When competition is intense, talent is scarce and salaries are rising, managers are in a bind when a good employee decides to leave. Should we let them go and try and replace them, or make a firm counter offer?

Conventional wisdom suggests a counter offer is the sensible course. The extra remuneration cost could be easily outweighed by lost sales, lost productivity or recruitment costs.

However, recruiter Robert Half warns against this approach and advises that counter-offers can create more problems than they solve.  For example:

  1. “Trust may never be the same. People don’t quit jobs they love. If the employee was completely satisfied working for you, you wouldn’t now be having to discuss counteroffers. Even if you make the requested adjustments, it may not make a difference in the long run.
  2. “The individual may begin to question why it took the threat of departure for the company to recognize his or her value and make improvements to the job. There also may be additional considerations that can’t be resolved and may cause the person to rethink the decision to stay.
  3. “The reverse is also true. No matter how much you want to retain a key member of your team, recognize that you may have lingering doubts about the employee’s loyalty and motivation.
  4. “Salary adjustments may be complicated. Evaluate not only the impact of a counteroffer on your budget, but also the effect it will have on your group. When you pay someone more than the typical salary scale, you could disrupt your organization’s compensation structure. This could create resentment among employees who feel they were deserving of raises or promotions but were overlooked because they did not threaten to quit.

Robert Half advises employers to “see resignations as a learning experience. While the loss of a critical employee can be difficult, it also presents an opportunity to make improvements that might benefit remaining staff. Take note of the factors that prompted individuals to leave your organization. You may discover that there is some consistency in the responses, helping you identify a broader problem”.

iHR believes the best answer to retention issues is to maintain focus throughout the year on providing a professional, attractive working environment, not just at salary review time.

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