The expression, “The only constant is change” couldn’t apply more to the workplace.
As a business owner, you don’t need me to tell you that the pandemic has caused a whirlwind of change and disruption. It always seems that once you have a moment to come up for air, your best employee knocks on the door and drops the bombshell that they’ve accepted an offer for a higher-paying position at a different company.
While you want them to spread their wings and flourish with their career advancement, there are ways to persuade them to stay. How far should you go?
Below, we examine the factors to consider before putting in a counter-offer.
Balance the Cost of Replacement
It’s important to consider how much it will cost you to replace that star employee. If you are looking at someone who barely carried their own weight, letting them go is a far easier decision. You have the opportunity to find someone better.
However, when it is a valued employee, the price of losing them is greater. Remember their overall performance saves you money and their ideas efficiency and productivity justify their salary. Meanwhile, bringing a new employee up to par to their performance can cost you in downtime until you find a replacement, as well as the overall costs to hire someone. You are looking at almost $10,000 on average to hire and train a new employee, and that’s at the very lowest end of the skill and pay scale.
Therefore, if you consider that number, and look at the value of the individual and their role, you might find that the right counter-offer can either save money or be worth a bit of investment so that you still come out ahead in the long run.
Consider the Precedent
Carefully consider the message a counter-offer will send to other team members. You might find people start quitting left and right with hopes you’ll negotiate a better rate of pay. Once you offer more money to one person, you set a precedent that might be hard to carry on.
If the person leaving was a top performer, their loss might impact your entire team.
This can have an enormous impact on morale, which in turn could increase turnover. If you allow this person to leave, how will this look on you? Will it show you don’t value team members? Will it leave the rest of the team high and dry? Is this person someone who helps keep team-spirit high? A strong motivator and leader? A major team player? All of these qualities add value to their worth and might encourage you to be willing to make a counter-offer.
Money is not the only thing that causes people to leave. Is there something more you can offer that will make staying worth their while? Perhaps a more suitable title? Taking on more responsibility? Receive more training or education? A nicer office? More help? Flexible hours? Working from home?
All of these options could be incentives when retaining a top performer.
The Right Time to Counter-Offer
Considering all of the above, when does it make sense to make a counter-offer? In most cases you can try price-matching another offer when:
- You’ll lose an integral team member or leader
- It works out it will cost more to replace them than to offer them more money
- You feel reasonably confident the rest of your team is happy and won’t try to pull the same move
- You can afford the offer
- You have other incentives to make them stay
- You trust your offer once accepted won’t result in a less productive performance from them
Sting famously sang, “If you love somebody, set them free.” That doesn’t mean you have to let top talent leave without attempting to negotiate and offer to entice them to stay.