The counter-offer culture, its impacts and possible alternatives
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A large number of small, mid-size and larger law firms are regularly counter-offering their staff on receipt of a resignation. The scenario is a common one: a valued, well-respected member of staff has an interview/chat with another firm (typically, but not always, a competitor) and when they go to resign at their current firm, the firm reacts by asking that person to stay by offering an incentive to do so (typically, but not always, a higher salary, a promotion, or the future promise of one or both of these things).
On the surface, the benefits of doing this seem to, at least initially, outweigh the costs of doing so, but there may be long-term implications for both the law firm and the people it employs. So what are the potential impacts and alternatives?
The short-term impact
In the short term, the impacts are obvious: the firm may not, after all, lose a valued, well-respected member of staff to a competitor and therefore not risk losing clients or the business that person has built up to that competitor. At the same time, the firm will not incur the substantial cost of replacing that person.
The long-term impact
The long-term impacts or negative implications are ones that most firms do not consider in the heat of the moment; these include the following:
Productivity and Loyalty
Despite the firm’s best intentions to keep the matter strictly confidential between the partners and the member of staff who has accepted/been offered a counter-offer, it is a fact that other members of staff, who are also valued by the firm, will find out and be upset about “the deal”. This may affect subsequent productivity or loyalty if not immediately, then in the months to come.
The possibility that clauses in the employment contract referring to a ‘yearly’ salary review may have been broken, and the perceived ‘fairness’ of the employment relationship is now questionable. This could mean management has lost a degree of control over their own business or compensation practices which could lead to confusion amongst staff about what they ought to be doing to get rewarded.
If it appears that staff who resign generally get counter-offers, then a strong message is sent to existing staff that in order to get the payrise or promotion they want, they should consider or look for a position with a competitor as part of their reward strategy. (In a competitive market such as East Anglia, a potential move would not be difficult for most experienced staff). In other words, this encourages a reward or counter-offer for the wrong reasons.
Bearing in mind the longer term impacts discussed above, counter-offers should only be made in special situations. These might be when a key part of the firm’s business will be seriously affected, or when the individual’s future potential contributions are judged to be exceptional.
In any case, the reasons for the resignation should be clearly understood as this may help the firm to make positive changes to the working environment in the future.