Minimizing the Acceptance of Counter-Offers

With the national unemployment rate at an all-time low of 3.6%, and an even lower rate for top management executives (1.6%), “the war for talent” has never been more evident. Companies faced with a key executive resignation are more likely to resort to the counter-offer to retain that talent. In the past, conventional wisdom was to not make a counter-offer to a departing executive, however, today due to the scarcity of talent, it has become more commonplace and more acceptable to make, and to accept, a counter-offer.

In a recent Harvard Business Review article, the authors quote a study that found, “78% of Senior Executives and 80% of Human Resource leaders indicated that it is sometimes acceptable to embrace a counter-offer.” So, the new reality is that there has been a significant rise in the number of counter-offers made and concurrently, a relaxing of the old “conventional wisdom” of not accepting a counter-offer. For companies in the market to hire an in-demand candidate, understanding this reality and how to mitigate the resulting increased risk that your top candidate likely will receive, and may accept, a counter-offer is more important than ever.

In summary, the low unemployment rate, the robust economy and the resulting “war for talent” has created a new “conventional wisdom” that to counter-offer is an acceptable means of retaining top talent and for the candidate the stigma of accepting a counter-offer is lessened. Unfortunately, for organizations hiring top talent this is a problem. The unpleasant reality is, the candidate that you have spent months recruiting may accept a counter-offer from her current employer leaving you unexpectedly empty handed. There are, however, steps you can take to minimize the chances that your candidate will accept a counter-offer. Here’s how.

Market Research

Do thorough market research regarding compensation. Try compensation.com, salary.com or contact colleagues in your industry to poll them on what they are seeing for compensation packages for a particular position. With the competitive market today salaries are rising fast for top talent. Usually salary surveys are out of date and many times woefully understate real market compensation. You must obtain compensation information on your competitors in real time. Remember that you must compare your compensation to your specific industry standards, not generic titles. Regional comparisons for some disciplines tend to be under market. If you want to land top talent, you will need to pay market or above.

Total Compensation Package

Think in terms of a package. Elements may include: base, bonus, equity (options and stock), signing bonus, 401K match, housing and car allowance, etc. Understand what is important to the candidate; then craft a customized compensation package that addresses her unique needs. Enlist the candidate’s help to create a package that works best for her. Make sure that the candidate fully understands the compensation package that you are offering. Especially the equity. Be creative, think out of the box.

In the Harvard Business Review article cited above, a senior HR executive estimates that roughly 75% of executives do not have a full understanding of how their current compensation package compares to the offer they have just received. To avoid a nasty surprise during compensation negotiations, early in the interview process discuss the candidate’s current compensation package and compensation expectations in detail. Understand the candidate’s current base and bonus, when she is due for a review and how much of an annual increase she is expecting. Understand what the bonus components are. What is the candidate’s bonus potential payout? What was the amount actually earned in the previous year?

Learn what the candidate will be forfeiting in bonus, commissions and equity if she resigns and moves to your company. It is the experience of some, that candidates and hiring executives do not fully understand the vesting and forfeiture provisions of equity compensation and/or 401K matching provisions which could also be forfeited upon resignation. Many companies today use multi-year vesting of equity grants and 401K matching to purposely provide a disincentive for an executive to accept a position with a new employer. It’s best to understand fully what your candidate’s total compensation package looks like now so that you are prepared to offer a compelling counter-offer proof package.

Don’t low ball the candidate. The candidate knows her market value. Develop compensation offers with this in mind. Offer the candidate a fair compensation package based on market value not necessarily where she is today. To low ball is an insult and may drive the candidate away.

Value Proposition

Develop a compelling value proposition for your company and the position. Develop talking points that sell the company and the opportunity to the candidate. Share these talking points with the interview team. Paint a positive and consistent picture verbally of how it will be working for you, with the team and at your company.

Position the role and the company in such a way that demonstrates that accepting the position will help her attain her goals (i.e. increased responsibilities, seat at the table, title, next step in career). Describe and demonstrate how you will be working together. You want to help the candidate vividly visualize how it will be when she is working with you and at your company.

Treat the candidate like a VIP from the 1st interaction. Provide a stellar candidate experience. The TLC will be remembered. Demonstrate that this respectful treatment will be how it will be when working for you and your organization. Reinforce throughout the process how the position and company will alleviate pain and/or increase satisfaction.

Make sure that your company’s mutual respect for colleagues, culture and values are demonstrated. Provide the candidate with opportunities to observe the leadership team’s interactions of living your values and culture. Be patient with the candidate, make sure questions are welcomed and fully answered. Verbalize to the candidate the value she will bring to the company.

Recruiting and Interviewing Strategy and Process

Recruit candidates that are currently one level below your target position title but ready to step into a more senior role. For example, recruiting an accomplished SVP of Sales, then giving them the title and responsibilities of a Chief Revenue Officer will substantially lessen a candidate’s susceptibility to a counter-offer.

Early in the interview process, learn and understand why the candidate is interested in leaving her current role and is interested in your position by asking the following questions. Before asking these questions it’s critical that you have first established a trusting relationship.

If you were your boss, what changes would you make?
What are the top 3 reasons that are motivating you to consider our opportunity? What’s missing from your current position? Is it compensation, equity, title, career growth, more responsibility, boredom, prestige, challenge, new experiences? Does the candidate desire to make more of an impact? Identify and make note of any emotional triggers you discover during interviews that may be causing the candidate to look.
What is not working for you in your current position/company (Prompts: career advancement, recent organization changes, recognition, compensation, a lack of respect for your leadership, colleagues, job content, culture). Why is she unsatisfied, unhappy, unfulfilled and frustrated? Another way to phrase: what are your “pet peeves” in your current job and at your current company? Ask if she has spoken to her manager about this.
Identify the candidate’s “deal breakers” – a deal breaker is anything or things that has or has not happened for the candidate (at her current position) that has severed or damaged the bond of loyalty that the candidate has for the company. You can use this information later to remind the candidate why she was interested in leaving the company in the first place.
What do you like about our opportunity? What do you dislike or are not sure of with our opportunity?
Identify and speak to the candidate’s “must haves” and “non-negotiables” that must be in place in order to make the move to your company.
Some candidates may not be fully aware of what is motivating them to look at alternative opportunities. The discussion you have with these candidates may need to take the form of facilitating an introspective, self-discovery process; providing the candidate food for thought.
Acknowledge that you understand that she has options and that you want her to make the right decision for herself and her family.
Take good notes, they will come in handy later.

Counter-Offer Susceptibility

Begin determining candidate susceptibility to a counter-offer early in the interview process. During the first interview ask the candidate her thoughts about entertaining a counter-offer. Engage in a general discussion only at this time. Later when you are preparing to extend an offer to the candidate ask the candidate the following questions:

What could your current company do, offer or provide to you that is as good as or better than our opportunity?
Before extending the offer, ask the following questions to the candidate. Say, “We are going to proceed with an offer. However, before we do, I would like to understand more about how you would handle a counter-offer.” Probe several questions deep. What will your boss say? What will be your response? What will your colleagues say? Will they be supportive? What will be your response? Is there anything that your current company could offer or say that would make you seriously consider a counter-offer?
Say to the candidate, “We only hire top talent which you certainly are. I would be concerned, if you worked for me, if you resigned. What will you say to the CEO when you are called into her office to discuss what it will take to keep you?
Ask the candidate: What would your employer’s motives be if they made a counteroffer?
After extending the verbal offer have the counter-offer discussion again with the candidate. Let her know that she is likely to receive a counter-offer. Let the candidate know that you have a backup candidate that you are not prepared to lose. Say, “So we must close the deal promptly.”
Ask the candidate “What are the top 3 reasons why you are accepting our offer?” Then remind the candidate of the top 3 reasons, shared earlier, for considering a move. Suggest to the candidate to keep these reasons in mind while deciding. Say “It may help to clarify your decision”.

Additional statements you may consider making to flesh out candidate intentions and susceptibility to a counter-offer and to close the deal:

Say, “So glad you are joining us” or “We have a deal right?” Shake on it if possible. Make it personal.
Say to the candidate, “Now that you have resigned and signed the letter, I am releasing our back up candidates.”
Say to the candidate “If you accept a counter-offer you will be leaving me and the company in a major lurch and that’s not good for anyone.” (Only say this if there is waffling going on).
Remind the candidate of their frustrations mentioned in earlier conversations.
If the candidate starts to waffle, ask “If the company gives you a raise, do you think anything will really change?”

The Resignation Process

When discussing resignation details with the candidate, prepare the candidate for the procedural and, most importantly, the emotional side of the resignation and counter-offer process. Remind the candidate that when she resigns, the company may panic and will likely get emotional.

Ask the following questions:

When and where will you resign? How much notice do you plan to give?
How will it be taken/accepted?
How will you resign if your boss is traveling?
When can you start?
What typically happens at your company when someone resigns?
Does your company have a resignation policy?
Does the company typically make counter-offers.

Additionally:

Remind the candidate why it’s not a good idea to accept a counter-offer. Google “why not to accept a counter-offer” for some suggested talking points to share with the candidate.
Encourage the candidate to prepare in advance the resignation letter and to develop a written transition plan.
Encourage the candidate to write down what she wants to say when she resigns and to role play to prepare in advance for the resignation meeting…remind them to….breathe and compose themselves before and during the resignation meeting.
Discuss with the candidate, how the final days at the company will be.
Encourage the candidate to start planning ahead (i.e. develop a transition plan, making oneself available for phone calls and consultation, offer to help train for your transition).
Discuss the guilt she may be feeling in leaving her current company especially if she likes her manager and current company. Provide support. Show empathy.
Have the candidate call you right after she resigns. Acknowledge the stress, offer to support them after the resignation.

Check in with the candidate before, during and after the resignation. Offer counsel and to listen. Let her know that you want her to make the right decision for herself and her family. Confirm she has resigned. Ask:

How did it go?
How do you feel about giving notice?
Who did you resign to? What did he/she say?
Did you announce your departure to your department and team? What did they say?
Do you think a counter-offer will be coming? How do you feel about that?

Get them in the boat!

The Hiring Manager should call the new hire and welcome her aboard.
Invite the new hire to the office, introduce her around to colleagues and co-workers. Invite her to meetings, social gatherings, Friday beers, lunch to start mixing with the team.
Take her to lunch, dinner or for a drink every week until they start….continue to “on-board” the candidate by sharing information and materials pertinent to the company position and customers.
The hiring manager may contact the new hire regularly asking questions, providing information, checking to see that all is OK, and to continue to bond and build excitement.
Have the CEO and/or board members call to welcome her aboard.
Send flowers and congratulations.
Provide house hunting trips if there is a relocation involved.
Meet the candidate’s spouse for dinner. Arrange for the candidate and her spouse to meet the hiring executive and her spouse for dinner.
Understand that some candidates desire more frequent contact than others. Identify if your candidate is one of these and adapt accordingly. These “high touch” candidates, due to their personal make-up, respond well to inclusion behaviors. To understand your candidate better, pay attention to how often she reaches out to you or asks for your advice or suggestions. Do understand that there is a baseline of contact that is absolutely necessary to land your candidate, it’s just that some candidates require more contact than others.

My sincere appreciation to clients, candidates, search and HR colleagues for their contributions to this article.