The Plague of the Counter-offer

In part 1 of this series (http://bit.ly/1U6JYRp) I wrote about the ever-increasing salaries that we have seen Financial Planners commanding over the last 12 months or so. This week I discuss the second major trend that we have identified over recent times: the ubiquitous counter-offer.

The resignation process, for a recruiter and recruiting employer, has always been a part of the process fraught with potential pitfalls. The candidates have been sourced, the lengthy interview process has been completed, the favoured candidate has been chosen and offered, and they have accepted it. All systems go, right?  Time to crack open the champagne all round? Wrong – this is only half the battle, and seemingly more so now than ever.

I don’t want to go over the same old ground of why someone shouldn’t accept a counter-offer. From ‘why has it taken the firm for your resign to pay you what you are worth’, to ‘the underlying issues why you wanted to move still exist’, I think most people have heard, usually from recruiters, some (valid) reasons you shouldn’t. I want to focus more on the causes around the increase we have seen, and the impact on the market.

Don’t get me wrong – counter-offers have always happened. Those resigning are often treated to emotional blackmail, tugging of the heart strings, promises that things will get better, assurances that a pay rise/promotion was just about to be announced to them (the number of times I have seen that remarkable coincidence…).  Over the last 12 months, however, I can honestly say that I have seen more placements fall through as a result of counter-offers than I did in the previous 2, or possibly 3, years.  Even when the recruiter and recruiting employer do all they can to qualify the candidates from the start, and despite most candidates having genuine and deep rooted reasons to move on, more and more firms are hanging on to these ‘unhappy campers’.

I don’t actually subscribe to the belief that many individuals only go through the process specifically with the intention to engineer a pay rise, and I certainly don’t think there has been a rise in people doing this. This increase is caused by more firms being willing to put counter-offers on the table, those counter offers being more generous than ever, and candidates being innocent/short-sighted enough to accept them.

The reasons a firm would propose a counter-offer are obvious. Whilst the more romantic of employees see it as a sign of the firm’s affection, appreciation and recognition of their worth, the cold hard facts are that offering someone a £10K salary uplift is cheaper and less hassle than finding a replacement. When you factor in the disruption to the team, potential loss of some clients, time spent interviewing for a replacement, recruiter fees, on boarding/IT/training costs, it is much more preferable to keep hold of the current employee – never mind the fact that they have been so unhappy (for reasons often never to do with package) that they have sought employment elsewhere! If that firm can reassure them that they will address whatever bug bears they have, and buy them with an extra 10K, everyone is happy, right? Unfortunately this approach is full of dangers for both the employer and employee; the employee often realising 6 months later that the promises they were given were empty and that, aside from having a bit more money in their pay packet each month, nothing has actually changed; and the employer risking paying over the odds for a potentially uncommitted team member (a fact which will clearly rile their colleagues should they find out). Surely it would be better, in the first instance, to make sure there is a culture of openness and honesty and a regular forum at which employees feel they can air any issues they have rather than it getting to this stage?

The lack of available candidates in the market place, as outlined in my previous article, has led to more and more firms leveling counter-offers because they know how difficult and time consuming it will be to find a replacement. As a result of this drought, they are now also willing to add an extra £15-20K to someone’s salary, to blow the other offer out of the water, where previously they would have gone in with £5K-10K.

I recently had an up-and-coming adviser (2 years CF30 experience) candidate offered a position by a client of mine. They were extremely keen on the role, and it was a great opportunity with what most people in the industry would recognise as a better company. My client recognised they were underpaid at their current basic of £35K, and, instead of doing what many firms would do and try to get away with pitching in at £40k or £45K, they generously offered them £55K basic. The candidate was really pleased, accepted and went to hand in his notice.  Suddenly the red carpet was rolled out, he was reassured what a key member of the team he is, how the future is bright, was counter-offered £60K, and stayed put. One day they value him at £35K, the next they have almost doubled his salary to £60K?! Meanwhile, of course, his other, arguably more loyal and committed colleagues are still sat on £35K…

Whilst 70%+ increases are rare, I am regularly seeing 30-40%. I also know of one, very credible firm, whose attempts to fill their (attractive, competitively paid) role has fallen foul of three counter-offers in a row.  

There is no doubt that the drought of quality candidates, caused in part by the lack of new blood coming into the industry, has led to a vast increase in the frequency and size of counter-offers being made. The question is whether this approach being taken is actually solving the issue for the companies involved or whether it’s just papering over the cracks. It’s certainly a frustrating trend for the firms who are recruiting.