Counteroffers of Employment

Out of the blue, one of your employees comes to you to hand in their resignation.  She has an offer from another employer and its better than what you give her now.  After the initial shock, you consider making a better offer to her so that she will stay.

In most cases, I think a counteroffer is a bad idea.

For whatever reason, she was not happy with her job.  She may not even be consciously aware she was not happy, but something prompted her to seek out another position.  Even if she was recruited, something prompted her to go through the process and obtain an offer of employment.  More money is not going to change the way she feels.

If you throw a pay raise at her to get her to stay, she will wonder - if the boss thinks I am worth more, why werent they paying me more all along?

On another note, if you have employees quitting for similar or marginally better positions, there are larger problems afoot.  A raise is not likely to solve those problems and your employee will still be discontent.  If your employee is grossly underpaid, treat this as your wake-up call.  You may not keep her, but you might want to consider reviewing your pay scales before you lose more people.

Be aware that the other employees wont be too happy if you give her a raise.  They may be envious, jealous or resentful.  Barb threatened to quit and got a big raise.  Why didnt I get one?  What makes her better than me?  You will also be seen as weak - All we need to do to get a raise is threaten to quit.

In many cases, you will not likely be happy that you had to shell out more money to keep an employee.  You will be even less happy if you have to give other employees a raise to maintain fairness and parity.  You will probably have less respect for the employee. 

None of these reactions and feelings promote productivity and harmony in the workplace.

All these disadvantages are offset by only one advantage: maintaining the status quo.   Most of the time, employers make counteroffers because they see the short term pain of replacing the employee, training someone new and all the cost and time that results.  However, the long term pain of keeping a discontent employee could be much greater.

Never assume that your employee is irreplaceable.  Some people gamble and threaten to quit unless they get a raise.  Employers who are faced with such a request might (and probably should) just say: Fine, I accept your resignation.