In the June 18, 2019 Ask The Headhunter Newsletter a reader wonders whether it’s ever smart to make or accept a counter-offer.
After I accepted a new job at a better company, my employer brought me in for a high-level meeting with management and made a counter-offer to get me to stay. I politely turned them down, even though the money was higher, because as I said, the new company is a better place to work. As a manager myself, I’ve never made a counter-offer to a departing employee. My view is, if they want to go, they should go. Am I wrong?
I think you’re right. It’s a very rare situation where a counter-offer is made and accepted and the outcome is good.
Counter-offers are almost always made and accepted out of fear. An employer fears an empty position. An employee fears the next unknown job. But counter-offers almost never resolve the underlying reasons for why the worker looked elsewhere for a job, simply because more money doesn’t satisfy other hungers — which linger until satisfied.
A counter-offer delays the inevitable
Headhunters routinely advise candidates who receive counter-offers from their current employers to turn them down. Some keep a sheet with a list of reasons to reject counter-offers handy. It’s of course self-serving — why would you want a candidate you’re about to place for a hefty fee to stay at their old job?
At the point where a candidate accepts a job offer, the myriad factors that led them to consider a new job coalesce to reveal just how potent the desire for change really is. Relying on a counter-offer to squelch all those factors just spawns other problems, or delays the inevitable until it reaches crisis proportions.
Virtually every case I’ve seen where a counter-offer was accepted still resulted in a parting of ways — it was merely delayed. And that’s why in most cases employers should never make counter-offers. The cat is out of the bag. Let the employee go.
There is no better lesson about counter-offers than the very-high profile story of Robert Kelly, CEO of Bank of New York Mellon, that was reported by Fortune magazine in 2011. It’s a case study that everyone should read.
Wishful thinking breeds mistakes
A person can work happily at a job for years before feeling the urge to move on. But as soon as they realize “it’s no longer working out,” the job is a bad match because something’s changed. There may be no fault in that scenario, as long as the match is broken up before the misery begins.
I often counsel overly eager job seekers that they should be very careful what job they take next, because the reason they’re job hunting is probably because they took the wrong job last time. This goes double for employers.
In BNY’s case, it seems clear Kelly was a bad match from the start. The fault seems to rest clearly on BNY’s board of directors, whose wishful thinking led to a bad hire and to ongoing agonies.
The article describes BNY as “a highly conservative, old-line institution that specializes in mundane, grind-it-out businesses and prizes tradition, self-effacement, and loyalty.” In 2006 the board nonetheless hired Kelly, a CEO with a huge ego who craved publicity, courted controversy, and relentlessly pursued “the next new thing — a grander job, more money, and more excitement.”
Kelly lacked the conservative nature that marked BNY’s reputation, but the board “decided that Kelly was just the change agent it needed to revive the fabled institution.”
Right there the board blew it on the match: Change was the last thing the board really wanted. And his urge for change drove Kelly away from the board.
A counter-offer is a mistake
CEO Kelly secretly pursued a bigger job with the bigger Bank of America. When he finally disclosed his intentions, the board of BNY resigned itself to announcing his departure. But BofA soured on Kelly and never made an offer. The premature news about hiring him turned into a public relations disaster for all involved.
According to Fortune, burned and burned out from pursuing BofA, Kelly returned to the BNY board with his tail between his legs and begged to keep his job — just moments before the board was to announce his replacement. You’d think BNY would have sent him packing, but Kelly pleaded and BNY’s board rationalized.
The board should have considered all the reasons they were already dissatisfied with Kelly; all the disconnects between his style and their corporate mission. An overpaid spendthrift wasn’t the right leader for the bank Alexander Hamilton founded on frugality in 1784.
But they took Kelly back — “not wanting to disrupt the bank’s operations and management, and hoping to avoid a potentially messy succession.” Translation: BNY’s board was scared. They made him a lavish counter-offer even though the guy was on the street with nowhere to go. The board renewed its vows for a bad marriage.
Never take a counter-offer*
The BNY board members weren’t the only foolish party in this story. Kelly’s next two years were marked by the board’s growing suspicions, and by the dearth of loyalty between them. Kelly should have rejected the rich counter-offer the BNY board made, because the factors that drove him away lingered.
BNY feared change. Kelly was terrified of being left without a job. But the counter-offer deal did not resolve the underlying problems between them. The rapprochement didn’t last. In the end, the board gave Kelly such a boot that the story became an expose in Fortune magazine. Then the board replaced him with the kind of CEO that BNY should have promoted to begin with — a lifer whose style and values matched the company’s.
Even if you part on good terms, remember that the decision to part company probably stems from a complex tangle of factors that cannot be so easily cut with a counter-offer.
* I can think of only one case where a counter-offer turned out very well for both the employer and employee. Maybe you’ll get lucky!
Have you ever made a counter-offer to keep one of your employees who already had both feet out the door? Have you ever accepted a counter-offer yourself? Did the counter-offer change any factors that triggered the departure?