Within the past year, we have seen a significant shift in the employment landscape. Workers are leaving their jobs in record numbers—dubbing it “The Great Resignation.” An employee’s low tolerance level for poor job satisfaction is playing a major role in their decision to seek better opportunities elsewhere. The movement has forced the hands of companies to pull out all the stops to retain as much talent as possible, predominantly through a post-resignation counteroffer. We sat down with ARTC’s General Manager, Chris Picariello, for a deeper discussion about counteroffers and what to look out for.
“If the candidate’s desire is solely compensation based, there is a very high propensity they are not truly committed to pursuing another job, rather fishing for information to leverage against their current employer.”
– Chris Picariello, ARTC General Manager
An overwhelming majority of employees find themselves at this crossroads for a number of different work-related reasons—a lack of career trajectory, poor leadership, inadequate compensation, toxic work culture, miserable work-life balance, and so on. Whatever the cause, it was significant enough to evoke action from the employee to improve their situation. The only thing a counteroffer changes about a situation is more money. Everything else stays the same and the issues are only temporarily relieved.
The instant an employee gives notice to their manager, it sparks a chain reaction that triggers a variety of actions, including whether to propose a counteroffer. It’s interesting to note that about 70% of managers will question a person’s loyalty and commitment to the team after accepting a counteroffer (showing a lack of trust), and 80% of employees who accept a counteroffer end up in a different role or new company within a year. These figures are telling of the fallout a counteroffer can bring.
A promotion may seem like a gesture of appreciation, but when it comes in response to a resignation, it is likely poorly planned and poorly executed. It’s easy to slap a “manager” or “director” level designation on a job title but if the department lacks the bandwidth or foundation to staff a support team, the promotion becomes two-sided—the title and salary are different, but the responsibilities stay the same. Logically, employees motivated to advance their careers seek approval and validation from their managers to continue on an upward trajectory. If that path becomes blocked or limited, natural progression dictates employees will find that growth and advancement through a different opportunity at a new company.
The counteroffer approach supports the fundamental ideology for every growing company—low costs equal higher profits. Studies show the cost to replace an employee can reach upwards of 200% by factoring in the loss of production, and the cost to recruit, onboard, and train their replacement. Based on the size and scope of the business, those in a leadership role are typically incentivized to keep their department costs down. Since losing an employee can be a significant hit to the bottom line, a counteroffer is a commonly deployed employee retention tactic used by managers.
On average, a counteroffer generates a 10-20% increase in salary. That sounds great, but what happens when the raise pushes the employee to the top of their pay scale? For starters, it may hinder the ability for traditional merit increases during annual performance evaluations beyond a cost of living increase. Each position within a company falls under a tiered system based on market and internal values; exceeding that threshold puts a cap on future compensation for that role.
To help challenge the counteroffer dilemma candidates are faced with, Allied Resources’ philosophy is to recruit for more than one motivating factor, such as career goals and interests. Our team is trained to sift through the real data points and uncover the key underlying factors of the candidates’ issues. This strategy helps us build trust with passive and active job seekers by helping them see the forest through the trees. This frame of reference is supported by ARTC Manager, Chris Picariello’s mantra, “As an avid skier, when you focus on the trees, you’ll quickly hit one. Don’t focus on all the trees to avoid—focus on the space between them and follow the clear path.”