6 Questions to Master One of Business’ Toughest Decisions
It’s Friday afternoon, and it’s been a long week. Your numbers are down and it feels like you’ve spent your entire week putting out fires. You are limping to the finish and ready for a relaxing weekend filled with anything but work. Just when you think things can’t get any worse, a tenured employee enters your office and informs you that they are being headhunted by another company. They’ve received a great offer and need a hefty bump in salary and PTO in order to stick around.
This is the last thing you need. They are a strong team member and you have some ground to cover in order to meet your quarterly goals. Losing them would definitely be a big blow to your team and your business. After quickly thinking about it, you decide it’s a no-brainer. On top of all that is going on, you can’t afford to lose a solid performer with good experience and client relationships right now. The short-term effect of them leaving would be too much to deal with. Why wouldn’t it be worth the extra money to keep them on the team? What choice do you have? You must give them the raise, right?
Nothing is ever that simple. While it can be tough to see talent walk out the door (or worse yet to a competitor), in some instances giving an employee a raise can be just as bad or worse in the long-term. This difficult scenario is becoming more common for hiring managers in today’s cutthroat battle for talent and knowing when to make the counteroffer is a tricky proposition. Here are six key questions to ask yourself that will help identify when to offer incentives, or when it might be time to say good-bye.
- Is this going to be a long-term solution? If you don’t know the answer to this you could risk spending additional time and money on an employee that is on their way out the door regardless of their compensation. Time and money are both valuable resources that could be spent finding and training a replacement.
- Is my trust in this employee diminished? Not only do these types of situations cost time and money, but they can result in irreparably damaged relationships. Make sure that if you do shell out a hefty raise, that your faith and confidence in the employee won’t be compromised.
- Does the employee’s performance merit what they are asking for? A raise that seems unjust can be a huge team disruption so, make sure a raise can be justified with tangible reasons and not just because the employee would leave without one. If their current performance doesn’t merit a raise, perhaps you can agree on a stretch goal that would justify it and keep them around.
- Will the employee’s performance actually improve enough for this to make financial sense? If beneath it all they are unhappy or not suited for the role, then a raise may make no difference. Raises need to make financial sense and they should be paired with expectations for increased responsibility and employee performance. If the money for a raise isn’t there, try to find other incentives or creative offerings that would motivate them to stay like additional opportunities or autonomy.
- Is there available talent in the market to find a quick replacement? How high are the costs for training a new employee? Having similar talent available in the market or someone on the team ready to fill in a role that comes available always makes for an easier transition.
- Does this employee leaving potentially shift market share to a competitor? If they are a crucial piece to your success, it’s possible that they deserve what they are asking for.
It’s up to each manager to know their employees, analyze their situation, and make the decision that is right for them. Will the increase in salary pay off long-term with employee loyalty and performance or will it cause more trouble than it’s worth? Make sure to think it through and not rush to bump up a salary or pay out a big bonus. While it may seem like a good solution and a quick way to fix a short-term problem, it can create long-term issues in regards to trust, loyalty, and the bottom line.