Ask them to rank their priorities so your offer is on point.
Often, we get excited about an applicant’s skills and personality – and we invest emotionally in the future employment relationship a little too fast. We don’t truly understand the candidate’s reason for seeking an alternative employer and position, or their long term motivation. We jump in too quickly.
Despite the hot job market, and your need to fill that job as soon as possible, slowdown in the interview and selection process.
One reason candidates accept a counteroffer is their own fear of change (that they have not even acknowledged!). In particular, if they have been in the same organization for a long time, they may be afraid of taking this step. Help them accept change by introducing them to their potential team and by inviting them to job shadow for a half or full paid day. This will help them get excited and make connections before they receive a formal offer – and be more likely to decline a counteroffer.
Refer back to the Motivation Matrix when speaking with a candidate and listen for cues. For example, the candidate may say they are seeking a new employer for more advancement, but really it’s that they don’t feel appreciated. They may say it’s about money or total compensation, but it’s really about fringe benefits or the chance to work from home.
ASK THE REAL QUESTIONS
Document all they say, and retain it. When you make the employment offer, refer to the reasons they said they would leave and provide clarity on how this role or environment is different and exciting.
Understand the possibility of a counter offer so you can shut it down in advance. Do this by asking:
Slow down during the selection process, but hurry up with the offer. We have many clients taking weeks to make a decision and get to the final offer. In the meantime, the candidate has continued their job search and interviews with other possible employers. Further, their current employer gets a whiff that they may be looking, and they make a counter offer before you even came up with your first offer! If you want this candidate, make a decision. Let the candidate feel your excitement.
Here’s the thing – you may have constraints. Perhaps you have a salary band to work within, or maybe you can’t offer top dollar for a hard-to-find skill. Just make the best offer you can. Don’t hold back at the offer stage to hope for a negotiation. Many employees find it hard to negotiate and are even fearful to even broach it, perceiving negotiation as conflict. So make it your best offer.
Explore all elements of compensation including: vacation, paid benefits, elements of the benefits package (i.e. vision care), bonus or commissions, hours of work, overtime and overtime pay, paid training and education plans, paid annual subscriptions, other types of paid leave, improvement in job title, improvement in office or working conditions, clear advancement potential.
Focus on culture as an element of total value. A positive work environment may be worth more than money, status and hours.
Dealing With Internal Restraints
In the verbal offer, show excitement and create a connection. Don’t rush the call in your verbal offer – take the time to review the key elements and why you’re thrilled to make this offer.
Immediately listen for areas of concern. Respond to questions and listen for hidden meaning in the questions; perhaps they have had second thoughts. Address concerns as you hear them – don’t shy away. If you need to change the deal, do so – especially if this is a hard-to-fill role and you don’t have a second candidate in mind.
Send the written offer promptly, and not to their work email address. Many firms will check their email log to see what the “other employer” offered and you don’t want to show your hand. Keep your offer confidential.
Make sure the written offer is clean – no accidental mistakes like someone else’s name in the offer, or wrong job title.
In our experience, the longer the lag time between offer and start, the higher the chances are that a candidate will accept a counter offer – or that they accept another role altogether. Of course take into consideration a notice period so that the candidate can leave their role on good terms, but avoid trying to fit the start date into your company’s best date if it’s too far out. Ideally, 3-4 weeks keeps the offer hot enough. When there is 5-6 weeks before the start date, the fall-off rate grows considerably.
Ask the candidate if they will remove their resume from on-line job sites once the offer has been accepted. The answer may give you a clue to how committed they are to your offer.
Despite item 9 above, try to find a way for the candidate to get a few days off before they start. The candidate is often keen to have a few days to themselves – for appointments, kids, and other personal matters, or they want to do a big getaway before their new job begins. They may want to start with you to get that needed time off!
So offer the shortest time between offer and start, specifically keeping the notice period to what is essential, and make room for personal time or extended vacation if it’s very clear this is the prospective employee’s goal.
This is not a time to be shy and make a pleasant offer with minimal details. Don’t be humble, share all of your assets with the potential hire. Tell them why you are a great firm – you have a established business, you are financially stable, you offer terrific social activities, you provide an engaged culture, you offer great learning and growth opportunities to all employees, your office is at a good location – anything that will set you apart.
It’s really hard to go tell someone – even an employer – that you don’t want them anymore. It’s like a break-up. Help the candidate you are hoping to hire by suggesting they:
Doing this shows the candidate that you genuinely care about them and want to help them through this transition period.
Remember, salary is rarely the only reason an employee leaves their current jobs. Here are a few other areas you can “brag about”:
The employee is in an intermediate CPA role earning $79,000 in a large firm. They are seeking a change to obtain a more senior role and have more impact in a smaller firm. The offer was $86,000 with a more senior role and responsibility.
The employee received a counter of $90,000 and a promotion. The employee would also have to pay back $10,000 in maternity leave benefits earned while off if she decided to leave. The prospective employer countered with $95,000 and $5,000 of the employee maternity leave pay back covered at 6 months, and the rest at 12 months.
In this case, the counter was countered and the employee took the new offer to have more impact.
The Employee is a Senior Account Manager making $80,000 and wants a promotion of some sort but isn’t exactly sure what – they also want less hours of work (44 hours per week on average). They accept a role at $66,000 for 35 hours a week with a role they have not done, but it may offer a new career option.
The employer does not counter because the role is dissimilar (can’t be overcome) and the hours are significantly less (can’t be overcome). The employee wants an overall change of pace and job.
The employee is a manager making $110,000. They want a bigger role in strategy. They accept a role at $120,000 with increased responsibility and job status, no waiting period for benefits and an extra week vacation.
The current employer counters with $120,000 and an extra week vacation, with an upcoming increase in role. It’s the best they can do. The prospective employer offers $120,000 and a signing bonus of $9,000 paid in 3 installments, plus a clear path to executive management. The employee takes the new offer.