Hearing the words “I have accepted another offer…” can be an entrepreneur’s worst nightmare… especially since it’s most likely to happen with team members who are high performing (the ones most likely to be recruited away!), where their departure could be a substantial setback. And as frustrating as it may be, it is inevitable that this will happen if you manage people long enough.
Firm owners typically have several different ways to respond when the news comes, especially if team member is departing for a competitor: 1) Thank them for their service, wish them well at their new gig, start searching for a replacement, and develop a transition plan; or, 2) Try to get them to change their mind by making a counteroffer.
In this month’s article, we are going to examine the pros and cons of a firm owner extending a counteroffer to retain key team members.
Commonly cited reasons for making a counteroffer to a recruited-away employee:
- The organization avoids having to find and train someone new
- Gives firm time to find their replacement (assuming they’ll eventually leave anyway)
- Managers truly unaware team member did not feel they had a growth opportunity and/or felt underpaid. (If you need further guidance on what a reasonable compensation plan could look like, check out last month’s article here.)
So what happens when advisory firms make counter-offers? Do they actually work? We can start by looking at the general business statistics around counter-offers, and the most commonly cited outcomes:
- There is a good chance the employee will accept:
- Employees do accept 57% of counteroffers made to them. Once the terms are even, a lot of employees are content to stay where they are, rather than take the uncertainty of a leap to the unknown.
- Team member probably won’t stay long afterwards though:
- Up to 80% of employees leave with 6 months of accepting counteroffer, and 90% leave at the 12-month mark. As if the underlying problems in the relationship between the employee and the firm aren’t fixed, a counter-offer just delays the inevitable.
Of course, these are general business statistics, and not specific to the advisory industry in particular. In practice, though, we find that these outcomes are typically true in the context of advisory firms as well. What we have seen at New Planner Recruiting is that:
- Usually, if someone has their mind made up, they have already envisioned starting at the new firm. And once the mental aspect of the impending transition is complete, their productivity never reaches the same levels again.
- It is probably something else, other than financially motivations, causing them to want to leave, but most Gen Y college grads carry student loan debt that they are anxious about repaying (so extra money can be extra enticing to younger employees).
- The common negativity of the experience of needing to go through a counter-offer adversely impacts culture and morale, because members of management and other team members viewing retained team member as the ‘greedy one’, ‘lacks loyalty’, and often ends out being treated as a scapegoat for anything that goes wrong in the future (which causes them to eventually depart permanently).
So what’s the alternative, if counter-offers are not an effective way to stave off the loss of a (potentially key high-performing) employee? What we suggest to do instead is to get to the root of the issue, just as a physician would do versus seeking solutions that only treat the symptoms of a deeper concern they have.
Here are a few things you can do to hopefully keep from having a team member get to this point:
- Schedule frequent discussions with your team members. If you aren’t doing this, try scheduling 30 mins each Friday for them to talk about anything they would like. Seeing that they have devoted time blocked on your calendar goes a long way, and reiterates your commitment to their development, which is what people want most. As soon as they think they will develop more quickly someplace else, it is difficult to get things back on track. Plus, these standing meetings will be productive and if you do them long enough, will give you the best shot of noticing when they become less engaged, which could be a sign something is up.
- Develop a career path and expectations guide to monitor progress. It has been table stakes for some time to have a career path to attract the most talented people, so you should have something you show potential hires during the interview process. Always make sure you have very clearly laid out what they must do, though, in order to move up. Telling them they can go from Client Services Planner to Partner is great, but it’s crucial to set clear expectations of what will be required from them and the firm for that to happen (otherwise, they’ll eventually just resent that it didn’t happen for them already!).
- Stick to a formal performance review schedule. The status quo is once per year, but top managed firms can meet as often as monthly to check goal progress and plan new priorities. Our firm uses a quarterly incentive plan, so it is natural for us to review these items no less than four times per year.
- Administer an anonymous career satisfaction survey. You can use a self-made survey, or hire a consultant to do this for you, and it is a surprisingly good pulse of what is happening in your firm. Consider including questions like, ‘what else needs to happen for this position to be your dream position?’ or ‘Why do you feel like you are able or not able to achieve your full potential here?’ It won’t be perfect because you will still have a percentage who won’t answer honestly in fear of retribution, so be sure to communicate clearly that it is anonymous, and no computer IP addresses will be tracked.
We hope these are helpful if/when you encounter this situation, but also realize that sometimes team members’ needs change and it has nothing to do with you or your firm so try not to take it personally, make any knee jerk decisions, and start questioning your overall culture.
New Planner Recruiting Team