Navigating Counter Offers: A Strategic Approach to Retention & Leadership RenewalBy Jennifer Silvester
Losing a C-suite executive or a key member of your leadership team can send shockwaves through your organization. You may be tempted to ask if they are open to a counter offer just so you can avoid the negative effects of their departure. But is this the right move for your business? The answer isn’t straightforward, and understanding when counter offers are suitable and effective can guide your decision-making process.
The Landscape of Departures
Over the last few years, we experienced what many called the “Great Resignation”. As of mid-2022, a Deloitte survey revealed that nearly 70% of executives have contemplated leaving their positions. A particular concern arose from the disproportionate rate at which women were leaving their executive roles, exacerbating the gender gap in leadership positions. Recent reports indicate CFO’s in particular are leaving at higher rates than ever before.
“In the first half of this year, 103 of the top 1,000 companies ranked by Fortune lost their CFO, according to executive search firm Heidrick & Struggles. In the same period a year earlier, the figure was just 79. If the trend persists, one in five companies on the list will replace their CFO this year – the highest proportion in over a decade.”
As the dust has settled on the pandemic and the labor market has slowed, so have the overall resignation numbers which have now returned to 2019 levels. It is important to understand however that in 2019, resignations were higher than any other time in the last 20 years. It is fair to say that the labor market, including among executive roles, will continue to be unsettled and highly competitive.
Being Proactive Makes All the Difference
It is important to recognize that executives are under more pressure than ever before as the role of the C-Suite and senior leaders is shifting dramatically. The requirements and skills to be a successful modern executive are more complex than ever before. A Deloitte survey indicates that 89% of C-suite executives prioritize well-being in the workplace, with 81% valuing it even more than career advancement. Another survey revealed as many as two-thirds of leaders feel their well-being is at an all-time low. Simply put, it is tough out there and leaders need more support to be successful than they have in the past. Some easily actionable steps organizations can take include:
- Formalize Executive Mentorship & Peer Support: Ensuring that your senior leadership has access to mentors both inside and outside the organization and offers an additional layer of support. Peer groups also serve as a sounding board for leaders facing challenges. Helping your senior leaders develop a support network can be powerful in many ways, including improving retention.
- Understand the Impact of Diversity & Inclusion: We know diversity in leadership is crucial to drive business success but there are still significant gaps to close within leadership for all underrepresented groups. While not always communicated, this lack of representation and inclusion could be a significant contributing factor to a leader’s resignation.
- Continuous Feedback Mechanisms: Implement regular feedback sessions with leaders as a standard across the organization. This can also require investing in training for leaders at all levels to understand how to ask for, receive, and act on feedback – particularly when it comes to understanding a direct reports well-being in the workplace. Implementing anonymous platforms where leaders can voice their concerns, aspirations, and suggestions can also be helpful. This will not only provide insights into their motivations but also foster a culture of continuous improvement.
- Utilize Data to Spot Vulnerability and Opportunities: Modern HR systems can provide predictive analytics on which executives or leaders might be at risk of leaving. By examining factors like changes in productivity, engagement scores, and absenteeism (with their organization), companies can proactive address potential resignations before they happen.
Being proactive means creating a culture of continuous feedback, transparent communication, and using data to drive action. It should not be shocking when an executive announces their intention to resign.
The Importance of Understanding Motivations
To solve regrettable executive turn-over and whether a counter-offer strategy is wise, you should first start with the key question: why is an executive resigning? As we have indicated already, resignations at the executive level are rarely driven by compensation. Factors such as leadership burnout, limited growth opportunities, poor work-life balance, and a lack of support are the most common reasons an executive will explore new roles.
In this era of career reevaluation, it’s crucial not to pigeonhole resignations as mere salary disputes or make broad assumptions. Executives are unique with different priorities and perspectives, it is important for you to understand the motivations and drivers for each leader on your team.
The Counter Offer Dilemma
The allure of counter offers lies in the potential to salvage departing leaders. Employers often believe that an improved compensation package, a promotion, or even the prospect of remote work can entice executives to stay. However, the efficacy of counter offers is questionable, especially if the underlying (and sometimes uncommunicated) reasons for resignation remain unaddressed.
To determine whether a counter offer is appropriate, consider if it genuinely aligns with both the employee’s needs and the company’s interests. Address the root causes of resignation—whether it’s the desire for a promotion, better work-life balance, or more direct reports.
Sometimes — in fact often, counter offers will not be the lasting solution you seek. Research from Harvard Business Review indicates that about half of employees who accept counter offers start looking for new opportunities within two months. Moreover, approximately 80% of those who receive counter offers end up leaving their positions within a year.
The Power of Healthy Attrition
When a key leader submits their resignation, consider their departure as an opportunity for both growth and reevaluation. A counter offer might not be the ultimate solution, particularly if the issues go beyond immediate compensation or benefits. But healthy attrition can make way for fresh perspectives or drive action to prevent future regrettable losses.
In a landscape where resignations are commonplace and counter offers might not be the panacea we hope for, it’s time to adopt a nuanced approach. Take a moment to reflect on your organization’s approach to counter offers. Are they a knee-jerk reaction, or are they part of a comprehensive strategy? Remember, the goal is not just to retain but to create a thriving, supportive environment for your leadership team.