Counteroffers: As in Poker, You Need to Know When To Fold

All_poker_chipsIt’s a situation many of you have faced: a valued employee announces his intentions to leave in order to take another position. It’s one that I’ve experienced as well.

When it happened to me I put a counter offer on the table and also made several other concessions. In the final analysis, it wasn’t just economic reasons that were driving his decision. His new job would reduce his commute to just a few minutes, while my offices were 45 minutes from his home.

The new job gave him back family time and allowed him to engage in other activities. I couldn’t compete with that. And thank heavens I couldn’t!

Phew! That was close.

In retrospect, I’m generally relieved that he didn’t accept my offer, it would not have been healthy for the financial condition of my company. I dodged a bullet there, albeit somewhat unwittingly.

When presented this situation, often small business owners are unable to see the bigger picture. For one thing, they have time working against them. When a valued employee is about to jump ship, and you know all the pressing needs of the business, it’s hard to sit back, relax, and calmly analyze all the implications of the situation. The “fight or flight” reflex takes over and there’s no way you and take the “flight” option, so you “fight” back with a counter offer.

However, if you can internalize a few principles before you’re confronted with an employee who’s about ready to pack his things and go, you’ll increase your odds of making the right decision.

Three-fold affordability

If you have determined that the main reason for the employee leaving is money and a counter offer carries a high probability of success, there are three “areas of affordability” you need to consider before weighing in with your counter offer:

  • Financial. Can your company afford it?
  • Social. Can your “esprit de corps” afford it?
  • Managerial. Can your authority afford it?

First, determine what the financial impact will be and take off your rose-colored glasses before you start to crunch the numbers. Can you replace the employee at the current rate, or perhaps even less? Will a raise prompt others to lineup outside your door with their own requests for a bump in pay?

The payroll hit may end up being larger than just the additional compensation to the prodigal employee.

Next, consider the possible demoralizing effect the counteroffer will have on other employees. Will coworkers turn on the employee who was ready to bolt? It might also prompt others to start looking for “greener pastures,” and this would greatly compound your problems. Usually it’s less painful to pull the bandaid off in a single fast motion.

Who’s in charge here?

Finally, would a counteroffer decrease your authority and ability to manage your workforce? Will the rest of your workforce see you as having been a pushover? This will decrease your authority down the line and once you lose authority, it’s difficult to get it back.

File away these three points, but make sure they are there when you need them. The biggest mistake you can commit in a situation like this is to make a hasty decision, because trying to turn back once it’s made, is the worst of all worlds.

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Image: By Promoplay ( [CC-BY-3.0 (], via Wikimedia Commons.