Headhunters routinely advise candidates who receive counter-offers from their current employers to turn them down. Some keep a sheet with a list of reasons to reject counter-offers handy. It’s self-serving, of course—why let a candidate you’re about to place for a hefty fee stay at his old job?
But in almost all situations, counter-offers are a big mistake for both the employee and the employer. At the point where a candidate accepts a job offer, the myriad factors that led him to consider a new job coalesce to reveal just how potent the desire for change really is. Trying to squelch those factors just spawns other problems, or it delays the inevitable until it reaches crisis proportions.
And that’s why, in most cases, employers shouldn’t make counter-offers and employees shouldn’t accept them. The cat is out of the bag. Let the employee go.
Fortune’s story of Robert Kelly, CEO of Bank of New York Mellon, is one that every aspiring manager and employer should read. Instead of “Inside The Fall Of A Superstar Banker,” Fortune could have titled it, “Inside A Counter-Offer Disaster.” Here are my three takeaways.
1. The urge for change stems from a bad match. A person can work happily at a job for years before feeling the urge to move on. But as soon as he realizes “it’s no longer working out,” the job is a bad match because something has changed. There’s no fault in that scenario, as long as the match is broken up before the suffering starts.
In BNY’s case, it seems clear Kelly was a bad match from the start. The fault for the bad match seems to rest clearly with BNY’s board of directors, whose wishful thinking led to a bad hire and ongoing suffering.
The article describes BNY as “a highly conservative, old-line institution that specializes in mundane, grind-it-out businesses and prizes tradition, self-effacement, and loyalty.” Nonetheless, in 2006 the board hired a CEO with a huge ego who craved publicity, courted controversy, and relentlessly pursued “the next new thing—a grander job, more money, and more excitement.” Kelly lacked the conservative nature that marked BNY’s reputation, but the board “decided that Kelly was just the change agent it needed to revive the fabled institution.”
Right there the board blew it on the match: Change was the last thing the board really wanted. And the urge for change drove Kelly away from the board almost instantly.
2. A counter-offer is the second big mistake an employer makes. CEO Kelly secretly pursued a bigger job with the bigger Bank of America. When he finally disclosed his intentions, the board of BNY resigned itself to announcing his departure. But BofA soured on Kelly and never made an offer. The premature news about hiring him turned into a public-relations disaster for all involved. Burned and burned out from pursuing BofA, Kelly returned to the BNY board with his tail between his legs and begged to keep his job—just moments before the board was to announce his replacement.
You’d think BNY would have sent him packing, but Kelly pleaded, and BNY’s board rationalized. The board should have considered all the reasons they were already dissatisfied with Kelly—all of the disconnects between his style and their corporate mission. An overpaid spendthrift wasn’t the right leader for the bank Alexander Hamilton founded on frugality in 1784. But they took Kelly back—“not wanting to disrupt the bank’s operations and management, and hoping to avoid a potentially messy succession.” They made him a lavish counter-offer even though the guy was on the street with nowhere to go. The board renewed its vows for a bad marriage.
3. Never take a counter-offer. The BNY board members weren’t the only foolish party in this story. Kelly’s next two years were marked by the board’s growing suspicions and by the dearth of loyalty between them. Kelly should have rejected the rich counter-offer the BNY board made because the factors that drove him away had not changed.
In the end, the board gave Kelly such a boot that the story became an expose in Fortune magazine. Then the board replaced him with the kind of CEO it should have promoted to begin with—a lifer whose style and values matched the company’s.
You can’t fix a bad match by taking back a disloyal partner who has made it clear he wants out.
Have you ever made a counter-offer to keep one of your employees who already had both feet out the door? Have you ever accepted a counter-offer yourself? Tell me about it on the Discussion Forum.