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Never Make Counter-Offers (2011) (bramcohen.com)
90 points by 127001brewer 1759 days ago | hide | past | web | 57 comments | favorite

The way the industry views raises is bizarre. In my mind, there should be an automatic say 3% raise to everyone's salary every year, performance review aside. If someone's not worth 3% more to you after a year, they should be fired. After that, give performance based raises to everyone. I know so many people who have quit because management never bothered to give out raises (hey, they make $150k a year, they don't need a raise), yet their employers could have kept them for a couple thousand extra a year. After the person quits, the company happily spends $40k on a recruiter to find their replacement.

I started working at a company out of college, and a year in, after a good performance review, got a 2% raise. I found out that this put my salary at slightly less than the company was offering new college hires for the current year.

So I confronted my boss about this, and asked for a 4% raise (including the 2% I was offered). While my boss agreed (or at least said that he did), HR blocked it, and so I was left with my 2% raise.

I did what most people would do - I found a new job and gave a generous 3 weeks notice. The counter offer was $20,000 on my next paycheck, if I promised to stay for at least another year. The raise that I had asked for was $3500 over a year. Naturally, I turned this down.

It is bizarre when companies operate this way, but, without defending the practice, you need to understand that few middle managers have the power to change this situation. Moving up the ladder, owners and executives will simply say "this is how we do things" and leave it at that.

Personally, I think this situation exists because many corporate leaders have simply decided to preserve their compensation/authority pyramid at the expense of keeping their best potential employees. There is less short-term risk and disruption to the pyramid, the theory goes, to hiring a new wave of employees than to augment the more experienced staff.

Remember all of this, though, for when you have the power to influence the compensation of others! This understanding can become a competitive advantage when you're building teams of your own.

I think the automatic 3% raise is so important because our salaries are worth less every day. If a company isn't even willing to keep up with inflation then they are creating a very strong incentive to leave. I think most people stick around at jobs like this because they don't want to put forth the effort of looking for a new one.

Personally, once I've gone to the effort of getting my resume out and interviewing, I'm going to take the new job rather than listen to a counteroffer from the old one.

This makes no sense to me. The initial environment of using counter-offers as a substitute to raises is, of course, crazy and must be avoided. But never making counter-offers is also dogmatic and crazy. When something is bad, the answer isn't to do the opposite. Maybe 90% of the time, doing the exact opposite is also bad.

It only seems right to me that counter-offers should be made when the situation warrants, and that they should in no way be made to substitute for proper compensation and raises in the first place.

Ideally, you never have to make counter-offers, because you pay your people properly. But mistakes will be made. If a really good employee gets a job offer with a better salary, and suddenly you realize that this guy is worth it, why not make a counter offer, if you think he's honest and isn't going to just leave three months later anyway? If the situation warrants it, do it. Take the situation as a sign that you screwed something up, but that's no reason to not even bother to try to fix it. Likewise, if a guy gets another offer and he's clearly not worth it, wish him well and let him go. Don't be dogmatic.

Why did you not realize that “this guy is worth it” until he already has one foot out the door?

If his only reason for being dissatisfied with his current job was the money, why didn’t he just go to his manager and say “hello, I was looking at salary surveys and other information about the job market, and reviewing all the ways that I have made money for you guys over the past year, and I think I deserve such-and-such more than I’m getting right now”? Why is he finding staying in the familiar environment of your company less attractive than job-hunting in his spare time, possibly even burning vacation time for interviews, and then going out to work with a bunch of strangers?

Not everyone knows their worth and some people avoid confrontation (you are confronting your boss in a way). Some managers might overlook some people (not saying they are good/bad at managing if they do).

I had the experience of being underpaid (while I was still in school so it wasn't all about the money) but after I graduated I wanted to make at least close to what is going around here. I had it pretty lucky that I could just waltz into the boss's office and say I need to make more. It had been over a year and I had graduated in that time frame so I felt I had a bit of an argument and I am the guy who hates confrontation. At that point it was pretty much only about the money as almost everything else I did like.

> Why did you not realize that “this guy is worth it” until he already has one foot out the door?

There are plenty of reasons this could happen. It's a mistake, and you should analyze the situation to see why it was made. But that doesn't imply you should let people walk out the door just because you made a mistake.

You assume that anyone who comes up with this thing implies a particular scenario, when it really doesn't. It could simply be that e.g. an employee got a cold call from some friends who recently got some funding and is toying with the idea of switching jobs, and the higher salary is the one thing that really makes him think of taking the offer.

According to my recruiter's stats he told me that 93% of those that accepted counter-offers from their original company were looking for a job again within 6 months. The two scenarios were a) The company extended the counter offer to keep the employee long enough to carry out the contingency plan (i.e. hire someone to take his place and then fire the guy who they couldn't count on to stick around) or b) all the reasons why the guy wanted to quit are still there, except maybe the money one -- and rarely does someone quit solely over money. People will deal with less money if they love getting up and going to work in the morning.

Counteroffers usually fail. The employee is usually in a different company in 12 months, either by getting fired (as soon as a CO is made, the boss is working on a replacement plan) or taking another offer elsewhere. Only if the counteroffer involves a move to another team or up the chain of command does it work.

Money has a surprisingly small effect on employee happiness. Most people who leave do so because they outgrow their role. Giving them more money to do the same stuff isn't going to have a long-term effect.

This happened to me; I was aggressively talked down from an attractive job offer I received, and when I accepted a counter, a succession plan was put in place to improve the the timing of my presumed inevitable resignation.

This isn't folklore. There are roles and companies where counteroffers are pathological; sometimes it's overt and the company is trying to screw you over, and other times it's subtle and emergent and has more to do with the inevitable loss of traction that comes of the company preparing itself more deliberately for your eventual departure.

If I ever end up in this situation again, I'm certainly going to bring this concern up directly and immediately. It's something you can work out if you're negotiating in good faith; it's not the case that there's no such thing as a successful counter.

If your story is any way indicative of SOP, it sounds like a counteroffer should come with an employment contract with time and termination restrictions.

The odds of you ever negotiating something like that from any company with funding and/or house counsel are effectively zero. The closest you'll get is severance, but note that negotiating an effective severance agreement is expensive and can get adversarial. (It's easy to get a severance agreement that does not really protect you).

By this I mean, don't look to contractual provisions to mitigate the risk of a bad-faith (or bad-in-effect) counteroffer. You'll either establish real trust in your employer or you should walk.

either by getting fired (as soon as a CO is made, the boss is working on a replacement plan)

Does this actually happen? Has it happened to you, or have you gotten rid of someone as a manager in this way?

Head of Talent at a few different startups here. I have seen this happen multiple times.

"Head of Talent" sounds pretty third-party HR, sorry. The fact remains is that this kind of conventional wisdom persists without examples.

Thanks for telling me what my job is, but its not third party HR. I am the head of talent at a specific startup and I had been at a different one before that. I hope you made yourself feel better with this bizarre snark out of nowhere though?

Used to work for a Fortune 100 tech company everyone has heard of - and have heard this confirmed from multiple members of first-party HR.

You're under no obligation to believe me, but I've heard this corroborated by people in the know.

So, "friend of a friend" is all we have for this? Hearsay? I'd think that if this was anything more than received wisdom that there would be more concrete stories about it.

Hey, cut it out. Multiple people have now told you they have direct experience with this issue. If you have a real argument against the idea that counteroffers are risky, marshall it.

After you tell me I'm lying about what my job is, you accuse someone else of only relating stories through a friend of a friend, when it is clear thats not whats happening. What is your agenda here? Your disconnection with reality is getting a bit scary...

Huh? The guy is posting from an account with 600 karma; I'm going to assume his experience is at least as reputable as anyone else's here. Though it'd be useful to hear a slightly more specific example with the timescales and nuances on which these things happen, yes.

Not saying anything about the guy's experience (I usually take people at face value when they say what they do), but karma's a pretty shitty measure to judge expertise.

- Signed, the guy with 23,000 karma, who was once #2 on the leaderboard and is still in the top 30.

I think there's a lot more meaning in the difference between 0 and 600 karma, than the difference between 600 and 23,000 karma. I was only speaking to my willingness to believe this guy wasn't flat lying or exaggerating about his position, or simply trolling. But tips hat point taken.

For what its worth, I;m not lying or exaggerating. I can send you my LinkedIn if you'd like and it would be clear I'm not lying. I suppose I could have provided some examples, but I would have been a lot more willing to do so if the guys original response had been "can you give a few examples" versus "hey stranger on the internet, let me accuse you of lying about what your job is, because that seems rational..."

No matter where you are, there is someone who wants your job. Even if your job sucks, there are people out there who don't know that yet.

As soon as your manager gets an inkling that you'd rather be somewhere else or doing a different kind of work, the clock is ticking. No manager wants to waste time or energy on someone who'll move on to greener pastures in half a year.

"as soon as a CO is made, the boss is working on a replacement plan"

I hear what you are saying but you cannot generalize this. One anecdote: my wife successfully got a counter-offer from one of her jobs a few years ago and stayed for a long time afterwards. her company/boss wanted her and did not think of her leaving to get a decent raise as a threat. They understood and obliged.

"Counteroffers usually fail." Which is why I advocate thinking about the situation and only making counter offers when they actually make sense.

I mean, startups usually fail. Does that mean one should never start a startup?

Of course. If you can come up with an intelligent counteroffer with a decent chance of success, then go ahead. It is, however, a failure of management to have had to make one. This may be why employees who take CO's often get fired; their existence is a continuing embarrassment to the manager who failed to promote/raise them until an ultimatum was made.

Which is exactly what I said in my comment. Treat the need for a counter offer as a failure, but don't just rule it out because the situation shouldn't have happened.

Before I was a manager, I believed that taking a counter offer was always stupid. Now that I'm on the other side of the fence, I see that it's not always so cut and dry. I wonder how many of the people supporting the author are actually managers in charge of compensation decisions.

I must be out of the norm.

Every raise have made me happier.

I will welcome every raise with open arms.

I dunno about this one. If one of my top engineers wants to leave and there's a chance that I can get him to stay by offering him a decent raise ... then I'm going to try to give him a raise after thinking through a couple of things

1. Did the ground shift underneath me overnight in terms of engineer salaries? This can happen very easily ... a couple of startups move into town and start trying to poach devs ... guess what, salaries are going to go up and if you don't play, you're going to lose your best guys. that one engineer leaving might just be the beginning of half of your team coming to you going "Hey man, these guys just offered me $140k ... you guys are paying me $95k ..."

2. What does this guy mean to the team ... and not just in cranking out high quality code? What would the effect of his departure on morale be. If he's very well liked and looked up to as a mentor/leader by younger developers, I'm inclined to try and come up with something to get him to say.

That being said, I'm not a fan of trying to do an exact match, just because, it feels too much like being held hostage. What I'd do is try to find out what they like about the new offer so much and see what I can do ... things like health insurance, shares, flex time and even process changes seem to get far more mileage out of developers than cold cash. I'd try to put together a package for them (with increased salary of course).

If that got them to stay. I'd re-evaluate the current package of my entire team and see about extending the same deal to everybody, to (hopefully) pre-empt another situation like this in the near future. That way, if I got another engineer wanting to leave, then I know that there isn't that much more I can do to get them to stay.

PS: Learn to be distrustful of the the words "always" and "never" ... because in real life its usually more like "it depends"

Unfortunately, this is nothing new. I saw this all the time back in the '90s - it was a running joke where I worked (which really wasn't a joke at all) that to get a raise, you quit and come back. Seriously - people would quit, work for another company for 6-months to a year, then they'd come back making massively more than before they left. This company also had percentage caps on how much you could get as a raise, even when changing positions into something completely unrelated - or at least that's what they told me when I changed positions, twice, over the 8 years I spent there. When I finally got fed up with the minuscule raises and ridiculous politics, I had my choice of job offers (was flown halfway across the country for interviews) and got a 50% salary increase with the change in employers (I could have more than doubled my pay, but liked the low-politics in the company I picked). When I submitted my resignation, my boss said to me "I know what you can make out there, so I'm not even going to insult you with a counter-offer." Those words shocked me and proved to me they knew they were underpaying me and didn't care (I made my case multiple times for a raise and promotion that I never received).

Sadly, I'm still seeing it happening and in a completely different industry and in a much higher level position.

FWIW: I'm one of those "too loyal for their own good" types (who get abused for such a trait, as described by others above).

The most devoted, upstanding employees are the least paid, and the most conniving, disinterested ones are paid the most.

Why can't you be a devoted and upstanding and also treat your relationship with your employer as a business one?

You can, but as this relationship is obviously toxic, those devoted, upstanding employees who treat the relationship as a business one won't stick around.

Why is it toxic? People are under obligation to their shareholders as much as companies are. It's not personal.

Requiring people to go out and get other job offers in order to get any sort of raise is toxic because it forces a great deal of effort and risk just to keep up with inflation.

Amen. While I'm sure Mr. Cohen used this phrase for its' impact, if you divide the world into devoted / conniving people, you have no incentive to be anything other than a short-sighted, tight-fisted moron.

Remember - sweet, kind, loyal dogs get put down as often as mean biting ones. And you're lucky if your employer thinks of you as anything higher than a dog.

An important corollary (learned painfully) is: Never take a counter-offer.

There are reasons you went out into the world, found an alternative and decided to take it. Even if money was part of the motivation, it's not the sole reason. Money can paper over those issues for a while, but they will come back.

@fpgeek, Can you please elaborate, what was so painful?

Depends on the industry. I think for software development, this advice holds true. We're at a time where really good developers are at a premium, so to get good work you'll have to pay for it.

There's also another side to this: don't create ultimatums for your employer. I don't know about you guys, but I get contacted by recruiters nearly every day. There is a huge demand for our work. This makes it very easy to "hold your boss hostage" but it only breeds contempt and distrust as they look at you as someone with one foot out the door. The best time to negotiate salary is up front, or while being promoted.

it only breeds contempt and distrust as they look at you as someone with one foot out the door.

Are there any anecdotes or anything about this actually having an effect on anybody's job, or that it actually exists at all? Surely there are people here who have managed those who have gone down this path who can speak to its practical results.

In my experience it works like this: you go to your boss as part of the review cycle and ask for a raise and your boss goes off and talks to the people that make those decisions. They say no. You tell your boss that you are going to look elsewhere, as you are on good terms, they ask you to at least see if they'll make a counter-offer before you hand in your notice. You end up getting more money than you wanted in the first place, your boss is happy that they've kept you.

Any sensible manager should know that if your staff is underpaid, they are very likely to be looking elsewhere. Personally I've always been supportive of my employees looking elsewhere, do you really want people that only work for you because nobody else will have them?

Anecdata: when I left my last job, I made it clear I wasn't asking for a raise or match. I was leaving, very sorry to do so, but if someone tried to hold me hostage for a raise, I'd fire them.

Can you elaborate on that a bit? It sounds like you are unwilling to negotiate with your employees.

Terribly sorry, I should have written more clearly. I was the employee leaving; they asked why, if I was unhappy about the pay, didn't I ask for a raise? I said that were I an employer, I would fire any employee who held me hostage for a raise, so I would not ask for one.

I wish you emphasized make extremely fair initial offers as much as "Never Make Counter offers".

Have the mods been editing titles to include the year of the article recently? I've noticed a lot more of the front page articles include the year in parentheses now.

It’s supposed to be standard HN practice for a poster or moderator to do so if the article isn’t from the current year. I’d guess you’ve noticed it because there are more such articles, not because there’s more moderation.

By the time employees think about taking a job elsewhere, it's often already too late. A counter-offer only retains the talent temporarily and more often than not, there's some fundamental dissatisfaction with the job.

One begs the question, what should employers do to retain talent?

The author left us with "Have clear and consistent salary guidelines, and regularly give raises to people who are outperforming their pay level." This takes the approach that prevention is key.

In my last job, I thought about quitting months before actually giving the notice. My employer counter-offered with 10% above what the other guy was offering. This temporarily retained me. However, for months after, I wasn't performing at my peak and eventually sought employment elsewhere.

"By the time employees think about taking a job elsewhere, it's often already too late."

Is that really true? Well, not for me. Every time I changed jobs, it was because of the money. The only time I worked in a bad environment, my boss was let go before I quit.

All those times, if I could receive a bigger salary without changing jobs, I'd probably stay there.

It really depends. If your company/boss is just lazy to give you a raise (upto his limits imposed by HR mafia), you like your job and boss/team a lot but decide to move primarily because of money, a counter offer may not be a bad idea especially if the boss values you.

However, if you are just not happy with the job/boss/company/team whatever and decide to move, then counter offer may not be a good idea. Also, in certain cases, if the company/boss needs you only for a short critical time period (e.g. accountant during fiscal year end is critical), then counter offer might be tricky since they could always get rid of you later if you are not valuable overall.

So yes, it all depends.

I have a policy of never making counter offers when someone says they are quitting. If they say it's about the money, it's never only about the money. In 16 years, I've seen people "saved" by a counter-offer, but it never lasted. They were always gone in 6-12 months anyway.

Off topic, but please change the background on your blog, it's not very user friendly.

Hiring a new employee, and ramping them up (which results in communication overhead and noise from learning) is very costly. Sometimes, a counter-offer is a good solution.

"Your W2 is your review"

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