Counter-Offers Are a Sucker’s Play
By Kris Dunn · 03.15.2013
Retention is important for organizations.
Paying substantially more for the talent that’s currently sitting in your office is a total sucker’s play. Don’t confuse the two.
Let’s break this down a little bit. You found that diamond in the rough. You hired them, nurtured them and grew them to the point where they’re relevant in your industry, their profession, etc. Or maybe you just bought them from someone else at a price you considered at the time to be fair, right?
Either way, after a couple of years with you, they have more value on the open market. That means people are going to ping them and see if they can strip them away to another company. At which point many managers and companies start freaking out, even in reaction to the potential of a slightly above-average talent leaving the company to go to work for a competitor.
It all comes down to replacement cost. Can you find another cog to fill the gap with? If you can, you don’t freak out and you don’t counter with a raise that gets into the 20% range to save the referenced employee with another offer in hand.
In the Talent game, there are really two types of employees that warrant a counter-offer when they’ve told you they’re getting ready to accept an offer from another company:
Great Creators = the people who create what you sell, and I mean truly create. In a lot of companies, those are software developers. Good creators in any type of company that produces products and services are worth ten of their peers.
True Rainmakers = not salespeople in general, but people who have the ability to bring in business in a way that an average salesperson can’t. Generally, these people have networks that have been formulated in a way that’s different from the average sales pro. Normal sales pros bitch about the quality of the leads. True Rainmakers never seem to give a flip about the leads marketing is producing. Hmm.
Not everyone who creates or sells for a living is special. In fact, most are average. BUT – when you find a top tier creator or rainmaker, they are different. They can drive results for your company in ways that others can’t.
That’s why they’re the only people you should counter when they appear to be seriously considering another job. Everyone else’s replacement cost is too low to freak out about. Accounting, Marketing, HR, Operations, Customer Service – you only save people in these areas if they qualify somehow as a creator or a rainmaker. Few will qualify.
Four final thoughts about retention and counter-offers:
1. You should pay people aggressively/fairly and provide career paths so talent can grow and get theirs at your company in at time frame that’s fair. I’m not talking about playing hardball when you pay people at the 17th percentile.
2. You create a culture over time related to how you handle resignations and counters. If you always go into save mode, there are a lot of people who play games. If it’s crickets when even a solid player brings their notice, you’re going to stop “I’m taking another offer” games.
3. Your tendency to freak out over average people resigning means you haven’t institutionalized knowledge transfer and operational soundness. The knowledge is in the average person’s head and nowhere else, thus your freakoutedness (that’ a word, I just made it up).
4. For a great primer on who Creators and Rainmakers are and who is replaceable, look to the New England Patriots. Their creators are Tom Brady and Bill Belichcik, and everyone else (and they mean everyone) is replaceable. The goal should be to have our stuff together as organizations to the point where we can replicate great results with different talent – while protecting the creators/rainmakers.
Retention and counter-offers. Don’t confuse the two. Counters are a sucker’s play in most cases. If they’re not, we’ve got to look at our organization to find the answers why.