Should you counter offer when a key member of your team resigns?

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What do you do when a key member of the team decides to resign? Do you counter offer with the aim of retaining them? Or should you think more strategically before making a counter offer?

The 2023 Chartered Institute of Personnel and Development’s (CIPD) report on the labour market showed that almost 40% of all employers will counter offer when a key member of a team resigns.

But is this the best long-term strategy for retaining talent?  In what circumstances is it wise to make a counter offer and when should you allow your best to walk away?

Here we take a deep dive into the pros and cons of the counter offer:

What to do when someone resigns. Stay calm...don’t panic

A natural reaction to a resignation is to quickly prepare a counter offer. Losing a valued member of the team can cause issues with clients, unsettle and put pressure on the remaining team, and recruitment can be a time-consuming and costly process. But, at the same time, it’s important to look at the situation from all angles and make a considered decision before presenting a counter offer.

Firstly, you need to establish why an employee wants to leave.  It’s rarely down to just money, more often than not there are more deep-rooted issues such as a lack of career progression, burnout, a personality clash or a because they don’t enjoy the company culture and environment.

Hold a ‘stay interview’ to get a deeper understanding of why your employee wants to leave and you’ll be armed with the knowledge to work out if a counter offer is a tenable solution. 

So, back to the original question - should you counter offer?

If you’ve held a stay interview and you believe you can resolve your employee’s reasons for leaving (e.g. a pay-rise, promotion or benefits might resolve the situation) then a counter offer may be the right solution.

But if it is about the money, tread carefully.  As an employer with a credible reputation, it’s integral you provide transparency regarding pay levels, criteria for career progression and industry led benchmarks for salary grades.  This helps create a safe environment in which employees will thrive, stay challenged and motivated.

Working outside of this framework, can produce problems later undermining the culture you’ve worked hard to create, whilst upsetting other employees who feel undervalued, unmotivated and overlooked.  The ripple effect can be lasting.

And with consistent research showing 90% of those who accept a counter offer leave within 12 months, it’s a high risk strategy that might back-fire in the long-run.

What if it’s more than just financial…?

If you can’t directly address the issues – for instance, if it’s about not getting on with other people or not enjoying the working environment – there’s probably no point and accepting the resignation will be the only solution.

Global research by Microsoft discovered that pay was at the bottom of the list of reasons why employees quit their jobs in 2022, with work-life balance and lack of flexible work hours/location at the top.

In fact, in the 2023 Hybrid Work Report by Hubspot, which surveyed 5,058 workers globally and 500 in the UK, 47 per cent, almost half of UK workers say they would choose a four-day working week over a salary increase, with 50 per cent saying they would rather have “great relationships” at work than a 10 per cent pay increase.

With this is mind, you may retain staff in the short-term with financial or benefits focused counter offers, but for those employees leaving for non-financial reasons it’s highly likely that they will still leave at some stage.

Learn from the experience

Ultimately, in the long term, if you are looking to maintain staff levels, make strategies to improve retention a priority.  This can be through increasing your employer value proposition (EPV) by providing a robust benefits package, development and intentional career opportunities, flexible working arrangements and so on. This may also include aligning your brand with and clearly demonstrating your commitment to fair and transparent policies, sustainable practices and responsible leadership.

Whether you manage to retain your employee, or they do still decide to leave, a resignation always provides the opportunity to learn. Always conduct an exit interview and make the time to understand the reasons for the resignation, compared against reasons cited by previous team members who have left in the last couple of years.

A pattern may be evident, and you may discover that you need to address a recurring problem to create a better working environment for the team.

And if you do lose that key member of the team, look on it as a chance to review the job profile for which you will now be recruiting. Would the team benefit from the introduction of new skills or expertise perhaps? Sometimes, a vacancy isn’t simply a hurdle to overcome - it can be an opportunity on which to build a stronger better team.

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If you need help with recruitment and want to ensure you see only the best candidates, speak to us today – we’d be delighted to discuss your requirements and the services we provide.

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