Should You Accept Your Employer’s Counteroffer?

By SHARON VOROS

Ralph Balastriere, vice president and general manager of international administration at C.R. Bard, a pharmaceutical firm in Murray Hill, N.J., was ready to take a job with a smaller drug company in Ohio early in 1998. But “when I announced I was leaving, Bard offered me such a great package that I decided I could put up with the company for a few more years,” he says.

Bard’s counteroffer included matching the Ohio company’s base salary, boosting Mr. Balastriere’s bonus from 18% to 25% of salary, bumping him up to a higher stock award category, tripling his stock options and providing supplemental retirement. In addition, Mr. Balastriere received a $150,000 “staying bonus” payable in three increments over a two-year period.

It was an attractive counteroffer, a typical practice nowadays. As the scramble for management talent intensifies, companies are trying to poach high-performance professionals from each other in droves. At the same time, they’re paying top dollar to retain their best people.
Counteroffers are a factor in at least 50% of CEO hires, according to Robert Stucker, a compensation specialist and partner at Vedder Price Kaufmann & Kammholz, a Chicago law firm. Increasingly, lower-level employees who tender resignations also are receiving counteroffers. In his high-tech field, at least 40% of job offers in the $75,000 to $100,000 compensation range are parried by counteroffers from the current employer, says Ben Slick, CEO of PeopleScape, a software company in San Jose, Calif.

Although most employers claim they won’t make counteroffers when an employee resigns for a new job, many eat their words and pony up to avoid losing critical talent. Says the staffing manager of one global consulting firm, “We don’t like to do counteroffers, but sometimes we have no choice [if we want] to keep an employee with an unusual skill.”
According to Mr. Slick, organizations make counteroffers for three reasons: They highly value the employee; they understand his or her reason for leaving and disagree; and the employee appears to be sincere about leaving and isn’t just angling for a raise.

“These factors, as well as the company’s frame of mind, will determine its response,” Mr. Slick says. Having special skills and experience, particularly in international business or technology, increases your chances of receiving a counteroffer.

Mr. Balastriere, a 16-year veteran of Bard, is bilingual and has extensive experience in Europe and Latin America, skills that make him highly valued.

Counteroffers are also more common in some industries than in others. They’re rare in manufacturing but prevalent in high-technology and financial and professional services where one rainmaker or idea person can produce significant business. Says Jeffrey Christian, CEO of Christian & Timbers, a Cleveland search firm, “In places like Silicon Valley companies hardly ever say goodbye.”

Your Strategy

If you fit these categories, chances are good when you walk into your boss’s office to deliver the news about a new opportunity, you’ll be confronted with a counteroffer. Be ready. You’ll have to make a decision and, if you’re highly valued, you’ll likely have to make it under considerable pressure to stay. Says Mr. Christian, “With competition for talent as fierce as it is, companies are developing war-room tactics.”

Before you step into the line of fire, arm yourself with facts about your career goals, your current and prospective employers and the job market. Consider the following advice when you develop your strategy.

Get your own career story in order.

What’s wrong with where you are today? Will the new position get you where you want to be?

Before you make a move, reflect on why you want to leave your current employer and whether you’ll be better served by the organization that’s trying to hire you. Look at the long-term goals and values of your current employer and those of the new one. Which more closely supports your long-term goals and values?

Don’t take a counteroffer just for the money.

Most experts say you’ll be sorry in the long run. “It can be tremendously flattering to have two or more companies bidding over you,” says Thomas Flannery, a partner in Dallas with The Hay Group, a Philadelphia human-resources consulting firm. “But quibbling over $10,000 isn’t a career-building strategy.”

Before you respond to a recruiter’s call or even think about an offer, reassess your career goals and whether your current employer — or the new one — can better help you achieve them.

Additionally, think about your work environment, work product and the corporate culture. “The employment relationship is a more robust thing than simply a base salary and a bonus,” says Mr. Flannery. “Most high-potential employees are seeking to make a difference or do something new and original. Even if their current employer can beat an outsider’s offer, it may be unable to support their career goals.”

Decide whether you’re looking for more opportunity, more money or both. If it’s really a matter of more money, gather facts on current market rates of pay before trying to negotiate. Compensation surveys for many occupations and industries are available through a variety of sources.

Avoid “dating syndrome.

If you entertain an offer from another employer for the sole purpose of wangling a raise or promotion from your current employer, you’re in for trouble, according to compensation experts, headhunters and human-resource managers.

“Many of the people we, and every other consulting firm, are trying to hire are afflicted with ‘dating syndrome,’ ” says the consulting firm staffing manager. “They talk to several companies at a time to see who will ‘put out’ the most. If we discover that they’re using our offer mainly to leverage more money from their current employer, they go on our blacklist. We won’t refer them to anyone else in this firm.”

Be prepared to discuss the factors influencing your decision.

It’s usually in your interest to speak frankly to your boss about the recruiting employer’s offer and why it’s compatible with your long-term career goals. But keep it positive.

If you’re fundamentally happy with your current employer but want a specific problem remedied — such as a combative boss, a long commute, lack of recognition or a low base salary — it’s worth exploring a counteroffer.

Consider Jeff Struve, former manager of staffing and employee relations at the Milwaukee branch of a major bank for more than six years. When a small Chicago-based bank recruited him to be senior vice president of human resources, he used it as the basis for a discussion with his boss.

“My issue was career growth,” says Mr. Struve. “I didn’t see much potential in my then-current position. I felt I’d have a greater span of control and more impact at the Chicago bank.”

With a written offer in hand, Mr. Struve talked to his manager. “He and the CEO sat down with me. They said I was an asset, that they needed me and that they would work to make opportunities happen for me.”

Even though the Chicago bank offered more money, Mr. Struve stayed because he was convinced top management would look out for him.
His decision was rewarded within a year, when he was promoted to senior vice president at the bank’s Chicago branch.

Know what your employer can change and what it can’t.

Realistically don’t expect a counteroffer if you know your company can’t match the outside offer, promote you or expand your responsibilities. Further, if you’re unhappy with the employer’s management style or operating methods, don’t bother taking a counteroffer. For example, a middle manager who thinks his employer’s hierarchical culture will impede his career shouldn’t expect the management pyramid to collapse overnight.

“Our employees occasionally get offers, and I always ask them what it would take for them to stay,” says Mr. Struve, who’s now senior vice president of human resources for MasterCard’s global technology operations in St. Louis. “If the issues are pay, scope of responsibility or career direction, we can almost always make changes. But if they have problems with the company’s products, culture or management, we can’t.” Understand the career impact. In a candidate-driven job market, companies can tolerate employees who have been won back from competitors with counteroffers. But if the job market turns, this view could change and you may be viewed less favorably. “If you elect to stay, your loyalty will always be suspect,” says Mr. Flannery.

Consider also that remaining with an employer that bestows raises and respect only when employees threaten to quit may not solve your long-term concerns. Says Mr. Stucker, “Who wants to work for a company that rewards you only when you say you’re leaving?”

Additionally, if you receive a counter-counteroffer and decide to accept it, you may be seen as a “bought” employee, a mercenary who will job hop at the first recruiter’s call.

Multiple Offers

Counteroffer tips also apply to multiple offers. It’s easy for talented employees to lose sight of their career goals when employers fight over them, offering a dizzying array of salaries, bonuses, stock options and other benefits.

Consider the experience of a marketing vice president of a large professional-services firm, who found herself at the center of a bidding war between a global management consulting firm and a financial-services firm. Each side upped its bonus payout and vacation benefits in hopes of winning her over. The deciding factor was a $10,000 signing bonus offered by the financial service firm. She grabbed it, but later discovered that management lacked the commitment to change. A year later, she became disillusioned, left the company and now seeks a new job.

— Ms. Voros is a Fort Worth, Texas, free-lance writer who specializes in executive careers, compensation, benefits and other human-resource issues..