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The Counter-offer: Employers’ New Iron-Clad Retention Tool

by | Jul 11, 2018 | Placement Process, Top Echelon Blog

Remember, once upon a time, when a recruiter could tell a candidate not to accept a counter-offer because it was a bad idea?

It was a bad idea because—hypothetically—company officials just wanted to keep the person on board until they could find a replacement for them. That’s because, as the recruiter would say to the candidate, they now know that you’re no longer loyal. “So if you accept that counter-offer, you’ll be gone soon, perhaps within six months.”

Then there’s the argument that even if the company does not fire the candidate, the candidate will not receive their next raise. Why is that? Because they received it in the form of the counter-offer. So when everybody else is getting their raise . . . no raise for you! (Fans of Seinfeld can call it the “Raise Nazi Syndrome.”)

What if that wasn’t the case anymore, either? What if the counter-offer has become employers’ new iron-clad retention tool?

What does that look like? And how in the heck did we get here?

A hypothetical retention situation

How we got here is the current candidates’ market. How we got here is the skills gap that currently exists in the country. To go a step further, how we got here is a scarcity of talent in some industries that borders on ridiculous. It’s a drought of epic proportions. So these conditions all conspire to create the following hypothetical situation:

  • An employer in a certain industry has an employee that they really value. In fact, there are not too many people in the industry who can do what this employee can do. As a result, the employer treats their employer well, as well as they possibly can. They provide a great salary with top-notch benefits, a flexible working schedule, etc.
  • Another employer in that same industry wants that employee. Badly. As a result, the hiring manager of that employer is more than willing to engage an executive search consultant to recruit the candidate. Not only that, but the hiring manger is willing to entice the candidate with more in the way of money, benefits, and anything else they’re allowed to dole out.
  • The search consultant successfully recruits the candidate, who interviews with the employer. The hiring manager makes a compelling offer to the candidate, who accepts the offer. The candidate then goes to their boss to submit their formal resignation. The candidate’s boss promptly has a stroke. Or a heart attack. Or a stroke and then a heart attack.
  • Obviously, the candidate’s boss knows the implications of letting this employee go. They are, in a word, dire. So they obtain permission to make a very attractive counter-offer to their employee. Not just as a gesture. Not just to do it. But to actually retain the services of this important employee.
  • The candidate, who was basically happy and comfortable at the start of this whole process, realizes that he can be even happier and more comfortable without moving a muscle. They accept the counter-offer.
  • The recruiter finds out what happens and throws his phone.

This situation really isn’t that hypothetical, though. Not for the recruiters in the marketplace who are enduring it right now. In fact, they’re enduring it multiple times in those industries that have the biggest drought in terms of talent.

A lot of questions, no easy answers

So what eventually happens here? Does the employer find a replacement for the candidate and fire them?

No, they do not. Because there is NO replacement in the first place! No good replacement, anyway. That’s why they made the counter-offer. If they let this employee go, they’re going to have to find somebody else just as good, and in this market, that is something that they are absolutely not looking forward to doing.

So . . . does the employee not receive a raise because they received it in the form of a counter-offer. Oh, they’re probably still going to get their raise. Their employer wants to keep them there, not get rid of them.

What if the counter-offer is simply not what the counter-offer used to be? What if company officials view it differently and use it differently? What if, in some industries and in some niches, there is no reason for candidates to fear accepting a counter-offer?

How does this change how recruiters operate within the hiring process?

All good questions. All questions that don’t have a lot of easy answers. However, there are some things that are known. (Or at the very least, we can feel as though they’re known. And that’s good enough.) These things are as follows:

  • The longer that this candidates’ market continues, the more that counter-offers will become a valid retention tool for employers.
  • The more that employers use counter-offers as a valid retention tool, the less that candidates will fear accepting one.
  • The less that candidates fear accepting counter-offers, the more often they’ll accept a counter-offer.
  • The more often that candidates accept counter-offers, the more that recruiters will have to prepare for the possibility of it happening and do everything they can to prevent it from happening.

This is where we are now in terms of top talent in the employment marketplace. It’s a prime example of supply and demand. Top candidates are in demand. In fact, they are in extreme demand. As a result, the old rules are starting to not apply anymore. That’s certainly the case in terms of the counter-offer.

This is what the “War for Talent” looks like. It’s producing things that some recruiters have never seen before.

And as the Baby Boomer Generation continues to retire at staggering rates, this could be a “war” that is only just beginning.

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