Written by
Changeboard Team

Published
27 Apr 2012

How to beat a counter offer?

27 Apr 2012 • by Changeboard Team

Securing top talent in a challenging marketplace

How concerned should we be and what measures can we put in place to help mitigate against the counter offer?

Key findings:

  • Top talent is hard to find and move. In uncertain economic times, propensity to take risks reduces and buybacks become easier.
  • Early in the conversation, recruiter and the business must identify the key 'hooks' with the candidate and the extent to which these could be adjusted by the current employer.
  • Deal specifically upfront with potential buy backs so they come as a surprise for neither party.
  • External research that shows the majority of buy backs do not address the underlying issues for the candidate’s frustrations sufficiently in the longer term.
  • We conclude that you cannot prevent counter offers but you can help beat them through four important steps.

Against a backdrop of continued economic uncertainty, top talent at all levels is becoming increasingly harder to find and land. Competition for candidates is increasing as companies start to ramp up their hiring efforts after the downturn. This has given rise to more challenging candidate management and the infamous counter offer. 

Recent research by the finance recruiter, Marks Sattin, suggests that in 2010, 7 in 10 finance professionals in the UK were counter offered, up from 1 in 10 in 2008. To define what we mean by a counter offer it is typically an offer made by the candidates’ current firm in response to a salary offer by another organisation.
  
Lots of research exists around why candidates should not take counter offers, typically these relate to what can happen if candidates take them. Research commissioned by Julie Waddicor at Hays* tells us that changes made as a result of a counter offer rarely work as they tend to focus on the short term monetary rewards rather than fixing the real reasons employees resigned in the first place. Hays statistics in the UK show that if candidates do accept a counter offer, the chances of them resigning or being asked to leave within a year is extremely high: they suggest 80% of people leave within six months and half resume their job hunts within just three months. 

This is backed up by Warwick Stacey at the head-hunter Wilton & Bain who believe 85% of their candidates who accepted a counter offer were no longer with their employer six months later. This research was carried out on searches both within the UK and in Europe. Our team can point to an example of a senior manager whom we poached from a competitor. After being counter offered twice he decided to stay after being promised a pay rise and some other benefits. Three months on he approached us to say he is still unhappy and would welcome another conversation. We have now re-offered him and he is still deciding whether to accept.

Lastly it is worth noting that in PwC, we do not generally seem to counter-offer from a financial standpoint. When a good candidate decides to leave there are numerous 'conversations' that exist to try to coerce people to stay but generally people are not counter offered with more money.  

Why are counter offers still being accepted?

In our view external recruiters and hiring managers are often not looking enough into candidates’ motivations. As mentioned below the drivers for candidates to move have to be more than just financial.

Fiona Rooney at HR recruiter Frazer Jones has seen an increase in candidates at mid-management level (up to £60,000 basic) entertaining multiple offers. She suggests that candidates at this level seem to be moving for purely financial motives.

This is set against a backdrop of stagnant pay rises and promotion prospects in their current roles. Candidates above this band are generally more motivated to move for non-financial reasons. 
 
Set against this trend, Fiona suggests that continuing economic uncertainty is forcing a ‘better the devil you know’ attitude amongst candidates where they opt for safety in accepting a counter offer at their current firm having negotiated an enhanced package.

Lastly some candidates seem to have an over inflated view of their market worth. At a recent Direct Resourcing Think Tank (DRTT) meeting, companies reported that recruitment agencies and search firms are artificially inflating candidate’s package expectations against pre-set salary criteria, which is leading to difficulties at offer stage.

How can we beat counter offers?

There are four separate but interrelated points here.

Understanding candidate’s motivations:

According to Fiona Rooney, early candidate engagement is key to gaining an understanding of the key drivers pushing them to interview. She suggests it's important to get into the psyche of candidates to understand what is really prompting them to move. Recruiters often use what we call ‘hooks’ to ensure candidates are brought back to these drivers throughout the process. With head-hunted candidates, these hooks are harder to develop but typically they involve either a promotion, change of direction and/or wider leadership remit. The salary hook for us should come last in the conversation.  
   
Using increased salary packages as a ‘hook’ is seldom a good motivation point to move. As mentioned above there is currently a problem with candidates only engaging when they want more money. It is a lack of understanding from companies and recruiters around the non-monetary ‘hooks’ for candidates to move that leaves companies potentially open to counter offers.

This is especially true of head hunted talent who are successful where they are and therefore not looking. We always seek to understand ‘hooks’ from these candidates that the business can use as a constant referral point in conversations. The skill of the recruiter and business during the interview process must be to refer back to these ‘hooks’ when a candidate potentially wobbles.

Constant candidate communication:

While counter offers could be on the increase, the key to prevention is to keep constant communication up with the candidate throughout the process. Too often recruiters stop communication at the post offer stage thinking the candidate has now accepted the offer only to find out that two weeks later their current firm has counter offered them. To back this up, Warwick Stacey suggests to all of his clients that they keep communication lines open post offer stage to enable the candidate to get ‘emotional buy-in’ to his/her new employer. In so doing candidates stand a better chance of joining the client fully motivated and engaged from day one.  
   
We would always advise on over contacting a candidate throughout the process to check for any ‘flight risks’ that sometimes happen at the back end of the process. Another step that we also find beneficial is to allow the client and candidate to have several check-in conversations throughout the interview process. It makes the candidate feel valued and wanted, especially if they have been head-hunted.

Counter offer discussions with candidates:

Fiona Rooney mentions that not enough of her clients cover off the concept of the counter offer during the interview process. She suggests that recruiter and hiring companies must broach the subject at an early stage and inform that candidate that they may be counter offered. By doing this, recruiters and companies can take the flattery notion out of the counter offer and effectively dispel the myth that accepting one is a viable option. Mark Holmes of Compliance and Risk recruiters Holmes Search agrees with this point suggesting that they always ask the candidate at the initial meeting what will happen when they resign. He suggests by doing so they can quickly ascertain whether a candidate will be swayed or not to stay at the current company at the point of resignation.  

Offer management and on-boarding:

The offer management process is key to beating possible counter offers. Andrew Mountney of Aspen Partners suggests the length of time it takes to get offer letter out after the verbal offer must be sped up. Due to the recession lots of people are mistrustful of things being pulled at the last minute (and thus may be entertaining different options at this stage) making companies susceptible to losing candidates. For Mark Holmes, this stage is critical in making candidates feel ‘comfortable’ in between the verbal offer and resignation stages.

Another important area is the candidate on-boarding period both (pre and post day one). Andrew Mountney again references a recent case where the client stopped all contact at the post offer stage, leaving the candidate feeling very alone. Four weeks after handing in their notice, the candidate’s old firm rang and persuaded the individual to re-join the organisation. For executive level candidates on longer notice periods, constant communication between the client, recruiter and the candidate is absolutely crucial to keeping candidates engaged and motivated to join. To this end Warwick Stacey suggests one or two ‘check in’ meetings to keep senior candidates aligned and focused throughout the notice period. 

Mark Holmes backs this emphasising candidates often have questions which they don’t feel they can bring up at interview stage so, this extra ‘informal meeting’ allows candidates to have their questions answered and concerns overcome which again leads to a higher chance of a successful completion of the process.

One company at the DRTT meeting has identified pre-on boarding as a key period for losing people. The resourcing director recently commissioned an online portal for newly hired candidates at all levels to connect to the business during the notice period. This has proved very successful in engaging pipeline candidates by inviting them to company events and organising buddy drinks to engage the ‘emotional buy in'.

Key conclusions

A number of consistent themes come through in this paper by way of keeping candidates engaged and managed. The first theme is for recruiters and the business to work together to firstly understand candidates’ true motivations and secondly use these as a constant referral point in all communications. This paper should spell out that engaging candidates on purely financial grounds will leave the business open to potential counter offers.    

Secondly the paper emphasises the need for constant communication throughout the process. Recruiters and our own experience tell us that communication is as crucial at the beginning of the process as it is at the post offer stage.

The third theme referring to taking the flattery out of a counter offer came across as an important viewpoint. By informing candidates they will be counter offered, it makes it a more mechanical process and takes the emotional side out of what is a complex psychological situation between employer and employee. Lastly the paper does emphasise the importance of a good swift offer management and on-boarding process. This is deemed essential in keeping candidates engaged and bought into the new employer, therefore guarding against any potential counter offers.

Statistics show that if candidates do accept a counter offer, the chances of them resigning or being asked to leave within a year is extremely high: they suggest 80% of people leave within six months and half resume their job hunts within just three months. This is backed up by Warwick Stacey at the head-hunter Wilton & Bain in London who believe 85% of their candidates who accepted a counter offer where no longer with their employer six months later.

(Source: Warwick Stacey
Partner, Wilton & Bain)

Acknowledgments and references

Thank you to the following contributors

  • Mark Homes, MD, Holmes Search
  • Andrew Mountney, MD, Aspen Partners
  • Fiona Rooney,  Senior Consultant, Frazer Jones
  • Warwick Stacey, Partner, Wilton & Bain

References

Julie Waddicor, Hays plc, ‘How to deal with multiple job offers’ published through Changeboard, 20 June 2011.