By Kelly O. Kay and Michael Cullen
Harvard Business Review, January 30, 2018 —
Senior executives and HR leaders alike agreed that accepting a counteroffer from a current employer will adversely affect one’s career.
You finally decide to start looking for a new job. You go through a lengthy search process, you’re presented with an enticing career opportunity, and get an offer you’re fully prepared to accept. But when you tell your current employer you’re planning to leave, they surprise you with a counteroffer. And you’re left with a question you thought you had already answered: Should you stay or should you go?
In our combined 30-plus years of placing senior executives in new positions, we’ve had more than a few late-night calls from people agonizing over this very question. And the answer? It’s not that simple.
In a recent national survey we conducted about best practices in resignation, nearly 40% of senior executives and HR leaders alike agreed that accepting a counteroffer from a current employer will adversely affect one’s career. Nevertheless, some 78% of senior executives and 80% of HR leaders indicated that it is sometimes acceptable to embrace a counteroffer. However, an additional open-ended question and supplementary interviews with transitioning executives and CHROs pointed to how hard it is to determine what those times might be and affirmed that the circumstances in particular cases are rarely identical.
Our interviewees variously estimated that counteroffers work out well in only 5% to 25% of cases.
What’s not in dispute is that counteroffers are a fact of corporate life today. While no hard statistics are available, we and our colleagues in executive recruiting have seen a rise in counteroffers in the past several years. And there’s no doubt that counteroffers are stressful for all concerned — bosses aware of today’s intense competition for talent and well-intentioned resignees suddenly finding themselves tempted by a counteroffer they didn’t expect. Should you find yourself in this position, here are some considerations that can help you navigate some very tricky terrain:
Show me the money?
Once you’ve declared your intention to leave, you will be asked many times if it’s a matter of money. Participants in our study differed widely on the advisability of accepting a counteroffer purely on the basis of compensation. A number of executives said it was always acceptable; others said it should never be the sole consideration. As one HR leader put it, “You should never stay just for money and you should never leave just for money.” At the other extreme lay this typical transitioning executive: “Most companies don’t manage their employees’ careers, despite rhetoric to the contrary, so it’s perfectly acceptable to manage your own career, including leveraging an offer to improve your salary.”
Beware, however. If you believe you are underpaid and you have no other compelling reason to leave, attempting to leverage an outside offer could backfire. Many companies refrain from making counteroffers precisely because they don’t want to tempt people to threaten departure in order to win greater compensation.
Something else to consider — there could be less than meets the eye to your outside offer. Monika Fahlbusch, the chief employee experience officer at BMC Software, who has been faced many times with executives in possession of an offer from another company, says that in about three-fourths of the cases they didn’t fully understand how the outside offer compared to their current compensation. “They didn’t understand how the equity was going to work, or they didn’t understand options versus restricted stock units, or restricted versus unrestricted,” she says. “And when they’ve been offered a piece of the company they simply look at the potential market cap and calculate their percentage.”
Consider the possible repercussions of accepting.
Asked to check off as many negative consequences of accepting a counteroffer as apply, nearly 80% of senior executives and 60% of HR leaders cited diminished trust and compromised reputation among the executives and board members of the employee’s current company. Nearly 80% of senior executives and 67% of HR leaders cited the same consequences with the board and executives of the spurned company. And 71% of senior executives and 67% of HR leaders also said that superiors in the current company would question the employee’s loyalty going forward.
Other negative consequences include a boss who may feel blackmailed and colleagues who resent what they see as special treatment. There is also your reputation to consider outside the company. “You’ve got to watch the reputational damage that comes with accepting an offer and then reneging on it,” says a former chief operating officer for a major division of a global bank. “People know that if it happened once, it could happen again.”
Look at the track record.
What are the odds that your accepting a counteroffer will be good for your career? Our interviewees variously estimated that counteroffers work out well in only 5% to 25% of cases. “In my experience counteroffers don’t work 95% of the time,” says Jenny McCauley, who is currently senior vice president of Administration at Southwestern Energy and has worked in HR at, among other companies, JPMorgan Chase and Hilton Hotels. “And when they do work it’s usually only for the short term — someone who wanted to leave is eventually going to leave anyway.” The chief revenue officer for a leading cybersecurity firm agrees, though he has extended counteroffers and supported the practice in organizations he has run: “My gut feeling and my observations tell me that people who accept are going to be gone, whether it’s in a year or two years.”
Listen for the big reveal.
That’s when your boss, upon being informed of your decision to leave, tells you that the company had been thinking about a new role or new responsibilities for you and would like to have a chance to present their thinking to you. “That kind of reaction is hard to fake,” says one CHRO. “They can’t come up with an integrity-filled counter in a day or two if they’re just trying to buy you back.” Ask yourself if you really believe that the offer is something they would have done anyway at some point in the near future. If so, you might want to reconsider your decision to leave.
Nonetheless, even an authentic-sounding revelatory counteroffer may simply be a sign of a strengthening economy buoying the market for top executives and pressuring companies to hold onto their people — including those whom they may have previously neglected or underappreciated. But when you’re back in the fold or the economy stalls there is no guarantee that such neglect won’t set in once again.
Take a step back.
If you are still unsure about whether you should accept the counteroffer, discuss it with your mentor or with some other trusted counselor who can help you work through its full ramifications, especially for your reputation. If you’re perfectly clear about your reasons for leaving, especially the positive reasons, you should be able to resist counteroffers, authentic or otherwise, that are ultimately not in your best interests.
Perhaps the best advice about a counteroffer is don’t let it come to that. Long before you’ve been tendered an outside offer and raised the other company’s expectations by going through the entire interview process, give your boss a kind of “right of first refusal.” A number of the executives we talked with recommended what one of them called the “pre-quit discussion” — a frank talk with your boss about the pros and cons of the career move you’re considering. The boss should be someone you trust, who has your best interests at heart, and who will certainly not hold whatever you decide against you. If your boss reacts with anger or resentment, the two of you probably don’t have a healthy relationship. And that revelation can be another factor to throw onto the scale as you weigh your future.