Irrational Markets and Nuclear Counter-Offers… Run Forrest, Run…

Jessica Lee had a great post over at Fistful of Talent a few years back regarding the drama of counter-offers.  Jessica had the candidate she wanted for an open spot and verbal acceptance of an offer.  Then, as it so often does, the rain started falling in the form of counter-offers from the girl's current employer.  Not 1 counter-offer, or even two.  Try three counter-offers before the candidate finally agreed to stay - and JLee was back to square one.

The recounting of the situation unleashed a torrent of emails.  Most of those expressed the oft-cited conventional wisdom of accepting a counter offer.  You know that wisdom, much of which is true - that the candidate who accepts the counter will be gone within 12 months, etc.

Some readers, however, offered up stories on getting pummeled by counter-offers that were so rich you'd question the wisdom of the candidate who would not accept them.  More via email from a reader who wrote in whom I'll call "Steve":Counter-Offer1

"Kris, you may remember me as you and I had a wonderful conversation about I don't remember what well over a year ago.  If you don't remember me, and that is fine, I am an avid daily reader of your oft-funny, and always pertinent Fistful of Talent, and have turned many other Search Consultants on to it as well.  I would never publish a one-upsman article, but wanted to share with you a back-to-back counter-offer episode that occurred to me as the Headhunter about 3-4 years ago. 
 
My first candidate was SVP Sales for a midwest HR Consulting firm involved primarily in performance improvement.  He called me referred by a mutual friend who used to work for my guy who we'll call Glen.  Glen told me he had to find another job.  He'd been with the company since he had been a rep, had built his pre-911 territory from $750K to $3M in 18 months and had been promoted to VP and since to SVP.  He said there were five things wrong, 1.  He hated his boss, a micro-manager.  2.  He thought he was worth more than the $300K package he had  3.  He was forced to move to a town far from his beloved Chicago and 4, his family was furious with him because they hated the new hometown, hated that he traveled so much and hated that in 2 years 5. his family home now had lost $140K in value while his Chicago home had nearly doubled in value to well over $600K.
 
I got him an offer from THE most prestigious HR Consulting firm on the Globe to become a Partner in the Chicago office, with a phenom moving package, a $500K first year financial package, with people that Glen absolutely loved and trusted. 
 
Problem:  Glen had confided with another VP that he was going to leave who, trying to save this mighty talent informed the CEO, who offered him the following as a counter-offer:

1.  Base salary raise of $100K effective immediately.
2.  Doubling of his guaranteed bonus to $200K
3.  Executive Coach for both the CEO and Glen to help them assuage their differences.
4.  A gift of $50K stock in the company with the company paying the taxes on that stock.
5.  A written assurance that the CEO would resign in 3 years and Glen would be sold enough stock to make him 1/3 owner of the firm.
 
Glen called me to say that his decision was based on how big a whore he was and he had decided that he was and accepted that counter-offer.  Let's not even talk about the $80K fee I was out.
 
Glen then said, "I'll try to make it up to you.  Send me THE BEST sales guy you know who is available in the industry and I promise you, I'll hire him.  As good as his word, he offered my guy the job for a guarantee of exactly what my guy was making already with a chance to make an additional $100K.
 
My Candidate, who we'll call Bill, was the Management Consultant to a major consumer goods company in NJ.  Bill had helped increase both the top and bottom lines of the company's revenue by retraining the sales force and developing the mgt staff including the CEO herself.  He was making $150K base and a $75K bonus He was worth it.
 
Bill lived in the SouthEast and at dark-thirty every Monday AM, he would leave home and fly to his meager apt in NJ and travel half the week, always returning to NJ before he could go home.  In two years, that had gone past tedium and was now burdensome.  Bill wanted out.  He resigned, but the CEO of that firm saw Bill as having been somewhat of a savior of her own job by what he had accomplished.
 
His CEO offered him:

1.  His current base  of $150K to work a total of only 75 days that current year. 
2.  Every day over that he'd be paid $3500 each and expenses.
3.  The balance of the year 160 or so other days, Bill could use to start his own Training & Development Company
4.  Contract would run a year and if Bill wanted it to go on another year, that would happen.
5.  At the end of the contract, Bill would retain this firm as a client. 
 
Bill accepted. 
 
We have literature about all the reasons to NOT accept a counter-offer that we use in my firm to hand out to candidates, but none of it can address the two very creative, and well thought out counter-offers my guys received.  These stories are famous now in our global search firm.  Since misery loves company, I thought you'd like to feel camaraderie on this topic."

The moral?  Like JLee alluded to in her post, sometimes the counter-offer signifies that the employer was underpaying the talent to begin with.  That's definitely true in many cases, but sometimes the offer you make challenges the organization to truly evaluate how valuable the talent is, and subsequently, how far they're willing to go to lock in the talent.

Like Steve found out, sometimes they're willing to go far - beyond market value far.  When that happens, you just have to shake your head and walk away.  You've just walked into what I'll call an irrational market situation...

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