When Taking a Counteroffer Can Beat Going Elsewhere

By Perri Capell

With demand for senior managers on the rise as the job market and economy heat up, a flurry of counteroffers are expected to rain on executives who give notice this year.

"Counteroffers always go up in a climate like we're now seeing, and my clients are now talking about candidates they're trying to recruit getting more counteroffers," says David Lord, president of Executive Search Information Services, which advises companies on executive recruiting.

ExecuNet, a networking group in Norwalk, Conn., reports that of nearly 200 U.S. executives surveyed this month, 70% are confident or very confident the executive job market will improve in the next six months. Manpower Inc., a staffing firm, reports that 30% of employers plan to expand payrolls in the second quarter of 2005.

Accepting a counteroffer is generally frowned upon in recruiting circles. Search executives warn that executives who accept counteroffers usually lose their companies' trust and end up leaving within a year. "Nine out of 10 times, counteroffers end up being the departure platform," says Mark Lonergan, managing partner with Lonergan Richards, a Redwood City,Calif., search firm. "The people who accept find they lost points around trust, and it's more difficult to get their jobs done, because they're no longer considered part of the team."

Still, recruiters and corporate HR executives say there are circumstances when accepting a counteroffer can work out professionally. If you can change what made you want to hop jobs in the first place, staying with your company can be a better option than leaving, they say. "It is often easier to stay than go," says recruiter John Wood with Spencer Stuart in New York. "You have built relationships and understand the business."

Jeffrey Hofstetter had been with market researcher A.C. Nielsen in Schaumburg, Ill., seven years and loved his job as a product manager when a recruiter contacted him about an opening at Siebel Systems Inc., a software maker in San Mateo,Calif. The new role was appealing because while his cash pay would have remained about the same, he would have received 20,000 options to buy shares of Siebel stock for about $13 a share. When he went to resign, however, Nielsen countered by offering him a job as a director on its global marketing team, which came with a $30,000 pay raise. He accepted. A year and a half later, he was made a vice president.

"I stayed because they offered me one of the premier positions in the company, and I wanted the international experience," says Mr. Hofstetter, now 40.

Mr. Hofstetter left Nielsen in late 2000, about two and a half years after accepting the counteroffer, because of a management change. He's now executive vice president and general manager for Clover Technologies Group, an imaging-products manufacturer in Ottawa, Ill.

He says he's glad he took Nielsen's counteroffer because he was able to direct a $100 million business and see the world. The 20,000 options Siebel had offered came to be worth in the millions as the share price rose, though it has since declined. Still, Mr. Hofstetter has no regrets. "I traveled to dozens of countries and helped launch software to some of Nielsen's biggest clients world-wide," he says. Siebel had no comment. A.C Nielsen didn't respond to requests for comment.

Recruiters suggest candidates weighing counteroffers focus on the nature of the work their employer is offering. "If you are open with your boss, discuss what's concerning you," says Fred Crandall, Midwest director of strategic rewards in Chicago for Watson Wyatt, a human-resources consulting firm. "Staying can work if you can change what makes you unhappy."

If you can't fix the problems, additional money from a current employer usually won't be enough to improve things. "People seldom go through the upheaval of moving just for more money," says Mr. Wood. "People at this level are thinking of a whole host of things."

When you talk to your boss, you may find the company ready to make the adjustments you want. "In some cases, the employer hasn't told the person they have bigger plans for them," says Mr. Wood. "They will sometimes move quickly to give the person more responsibility." To find out if you might be in line for a promotion, say something like, "I'm not privy to how succession planning is being handled, so can you shed light on it?" If you can't resolve fundamental issues, it may be time to go.

Mike Rowe, executive vice president of human resources for Activision, an interactive entertainment products company in Santa Monica, Calif. , agrees. "The key is to have adult and honest conversations," he says. "Real reasons come up when you can sit down with the person and say, 'Let's solve the root cause of why you're looking.'"

Mr. Rowe believes counteroffers are "entirely appropriate" when an executive decides to go elsewhere because he or she didn't know what the company was planning for them.

"Obviously, you wouldn't want to throw money at them, but if someone takes a VP job elsewhere because they didn't know the company was planning to make them a VP down the road, it's time to say, 'Shame on us, we haven't told you what we have planned for you, and you may want to rethink the circumstances,'" he says.

Ham Davis was working as a bond salesman in Chicago in the early 1990s when he took what he thought was a step up and accepted a job for more money selling bonds at a bigger bank. Mr. Davis, now 46, actually wanted to be a bond trader and hadn't been able to make the move where he worked. When he turned in his resignation, his employer said a bond-trader job was his if he stayed. He reneged on the other offer. While it initially meant taking less money, he stayed with his current employer as a trader for another five years until the trading operation was closed.

Naturally, it's better to talk with your employer before you have accepted another offer. Mr. Davis says he didn't like turning down his outside offer after accepting it but "the opportunity to do what I wanted to do was worth more than the money," he says. Mr. Davis, now a director for a Midwest bank, adds, "I had no intention of thinking I was gaining leverage and every intention of making the move."

If you fear that your company, in countering, is biding time until it can replace you, ask for a contract specifying generous severance if things don't work out. Firing you in a few months would mean the company has negotiated in bad faith, which is seldom the case if an organization wants to retain you. Although it does happen, Mr. Wood says, "in my 12 years of recruiting, I have never seen someone who received a counter get fired."

Finally, if the recruiter you've been working with tells you not to accept a counter because your company will never trust you, keep the advice in perspective: Recruited finalists who turn down job offers to stay where they are can spoil months of a search firm's work and force them to start all over again.

"That lack-of-trust thing isn't true," says Mr. Rowe. "That's a recruiter who's trying to pull you out because they don't want to lose their fee. If you have a long-tenured employee and an additional legitimate need to fill, and the person has opened a dialogue with you, why wouldn't you want to keep them?"

-- Ms. Capell is a senior correspondent for CareerJournal.com. She can be reached at frances.capell@dowjones.com .

Article from CareerJournal Today – March 2005

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