Counter-offers – a slippery slope

We all remember the last boom in the mid to late 1990s, with its demand for the highest-quality individuals. People moved jobs more readily than before, but few resigned without their employer trying to persuade them to stay. Employers knew the problems they would face seeking replacements.

However, the downturn in 2000 meant that buybacks and counter-offers instead became borne more out of courtesy than necessity. This is about to change.

Law firms are again hiring across most sectors. The resurgent M&A market is a driver, but there are other factors. Finance and private equity are obvious ‘hot’ areas, but more esoteric disciplines such as competition, pensions, tax and life sciences are also figuring in firms’ strategic plans. There are simply not enough lawyers to go around. Retention is therefore once again at the top of the agenda.

From an individual’s point of view, handing in one’s resignation is just the first small step towards leaving. They must be clear about the statement being made and the reasons for doing so. An acceptable offer has been received, but the individual may not be prepared for the prospect of a counter-offer.

It is understandable that the lengths to which their current employer may go in order to keep them flatters individuals immensely. But a word of warning: this may be because the employer is aware of how hard it will be to replace the individual rather than being in the best interests of the employee.

Resigning is usually an emotive situation. An individual who already feels slightly guilty about resigning will be susceptible to coercion. A classic scenario when an individual resigns is that the managing/senior partner will ask to have a chat with them. These powerful figures can turn on the charm, and the very fact that they are taking time to see an individual can be very flattering. The resigning employee may begin to wonder whether they should stay. The managing partner will be wondering whether it is really worth keeping them on and for how long they will stay.

Employers should be very mindful about using counter-offers. Quite often, in the heat of the moment, they fail to consider the internal ramifications of their actions. Offering a special deal is not always an inspired move. It can give rise to a culture of crisis management, one where employees know that resigning is the best way to achieve aims that in fact should be discussed and negotiated via a review.

Although a headhunter’s obvious standpoint decrees that their candidate should never accept the counter-offer, there are some that are difficult to refuse. The prospect of immediate partnership/directorship, a 50 per cent salary hike or a secondment can be very tempting. However, there are some employers who will find a reason to renege on the deal.

Buybacks are doomed to failure because they are short-term fixes to long-term problems. The lawyer wanted to leave, and for whatever reason that situation will appear again, and when it does they will definitely move. The law firm has simply bought itself time.

A smart, if somewhat ruthless, firm would immediately start the search for a successor (internally or externally) once they have bought back someone, but most don’t and then find themselves in the same situation in the future. In the meantime the promises that have been made to retain the resigning individual will have leaked out and will increase the temptation for others to follow suit. Hence a bad precedent is set.

When faced with a counter-offer an employee should decide whether the content of the offer would have emerged if they had not resigned. An employer should evaluate whether the departure of the individual will really damage the business, or whether the repercussions of a special deal could prove even more damaging.

At the point of resignation the trust between employee and employer is broken and, whatever happens, the relationship will never be the same again.

Nick Woolf, director, Norman Broadbent

Please note that this article represents the opinions of the author. It does not necessarily reflect the views of The Lawyer or Centaur Media.