The Dead Meat Theory – Why Counteroffers Don’t Pay Off

John Q. Executive walks nervously into his boss’ office to announce, “Mr. Employer, I’m really sorry to have to tell you this, but I’ve decided to accept another position. The XYZ
Company made me an offer I couldn’t refuse.”

Mr. Employer doesn’t miss a beat. “Wait a minute, John. We can’t afford to lose you. Tell me about this other offer.”

Almost every executive will play this scene in his or her career. When the counteroffer is put on the table, what happens next is critical. Not only for a particular situation. but also as an overall
career strategy. Before even considering a counteroffer, John Q. needs
to look at these questions.

1. Why is the boss so afraid to lose me?
2. What will my future be here if I stay?
3. What will others think of my decision?
4. What brought me to submit my resignation in the first place?
5. If I accept the counteroffer, am I a winner or “dead meat?”

I have seen many people caught in this scenario, and have come to a definitive conclusion. It almost never pays to accept the counteroffer. Let’s look at some possible answers to John Q’s questions:

1. The Motivation of the Boss:

If John Q. is good enough to get that super offer form XYZ Co., then Mr. Employer almost certainly values his work. He may even like John. But, for most employers the first thoughts that come to mind upon
receiving a resignation are: How is this going to inconvenience me? How
long might it take to find a replacement? Who will run the department
in the interim? Who will train John Q’s replacement?

In many cases, the first answer that comes to mind is, “Let me buy some time to sort this out.”

If John Q. can be persuaded to stay, the employer can, at his leisure evaluate the impact of John’s departure, Mr. Employer might put out a confidential search with a recruiter for John’s replacement
(we’ve done several of these). He can examine John’s subordinates to
see if any can be groomed to succeed him. Mr. Employer can even bring
in John’s potential replacement as a “consultant”, and let John train
his successor. So what if these steps cause the employer to shell out
$20,000 to $40,000 more in annualized salary. The three to six months
it takes to sort things out will be inexpensive compared to the
potential cost of sudden loss of a key manager.
And, odds are, the boss isn’t going to gamble on John Q’s continued loyalty much longer.
Despite the counteroffer flattery, Mr. Employer may decide that his
most logical long range solution is to get the replacement on board as
soon as possible.

2. John’s Future in His Current Company:

John is still John. His company is stilling the same. If the match were really so wonderful, John wouldn’t have been vulnerable to XYZ Company’s offer. Will an elevated title or a few dollars really improve
the essence of the relationship? Maybe, but only for the short term.

If the boss hasn’t already done so, soon after giving the counteroffer, he will begin to second-guess John’s contribution to the firm. Mr. Employer may feel betrayed, blackmailed. He may worry that
other employees will use job offers to leverage their positions
sometime in the future. When the next scheduled salary review comes up,
the boss has a chance to “get even.” Without another outside offer in
hand, John Q will have to accept the boss’ excuse: “Don’t you remember,
John, I just gave you that big raise when XYZ tried to steal you away.”

When a real promotion comes up, will the company choose to advance the person who had been looking and had to be induced into staying? Or will they reward a loyal, dedicated coworker who has demonstrated a
genuine commitment? Or even worse, might they hire from the outside,
over John Q’s head?

3. What People Will Think:

If John Q accepts the counteroffer, certainly some people won’t be happy. Clearly, the XYZ Co., which is already anticipating his arrival, will be disappointed. If a recruiter was involved, John’s credibility
will be strained by the reversal.

What about his references? What if they see his actions as a career leveraging maneuver? What if they feel used, or worry that they may be “manipulated” in the future?

How about John’s coworkers? Regardless of how discrete he’s been, someone, if not everyone, is sure to know he had planned to leave. The office grapevine rarely deals kindly with these matters. Maybe
subordinates may have started jockeying for his job. May they are
relieved he is leaving! Or, maybe he was so well liked; his fellow
employees are planning his farewell testimonial luncheon. As rumors
circulate and escalate and demand denial, John Q. will get the short
end with his peers.

John’s sudden reversal may be perceived as fearful, a sign of weakness. Respect for him may drop. His relationships may never be the same.

4. Why John Had the New Offer:

A candidate for a job change is either dissatisfied with his current position, or tempted by the positive aspects of the new opportunity. Or, more usually, it s a combination of both factors.
As a search consultant, I will admit that I can’t get an executive to see a
potential new employer unless he is motivated (nor would I want to
force such a meeting).

It is that motivation that led John Q to see the XYZ Company, listen to their pitch, and interview well enough to elicit an offer. We must assume that John Q Executive was smart enough to carefully analyze the
offer, listing and evaluating all the plusses and minuses before
A clearly convinced John Q marched into the boss’s office to resign, only to be confronted by the counteroffer in the face of
such an emotional encounter, many people would be hard pressed to
remain cool and logical and focused or, the original intent, to resign
and move on.

But all the factors that preceded that moment remain unchanged. John needs to remember that he has decided that XYZ represents the better long term opportunity.

5. A Winner or Dead Meat?

I trust that the reader will not be offended by the purposely outrageous phrase that I use to characterize the result of accepting a counteroffer. I certainly don’t regard people with so callous an
attitude. I have found, though, that many executives in the emotional
throes of a decision about whether to accept a counteroffer need to be
shocked into recognition of the downside risk.
Let me emphasize that these observations are not the casual opinion of the author. In
meetings and interviews with many hundreds of executives, our
consultants have spoken to dozens who have been involved in
counteroffer situations. In less than 20 percent of the cases has the
acceptance of such an offer worked out satisfactorily. The overwhelming
majority of the executives we have talked to have expressed regret;
based on the negative results I have talked about above. They have
admitted that it is difficult to see the pitfalls while their current
firm is “courting” them to stay. The situation is just too emotional.

Remember, the new employer considers you a winner. They are the ones willing to pay a premium for our services and start you out in a higher position. The reasons for making the job change are rarely strictly
financial and those reasons will still be there.

The best advice is to make the change you have agreed to, and don’t look back. Keep relationships with important people in your old organization intact, but politely deliver the firm message that you
have decided to move on. If it is made clear that you are not open to
renegotiation. you may be able to prevent the counteroffer attempt, and
save embarrassment for all concerned. You decide which way you will end
up a winner.

For more tips and tricks visit the Headhunter's Secret Guide

Views: 312

Comment by C. B. Stalling!! on October 16, 2010 at 9:42pm
Comment by Steven Englander on October 18, 2010 at 1:03pm
Well said.
Comment by Navid Sabetian on October 18, 2010 at 6:49pm
One of the best written on counteroffers. The only other downside to accepting a counteroffer is that it demonstrates the employee's indecisiveness. A person who has come to resign yet can be so easily influenced and enticed to stay when his boss throws more money at him
Comment by Suzanne Levison on October 18, 2010 at 7:13pm
Bravo! This needed to be written and in the exact terms stated. Agree, here.
Comment by Charles Van Heerden on October 18, 2010 at 11:34pm
Mark, as an ex-HR Director I used to believe that counter offers were not effective and seldom supported them. That was until we really hit a talent shortage.

For the last five years I have done several counter offers. Of those, about 50% were successful. Not a bad strike rate.

Managers are often limited by annual pay increases and sometimes simply don't recognise the real value of an individual. If I want to retain a star, I would get the CEO involve and we had a policy of responding within 24 hours.

I guess it how all depends on the circumstances. Of course I can understand that no recruiter would be happy to go back to your client and start the whole process all over. But to suggest you are dead meat, is a little different from what happens in companies that want to retain talent.

As the war for talent heats up, recruiters should expect more counter offers. It is the nature of the beast. And now I hear you ask, how many people were still with the company a year after the counter-offer - more than 50%. So, overall the success rate was about one out of four.

In the long-term, for the majority of cases, counter offers are not the best way of managing talent retention.
Comment by Lisa Howarth on October 19, 2010 at 1:47pm
@Charles - Your comments about your success with counter offers are interesting; you're right that managers are often limited by strict salary bands and policy. My challenge from a corporate perspective is this: at what point does a company decide that they are willing to pay for the talent they have, and incent their people not to look elsewhere?

My general philosophy is that salary bands should be a guideline, not hard policies. Managers should have the ability to move outside of those for top performers (assuming market dictates as such) without having to go to a CEO (obviously dependent on the size of your org); managers need to be educated about what opportunities exist outside of the company for their people so they can understand who is at threat for leaving; managers need to provide motivation (and not always in the form of cash compensation) for their people.

In the knowledge-based economy that we are living in, giving your talented people reasons to look elsewhere is far more expensive than paying what they are worth in the first place.
Comment by Charles Van Heerden on October 19, 2010 at 8:37pm
@Lisa, I think you have touched on the heart of the issue. Fundamentally, the way we structure pay increases are often flawed, which result in talent believing they are being undervalued.

Your other point of managers being disempowered is also often true, as they are given a pool of money with lots of stipulations of how they can divide it between their staff.

Recently a CFO I was working with, operated on the basis that everyone was making a contribution, resulting in substantial dilution of reward for top performers. We had to align the various pay systems (fixed and variable pay) to develop a better way of rewarding and retaining talent.

Lastly, the cost of an increase, even a substantial increase, from a purely commercial perspective, invariable is less than the cost of the recruitment/replacement fee.
Comment by Chris Fleek on October 20, 2010 at 11:43am
This is article is very well thought out - nicely done. In my experience this counter-offer situation (employee choosing to stay) rarely works out long-term for the employee. I appreciate your insights!


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