Research from recruiter Robert Half has found that 94 per cent of Australian CFOs indicate that they have at some point extended a counteroffer to a member of their team handing in their resignation.
Breaking this down, 34 per cent of CFOs ‘always’ make counteroffers, 25 per cent ‘often’ make counteroffers, and 26 per cent ‘sometimes’ make counteroffers. Meanwhile, only 9 per cent ‘rarely’ make counteroffers and the remaining 6 per cent ‘never’ make counteroffers.
However, these counteroffers are often ineffective, with 66 per cent of those who made a counteroffer admitting that the employee still left the company. For 37 per cent, the staff member left within six months, for 20 per cent the employee stayed for less than a year, and for 9 per cent the employee stayed over a year.
“Counteroffers are often an immediate reaction to a skilled employee resigning, however offering a purely financial incentive to remain with the company rarely works. It can be a very costly way to delay the inevitable,” said David Jones, senior managing director at Robert Half Asia Pacific.
“With the war for talent and companies actively poaching top employees from competing organisations, business leaders need to proactively address their staff retention measures and not wait until one of their top performers wants to leave the organisation. It’s too late then.”
“Managers need to check in frequently with their employees to make sure they’re challenged and satisfied with their career path, as well as regularly assess salaries to ensure compensation is fair.”
The reasons for CFOs to make a counteroffer vary, with 68 per cent indicating the main reason is to avoid hiring costs for a replacement, 60 per cent referring to a desire to keep knowledge within the company, and 40 per cent citing a smaller talent pool of candidates.
“While hiring and onboarding a new employee comes with additional costs, offering a higher salary as a counteroffer does not always translate into better performance. When employees feel they are ‘indispensable’ in a company, it is possible they have little motivation to work harder. What’s more, there is a risk they will become less efficient, gradually becoming a strain on the company at hand.”
Mr Jones also warned that counteroffers can set a precedent within the business, undermining trust and morale in the long term.
“Business leaders will send a message to staff that, unless they threaten to resign, their pay rise request won’t be considered. Some may even look around at other jobs merely to be able to renegotiate their employment terms,” he said.
“So while staff retention is the key driver for extending a counteroffer, it might actually have the complete opposite effect within the wider business.”