Do counter-offers ever make sense?

Dear Bob …

The company I work for has a small IT contingent at this location (five of us in total). One of the developers recently received — wait, not received (sounds like a gift), but won (in the sense of the spoils of battle) — an offer from another company that is closer to that employee’s home, and quite a bit higher salary than what the developer was making here (like $10K higher per year!). The developer accepted the new position and turned in a resignation, confident that our company would never counter-offer and, if they did, would never match the higher salary.

Well, you know what happened: Our company counter-offered, met the higher salary, and the developer is now staying instead of going!

I would like your opinion on counter-offers in general, and on this situation in particular. My own opionion is that counter-offers are bad in general and bad in this situation. I think counter-offers are bad in general because if I have an employee who has gone to all the trouble of finding a new job, interviewing, and securing a suitable offer, then they obviously want to move on and who am I to stand in their way?

I say it is bad in this situation because what the company has done in this is to tell everyone in IT that the only way to get a substantial raise is to find a job offer somewhere else. This is also going to damage the morale of the other developers (I am in operations) because there is already a perception that the developer who was leaving was getting all the “good stuff” (that is, new technology, highly-visible projects, etc.). We are near the end of one of the highly-visible projects that the departing developer was working on, but I cannot believe that the developer was indispensable.

Your thoughts?

– Close observer

Dear CO …

I’m pretty sure I’ve discussed this in Advice Line once or twice, although I can’t pin down the exact reference. Short version — you and I are in complete agreement. Even with the employee who was ready to go it’s a bad message: “We wouldn’t pay you what you were worth until you threatened to leave.”

Companies should always do what they can to pay market value — the point of compensation where the company doesn’t have a financial incentive to replace an employee and the employee doesn’t have a financial incentive to leave. If the company is successful at this, the situation won’t even come up.

– Bob