Study: Counteroffers are Ineffective in Bid to Retain Staff

Despite being assumed to be ineffective in today’s competitive employment market, counteroffers are still common practice in Singaporean companies.

According to independent research commissioned by specialized recruiter Robert Half, the overwhelming majority (96%) of Singaporean CFOs extend counteroffers, despite more than half (59%) of the same CFOs saying the employee ended up leaving the company.

Extending counteroffers appear to be common practice in Singaporean businesses as one in three (30%) CFOs apply this practice ‘often’, more than four in 10 (42%) ‘sometimes’ and 5% ‘always’. Less than one in five (18%) say they ‘rarely’ make a counteroffer and merely 5% say they have ‘never’ extended one.

However, further acknowledging the ineffectiveness of counteroffers, almost six in 10 (59%)  business leaders who have made a counteroffer indicate the employee ended up leaving the company, with 20% saying the staff member stayed less than a year, 22% citing the employee stayed for over a year, and 9% saying they stayed less than six months.

“Even though extending a counteroffer can be an immediate reaction to a top employee resigning, offering a financial incentive to remain with the company is just delaying the inevitable as oftentimes the reason why they want to leave the company goes beyond purely financial reasons,” says Matthieu Imbert-Bouchard, Managing Director at Robert Half Singapore.

“Even if the counteroffer is accepted, a higher salary does not always equal better performance and stronger loyalty. Employers would be better placed to withhold a counteroffer and immediately start the hiring process to replace them.”

Cultural fit is main driver

Cultural fit is the main driver for 60% of CFOs who have made a counteroffer as the employee fits in well with the company and team. More than half (59%) cite the desire to retain knowledge within the company as one of the main reasons for making a counteroffer, while 57% point to the additional costs related to the hiring, onboarding and the professional development process.

“Not only are counteroffers ineffective in retaining employees for the long-term, they can also set a negative precedent for employers as it gives an indication to staff  that threatening to resign is a successful way to receive a pay rise, all whilst creating rumors of favoritism thereby undermining staff morale. A better approach is to have a blanket policy to not extend counteroffers to resigning employees as it’s not an effective, nor a cost-saving staff retention measure.”

“Instead of reacting when an employee decides to resign, Singaporean employers need to take a proactive approach to their staff retention initiatives to avoid staff turnover. Knowing what drives staff members and taking appropriate measures, as well as regularly reviewing salaries should be key elements of any company’s staff retention policy,” concluded Matthieu Imbert-Bouchard.  


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