I spoke with a contact yesterday who accepted a counter offer. Luckily for me, it was not a deal I was involved in. Unlucky for the candidate, he had no idea about the potential consequences and hazards of accepting a counter offer. Put bluntly, accepting a counter offer is a bad idea.
A counter offer is the equivalent of a band-aid on a gaping wound. At best, it is a short-term fix for the employer which buys them some time before the inevitable happens… that the person accepting the counter offer will leave. That’s right, the VAST majority of employees who accept a counter offer leave within six months. Employers know this, but a counter offer is often cheaper and easier than quickly replacing a good employee.
A counter offer generally consists of two things. First, a counter offer will include promises. The employee might be offered a promotion in six months, a bigger office, or told about “exciting changes” that are coming. Second, they might be offered money. Sometimes, it may seem like a lot more money. The candidate I referenced above was given a 20% base salary increase to stay! Big promises and more money sound good… right? If you get a counter offer, it’s important to remember that talk is cheap. The promises made are almost always empty ones. It’s easy to tell an employee things that they want to hear and never deliver. Especially since employers know that the employee is likely to leave anyway. As for money, while a 20% raise may sound great, it’s only done because it is far cheaper for the employer to offer short-term cash to avoid long-term headaches associated with replacing the employee. Moreover, since the employer knows that person will likely leave within six months, the employer never has to pay out in full. They may give you a 20% salary raise today, but only pay a small amount of that to you before you end up leaving, or get fired! The cost of replacing a good employee is high. A recruiter like myself charges anywhere from 25-33% of a new hire’s first year pay. The cost in time and effort training a new hire is also expensive. When you add up all these costs, what seems like a generous counter offer is actually chump change!
A counter offer can almost never remedy the reasons the employee was looking for a job in the first place. Most job seekers who leave an employer do so because of limited opportunity, a desire for more growth, to work in a new field or industry. A counter offer can do little or nothing to address any of these causes. Thus, most people who take them come to realize this within weeks or months of accepting a counter offer and end up leaving.
The potential fallout from a counter offer is similar to that of a personal relationship. When you accept a counter offer, your loyalty is obviously questioned. You’ll never be considered part of the “inner circle” again. Companies have long memories for this sort of thing, and when it is time for a raise, a promotion, etc., you will be looked at differently. If the company needs to reduce the workforce, it’s very likely your name will be on that list after accepting counter offer. The minute after you take a counter offer, it’s safe to assume the employer is already planning on how to replace you. They know from experience that you won’t stay, but if you accept the counter offer it affords them time to find a replacement in a more cost effective way.
You should rule out a counter offer before you ever look externally. If you get to the point at your current employer where you want to leave, try to address the reasons internally first. If you ask for a promotion, more responsibility, a change in duties, salary, etc., in a constructive way and are told “no”, then you can be pretty confident in your decision to leave. That way, when you give notice you’ll see the counter offer for what it is… a band-aid on a gaping wound.