Should you let them go or counter-offer?

Of all the tools in a line manager’s armoury, this is the one labelled “use in case of emergency” – the mention of a counter-offer to appease those who have or are about to hand in their notice.

With a few more grand in their pocket, potential leavers should be persuaded to stay and the whole thing can be forgotten. Well, that’s the theory anyway. But why do this at all? Isn’t it best to simply let them leave?

“Nine times out of ten, firms should never try to keep staff who clearly want to go,” says Gareth Mann, managing partner at executive headhunters Barrington Hibbert Associates. “Our own research finds 71 per cent of those given counter-offers to stay will leave within the next six months anyway. More cash or responsibility seldom changes the fact people want a change of scenery. Managers must resist the urge to use counter-offers.”

Feeling the pressure

According to Simon Gott, organisational development programme director at leadership institute Roffey Park, it’s easy to see why they’re the default response to keep talent. “Firstly, it can come as a shock when people want to leave – it’s almost like the break-up of a relationship, because one person is saying they’ve outgrown you,” he says.

“Managers are also under operational pressures too. It takes time and money to find replacements, which can be hard in sectors with skills shortages, and it takes time to get new people up to speed.

People talk and as soon as someone says they got a big pay rise by threatening to move, others will be queuing up to do the same

“Also, pride plays a part too. Managers don’t want to be seen as the person nobody wants to work for. A bit more money to avoid all this can seem like the best solution, but it seldom is.”

The only way to stop the counter-offer habit is to form a new one and accept people’s intention to leave, says Asif Mullan, managing director at global reward consultancy Mallon Errington. “It might hurt at first, but letting people go can be the lesser of two evils. We recently worked with a FTSE 100 company where a person’s pay was improved from £100,000 to £160,000 to stop them going,” he says.

“But in the end we advised it was better they withdraw this rise because the person involved was more interested in money than a career.

Sending a message

“Accepting people’s intention to leave will be hard, but it sends out a powerful message. People talk and as soon as someone says they got a big pay rise by threatening to move, others will be queuing up to do the same. Managers can use this same rumour-mill to their benefit, to spread the word this doesn’t automatically happen.”

Mr Gott adds: “Not succumbing to making counter-offers simply requires confidence. It’s about knowing you’re playing the long game, accepting that people leaving is a fact of life and that it happens all the time.”

Mr Mann concludes: “Not counter-offering prevents most bad consequences happening. A few months of pain finding someone new is nothing compared to the reputational damage from being known as a company that pays to keep staff, whatever the cost.

“Instead of creating the situation where for six months someone was paid to stay, but is disengaged and unproductive, managers can better spend that time training someone up who’s really keen and willing to learn and contribute. Attrition is good. Firms must fight the urge to stop it happening.”