What Counter Offers Really Mean in Today’s Economy

By Sandra Nadeau Gifford, Client Account Coordinator

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In today’s economy executive recruiting firms are finding it increasingly difficult to bring closure to the employment offer and acceptance process.  Firms are facing a unique set of challenges brought on by an uncertain financial environment that requires them to devote more effort in pursuit of the ideal executive for their clients.  With high unemployment and continuing corporate downsizing one would assume that today it is easier to find qualified candidates than in recent years.  However, other factors such as the hesitancy of candidates to relocate and the increase in counter offers by their current employers are new complications that must be dealt with. Presently, employed and unemployed candidates are hesitant to relocate, especially when many are upside down on their mortgages and uncertain if they will be able to afford a comparable home in their new location. Many candidates are now asking for compensation for their negative equity as part of their employment offer, something that was previously rarely done.

The greatest challenge, however, for executive recruiting firms in the present economy is the increase of counter offers given to employees by the companies they are intending to leave. In a recent poll conducted by Top Echelon Network, 23% of recruiters reported a high level of increase in counter offers, with another 35 % reporting some increase in counter offers. That’s a staggering 58% increase. Candidates and recruiting firms are investing valuable time and money in pursuit of filling an executive position yet in many cases, the successful candidate chooses to remain with his/her current employer and the search firm is required to do more work. The question to consider is does remaining with an employer due to a generous counter offer serve the best interest of the individual. Statistics strongly support that it is not.  According to US News and World Report, 70 – 80% of employees who take the counter offer and remain with their company either leave or are let go by their employer within 12 months. The reason is simple: once an employer views an individual as being disloyal or not a team player, it is inevitable that they will find someone to replace that individual. Employers initially scramble to keep talented executives, not wanting to create a void in their management ranks, but will start planning to hire a replacement.

Firms must today be better prepared for counter offers by addressing the issue upfront, before either side becomes too invested in the search process. Job searches should not be used as leverage for a raise or a promotion. Recruiting firms need to inform prospective candidates that they most likely will receive a counter offer from their employer and to prepare for it. Candidates need to keep in mind the reasons that originally motivated them to search for a new position and understand that accepting a counter offer will not change their work environment or fix a company’s financial position. Furthermore, prospective executives must have realistic expectations and realize that most employers will not compensate for loss of equity as part of their offer package. Candidates should consider all aspects of a job transition before forging ahead with the search process, such as the financial ramifications of relocation, including negative equity in their homes, and factor in any possible losses into compensation negotiations rather than as a separate request. In today’s economy, counter offers are more and more prevalent and will continue to affect the dynamics of an effective search process. While today’s economic climate makes the recruiting process more challenging, at the end of the day, the goal remains the same: Recruiting firms seek to place the best candidate for their client, and executives aspire to find an opportunity that best meets their professional objectives.