It’s a familiar scenario for some: you’ve worked for the company for years, and feel your contributions are under-appreciated, and that it’s time to look for new opportunities. You begin the job search process, and find a new employer who is excited to have you come on board, providing a nice increase in your compensation as a part of the package. Deciding to take the new offer, you go back to your original employer to break the news… only to discover that, when faced with your anticipated departure, the attitude has changed. Suddenly, your existing employer offers you higher compensation; perhaps a promotion and new title; maybe even some equity in the company. So what do you do? Are you appreciative your employer finally recognizes your value? Or insulted that it took your imminent departure to raise the issue? If you’re the employer, did you just come up with a way to retain your employee, or hasten his/her departure?
The inspiration for today’s blog post is a situation that recently arose for my business partner Caleb Brown in our firm New Planner Recruiting, which was essentially a mirror of the scenario described above. An individual contacted us after several years of feeling discontent and unrecognized at his current firm. We found a firm that would be a good fit for him, and that appreciated some of his unique abilities and background. They made a reasonable offer, which he liked. But upon returning to his original firm to inform them of his decision to leave, they unexpectedly responded with a counter-offer… a whopping 50% raise, and a significant promotion in the career track.
On the one hand, he was flattered. Finally, to be recognized for the contributions he makes to the firm! Clearly, they didn’t want him to go, and were making it clear that they really viewed him as a valuable part of the company. The promotion would allow him to move further down the career track at the company, and the salary increase itself was very significant, bringing him materially above even the compensation level he had just been trying to negotiate for himself at the new employer.
On the other hand, he was insulted. It took a very real threat of leaving, just to be recognized!? The company valued him so much it was willing to give him a huge raise, yet what if he hadn’t threatened to leave… would the company have just continued paying him at the lower rate? Does that mean they were deliberately taking advantage of him, using the fact that he had been a loyal employee to under-pay him, just because they could get away with it? If the company was willing to pay him less than they thought he was really worth in the past, isn’t there a significant risk they’ll do it again? Is that the kind of company at which you even want to build a long-term career?
If you were an employee in this situation, how would you feel? Would you be insulted the company was "suddenly" willing to pay you so much more, implying they were deliberately underpaying you in the past, and leave? Or would you be flattered that the company was finally recognizing your value, and stay? Would the fact that the original company was willing to pay you even more than the new offer help to sway you one way or the other?
If you’re a firm owner, what would you do? Is having a big counter-offer ready a good idea? How do you balance the need to keep the firm profitable, and not just "throw" money at your employees, with a desire to keep your employees compensated and motivated? Is it "good business" to always pay your employees the maximum amount you’d ever offer them in the event they threatened to leave, or does that just tend to overpay your employees?
What do you think? What would you do if you were the employee in this situation? If you were the firm owner? Is this good business, or bad business?