Guest comment: The counter-offer - one step forward, two steps back!

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Fancy moving to a new job? Your current employer may have other ideas, says Richard Grant at search firm JM Group.

With market conditions on a real high there's been an increase in both the volume of new jobs and the diversity of exciting new projects. Consequently, organisations are pulling out all the stops to secure the required talent. We see this effort reflected daily in job offers with a minimum of 10% to 20% salary increases. We recently placed a candidate who received a 45% pay rise - and this is becoming more common.

With candidates in short supply, it's becoming increasingly important for organisations to retain the staff they already have. As a result, we've seen a huge rise in the number of counter-offers, with the promise of phenomenal packages and promotions. Until recently, counter-offers were restricted to senior executives, but in the last six months approximately 60% of our candidates have received one.

Regardless of your sentiment towards your employer and current role, it's flattering to receive a counter-offer and the salary increase is bound to be enticing. But there is a far more commercial reason as to why a counter-offer is made. Sorry to burst the bubble!

A counter-offer is often a knee-jerk reaction from your manager. Losing a key member of staff is a direct reflection on him or her and so they will do whatever they can to keep you. Some of the implications of losing an employee are:

Cost: Replacing staff is more expensive in terms of cash and time than retaining them.

Vacuum: Replacing good quality staff in the current climate is difficult.

Skills: The loss of knowledge and the need for re-training is time-consuming and expensive.

Instability: The potential domino effect within the team can be damaging as others question their own predicament.

Resource: With a freeze on headcount, managers may be unable to replace lost staff.

Managers may not be quite so candid, however, when presenting you with a counter-offer. It will typically be packaged with much more emotional leverage:

"You're too valuable and we need you."

"We were just about to give you a promotion and it was confidential until now."

"What did they offer, why are you leaving and what do you need to stay?"

"The MD wants to meet with you before you make your final decision."

Companies will frequently offer large salary increases, new projects, promotions and modified reporting structures. Although this may appear exciting and tempting, there are often negative implications which may not be immediately apparent.

Once you have resigned, particularly if it is to join a competitor, your relationship can change. The perceived lack of loyalty may create a reduction in trust and respect from your manager. This could jeopardise your involvement in future projects and, very often, any pay rise you've received as a result of the counter-offer will subsequently be eroded in relative terms by similar increases for your peer group. Indeed, there is a good chance you could miss out at the next pay review and we've seen several instances where the decision to stay on after a counter-offer has resulted in a lower than expected payout come the next bonus round.

Even worse - from our experience, approximately 80% of those who have accepted a counter-offer leave or are terminated within six to 12 months. And of that 80%, over half reinitiate their job search within three months.

So what advice can we give you?

· In accepting a new role ensure you are committed to it. Current market conditions dictate that the recruitment process will move very quickly and now is not the time to test the water.

· Understand that many of the issues that made you consider a move will still be there regardless of any pay increase.

· The short-term cash gain as a result of the counter-offer may not work out as attractive as it may seem in the medium- to long-term.

· Remember the impact that your resignation will have on your manager, so don't use resignation as a negotiation tool. Only resign if you want to leave!

· Consider the bigger picture and the new opportunity, as well as the commitment made by the new employer to get you on board.

· Don't burn bridges. Be clear and consistent with communication to all parties.

Whether you decide to accept or decline a counter-offer, ensure that you have all the facts and the decision to stay or go is an informed one.

· Want to write a guest comment for eFinancialCareers? Send suggestions through to Editor@eFinancialCareers.com.

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