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Counteroffers: Are They Benefit or Detriment?

Have you ever been approached by your current company with a counteroffer to keep you from jumping ship? What did you do?  Take the money and be glad to get it?  Wonder why you had to "leave" to generate some financial appreciation?

Counteroffers are mixed blessings.  While the executive who really enjoys bargaining might be wary of anyone who automatically gives him what he wants, the "call-them-as-I-see-them" professional is likely to be offended by even a hint of gamesmanship.

How you decide to deal with a counteroffer will have a lot to do with your perception of the individual suggesting it, your personality, the history of your relationship and the overall package that comes along with the offer.

Let's take a look a typical counteroffer scenario and consider the questions and thought process it poses.  While Bill isnít a real person, his situation may sound familiar to you.

The We-Want-to-Keep-You Counteroffer

Bill Johnson has been a manager with a successful hospital chain for about six years.  He's a savvy, hard worker who can always count on a good review.  While he knows he's made an important contribution to his company, he thinks his boss has taken him for granted and is laissez faire about promoting his career.  Consequently, Bill has been looking for other employment where he can tackle new challenges and have the active support of his management team. 

Several months into his job search, he is offered a new position, which includes a 10% raise over his current earnings and promised advancement in no more than two years.  When Bill gives his two-week notice, he is surprised at the impact it makes on his manager.  Two days later his boss offers him an immediate 15% raise and a spot on a company-wide task force that will dramatically increase his visibility and showcase his ideas.

Questions Bill Should Be Asking Himself

  • If I'm so valuable, why has no one acknowledged my contribution before?

  • Is this counteroffer a harbinger of things to come or just a stop-gap measure to keep me around for a while?

  • Which offer is the best overall match with what I want in my career?

  • Should I take the new opportunity or stay where I have established relationships and a good track record?

  • Is there anything I should do differently to solidify and promote my position either in my current job or the new one?

Bill's Thought Process

It seems that Bill has jolted his management into recognizing how tough things would be if he left the company.  Apparently he has a lot more leverage than he thought. Why didn't he already know how important he is from his boss' perspective?  He and his manager are not communicating.  Probably his manager is so busy putting out fires, he takes Bill's contribution as a comfortable, reliable constant.  Maybe it never occurred to him that Bill is unhappy, because he never asked for the opportunity to expand his horizons.  If this is the case, both parties are guilty of perpetuating the status quo without considering the consequences. 

Before Bill decides to stay, he must be sure his manager has seen the light and will assume the mentoring role he's abdicated for so long.  Bill will also have to take more responsibility for his own career and be prepared to ask for what he wants.  Should he doubt either his ability to become more proactive at his current company or his boss' commitment to promoting his career, Bill should change venues and start fresh with a new persona and new management.

The task force is an enticing bird-in-hand that could give him the visibility he's been wanting while maintaining his current support system.  If he decides the immediate exposure to task force participation is more promising than a promotion two years down the road, he should take the counteroffer and get rolling.

In evaluating whether to go through with the move to a new employer, Bill must decide both if his new boss will keep his promise of advancement within the next two years and how important that promotion will be to his long-term future.  If he is fully confident of the integrity of his new employer, he can devote himself wholeheartedly to making a major contribution and preparing for the increased authority waiting on the horizon.  But if his gut is telling him something isn't right, he may want to get more information on the specific process for moving up and the relative importance of his new position within the company before making his final choice.

A Stingy Offer from a Great Company: What to Do?

Jan has been job hunting for several months since a bank merger eliminated her position. After surviving several industry downsizings, she's decided to concentrate her search efforts on finding a CFO or controller position with a fast-growing local company (far away from banking) in need of her management expertise.

Before long, she receives an offer from a nearby high-tech firm that fits her criteria. She likes the job description, the people, the culture and the opportunities for growth. The only problem is the compensation. The company is offering $12,000 less than she deserves. When she tells the CEO about her disappointment with the salary figure, he says he'll review it. He later calls to offer her $6,000 more, "the most he could afford," which is still $6,000 short of her goal.

In the meantime, an executive recruiter arranges a telephone interview for Jan with the CEO of another attractive high-tech company. The conversation goes well, but the position requires a distant relocation, which Jan wants to avoid. The CEO has invited her to fly in for an interview, and the recruiter is awaiting her response.

Questions Jan Should Ask Herself

  • Is the local populated by engineers, naive about what a seasoned financial pro can demand on the job market, or does the CEO just want to hire her "on the cheap"?

  • Is he discounting her expertise because it's different from his own and, consequently, not very important?

  • Is his unwillingness to meet her number a sign of future Scrooge-like behavior? Or, is he just concerned about holding down expenses and keeping her salary in line with others already on board?

  • If she takes the lesser amount, will it be a constant thorn in her side? Or is the position sufficiently exciting that the opportunity outweighs the loss of income?

  • Given that she doesn't want to move, can she afford to reject the local offer?

Jan's Thought Process

Young companies run by entrepreneurs often have tunnel vision about issues such as compensation, especially for staff personnel. Couple this with the tendency for engineers to be more interested in developing and producing the product than putting together effective management systems, and you have a recipe for under-compensated, under-appreciated administrators.

The issue is whether the company's CEO has the vision to realize that technological expertise alone won't make his company a success. If he genuinely believes his firm needs good financial management to move forward, he'll do whatever it takes to find and keep the right people. He may not be financially or psychologically able to grasp this all at once, but with some educating, he should learn quickly.

Perhaps Jan doesn't have to settle for his second offer. If money is tight, she could concentrate on negotiating for other rewards, such as an extra week's vacation, stock, an annual bonus, health-club membership, professional dues and fees, etc., that would hold the line on salary while boosting her total compensation package. A little creativity may be all that's needed for her counteroffer to succeed.

Because Jan is changing industries and job descriptions, the CEO may want proof of her performance before he feels justified giving her the income she seeks. If so, she can request a review and an increase in six months based on her ability to reach pre-set goals. This approach will give Jan the track record she needs to qualify for her requested income.

She should pose more questions about the company's goals and spending policies before making a commitment. The CEO's resistance to meet her salary requirements might be a signal of future penny-pinching. Installing new systems, hiring more people and keeping the best talent may be a struggle not worth her effort.

There's a good chance that $6,000 won't make that much difference in Jan's lifestyle, but it can have a tremendous impact on her attitude as part of the firm's management team. If she thinks the principle of the issue is more critical than the paycheck, she should reject the offer and accept the distant company's interview invitation.

On the other hand, if money is less important than the opportunity to build a company with a committed team of respected colleagues, she should go for it. Corporate success will breed personal success and satisfaction.

The worst scenario for Jan would be to accept a mediocre position at an insufficient salary. Doing a job she doesn't like for less than she's worth can have a tremendously negative effect on her self-esteem and long-term career options. She may start discounting her expertise because she won't be using her best skills. This is a no-win situation for everyone involved, including the company.

A Last Word

While the decision to accept a counteroffer may seem to be no more than a money issue, it's often a lot more complicated. Job satisfaction, corporate culture, personalities, personal responsibility, history and potential opportunities should all play a role in making the right choice.


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