Here's why extending counteroffers to workers who resign are ineffective

SINGAPORE - If you've tendered your resignation before, you might have encountered a situation where your boss offers either an increment or promotion in a bid to keep you within the company.

Such counteroffers, however, are ineffective in retaining staff, according to a recent survey conducted by recruiter Robert Half, where 100 chief financial officers and finance directors in Singapore were surveyed.

Counteroffers are common practice in Singaporean companies, with an overwhelming majority of 96 per cent of Singaporean employers extending it and about one in three doing so often.

However, this is not stopping employees from eventually leaving the company - almost six in 10 business leaders who have made a counteroffer indicated that the employee ended up leaving the company anyway. Around 20 per cent say the staff member stayed less than a year.

Offering a financial incentive may be the immediate reaction to a top employee resigning but according to managing director at Robert Half Singapore, Mr Matthieu Imbert-Bouchard, making such an offer is just delaying the inevitable.

Oftentimes the reason why they want to leave the company goes beyond purely financial reasons. Even if the counteroffer is accepted, a higher salary does not always equal better performance and stronger loyalty.

- Mr Matthieu Imbert-Bouchard, managing director at Robert Half Singapore

"Oftentimes the reason why they want to leave the company goes beyond purely financial reasons. Even if the counteroffer is accepted, a higher salary does not always equal better performance and stronger loyalty," said Mr Imbert-Bouchard.

He added that employers would be better off withholding the counteroffer and immediately start the hiring process to replace them.

But what is the reason behind employers offering incentives for an employee who has expressed interest in resigning?

Cultural fit, or being able to fit into the company and team, seems to be the main driver for 60 per cent of employers who have made a counteroffer. More than half cited the desire to retain knowledge within the company and team, and 57 per cent point to the additional costs related to the hiring, onboarding and the professional development process.

Mr Imbert-Bouchard also added that counteroffers are ineffective in the long-term as they can set a negative precedent for employers, giving an indication to staff that threatening to resign is a successful way to receive a pay rise.

"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," said Mr Imbert-Bouchard.

He also advised employers to know what drives staff members and to regularly review salaries.

klim@sph.com.sg