Never Make Counter-Offers

And then there's another post waiting to be written -- "Never Accept Counter Offers."<p>I didn't heed this advice, and took a counter offer (doubling my salary at the time). This seemed like a good deal.<p>What did I turn down? 10,000 shares of Microsoft stock. In 1983.<p>Oops...

This is counter-intuitive from a business standpoint. Managers behave this way because they've learned through experience that:<p>1) Most of the worst employees hang on for dear life to their jobs and don't dare risk losing them for any reason (asking for a raise, etc). Incompetence or sub-par job performance not withstanding.<p>2) Occasionally employees get a fire lit under them by a spouse, mid-life crisis, etc and attempt to obtain a raise. Doing so communicates that the employee wants to stay at the company, and that they can be low-balled.<p>3) The best employees have mobility in the job space and can get better offers. This is why quitting is the only reliable way to get a raise (counter-offer). The employee has clearly shown market value above their current position, and the psychological effect of social proof kicks in.<p>There are of course exceptions, but even a moderate amount of time in a large company shows this to be generally true. Managers are incentivized to keep personnel costs down, and only give in if their hand is forced. It's just human nature at work.

This is a great article. It describes exactly how salary negotiation works in the US, and now when someone asks, I won't have to write it all out myself.<p>Ironically, I only realized the way things worked at my last job. I wanted to get paid more, but didn't really know how. Then a few companies contacted me out of the blue; I interviewed at each and was offered a job at each. They all involved moving, which I didn't really want to do, but I kept that to myself. I then asked my current employer to match the highest offer, which they agreed to do. Then I showed them the offer letter, and they didn't believe that my other offers were so high, and tried to negotiate me back down to my current salary. I put in my two weeks noticed and my managers looked extremely surprised. Apparently nobody had ever actually followed through on their threat to quit; everyone had used "I have another offer" as a way to get an easy raise (but never as much as the mythical offer).<p>Anyway, my current employer is More Enlightened and I don't think I will have to play this game for a long time. Which is nice, because you never actually win...

There are organizations where it takes the threat of quitting to get one's salary, job duties, etc. reassessed. There is a lot of poor implementations HR processes out there - and poor implementation by managers, rather than company policy, often underlies the situation.<p>Many managers no more want to have negotiations about pay and advancement, than many employees do - there are two sides to the coin, many employees prefer the excitement of an affair with another company than trying to work out the existing relationship. The new company expresses their love; the old ignores the employee.<p>In other words, the situation described is frequently a failure of communication between supervisors and managers and their employees.

At my previous job, I signed on with really low pay because I had little professional experience, but tons of personal experience. They quickly realized they were underpaying me and in a year, I was almost at what I was worth, and at 3 years, I was there. Since this was my only real experience on my resume, I felt this was a good response from them, and they valued me.<p>Then they refused to give me good raises the next 2 years. My skills were increasing faster than ever, and I was the only guy who knew the entire system inside and out. Everyone in the company came to me when there was a problem because I knew how it all fit together. (I did not hoard this knowledge... Others were disinterested in having it, or didn't stay long enough to matter. I was unable to pass it on, and documented as much as I could at all times.)<p>So at 5 years, at my review, I asked for a raise. The answer was that if I "really cared" I should go talk to my boss's boss. ... Seriously? After some arguing, my boss eventually told me that they would be looking to correct everyone's salaries within a year.<p>Faced with the knowledge that they intended to knowingly screw me for a year, and then possibly continue afterwards, I started replying to the job offers that had been coming in. I had previously been ignoring them.<p>Right away, I found a company that looked good, and signed on. For a 40% pay hike. I had known I was underpaid, but didn't realize it was that much.<p>6 months later, the pay raises came in at the old job. A friend who was making what I made (!) got a 20% increase. He managed to find get a job offer at the same rate I was now making, and took it back to them. They refused to match it.<p>And in case that wasn't insult enough, they put out a job ad for 7 new people at the rate I was now making. The rate my friend tried to get them to pay. Their existing, experienced, efficient works were worth less to them than random people off the street.<p>I told my new boss about all this and he gave the same advice that a lot of people here gave: Do not accept a counter offer. IF the company gives one, they intend to replace you soon with someone who won't hold them hostage. Because that's how they see it. You are demanding that they pay you more, or you'll quit and leave them short of staff until they can find a replacement. They can't take the chance that you'll do it a second time, so you're out of there as soon as they can make it happen.<p>And he's right. I'd do the same thing in his position. All he needs to do to avoid that problem is to pay me properly, and that's happening. It's so simple.

&#62; Management figures as long as they always match what someone is offered elsewhere, the employee will always prefer to stay<p>Do some companies <i>really</i> believe that? I can't speak for the world of employees, but if I have to put in the work of finding another job because my salary situation is stagnant, I am going to be very bitter with my current employer and require a crazy large counter offer to consider staying.

Ben Horowitz (of a16z) discusses just this very problem:<p><a href="http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-your-company/" rel="nofollow">http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-...</a><p>I enjoy Ben's blog post because talks about a more general company problem (politics), and gives guidance and process on how to avoid politics.

My first professional experience was working at a company where this seemed like the norm. They had no well-defined plan for advancement or raises, and I was constantly given the run-around when I would bring up the topic in conversations with my manager or HR.<p>Those which consistently threatened to quit renegotiated by throwing other employees under the bus, which led to a very tense work environment.<p>I wholeheartedly agree with the sentiment that retaining employees by expecting them to renogiate for themselves is wrong headed, but I'm not sure that "never make counter-offers" is a great philosophy. You paint yourself into a corner by having this doctrine which doesn't allow you to have your whole arsenal available when the moment arises in which you might want to make a counter-offer to retain an employee.

<i>Sooner or later the lower paid employees are either going to get the feeling that all the necessary secrecy around salaries means they’re getting screwed (because, um, they are) or find out that someone got a raise by quitting, and go about doing it themselves.</i><p>A good axiom I've always gone with is that the amount of pressure and process a given company has built into promoting secrecy about pay is inversely proportional to my desire to work for them. If you're asked by management to never discuss salary with your peers, you know they're screwing people.

this isn't going to be very popular, for obvious reasons.<p>&#62; The most devoted, upstanding employees are the least paid, and the most conniving, disinterested ones are paid the most.<p>disagree. the best employees are the ones are constantly being recruited, they know their value, they have the quitting credibility to leave and go get a job <i>anywhere else</i> if their value isn't met.<p>anyway, if the employee wants to stay, it shouldn't get to the point of a counter offer. they ask for the raise, they have implied quitting credibility that is obvious and doesn't need to be used as a threat, they get the raise. if you have to actually threaten to quit, somebody is doing something wrong.<p>&#62; If an employee tells you they have a job offer, tell them that if they take it then you’ll wish them well, and stick to it.<p>clearly Mr Cohen isn't working with superstar engineers, the type that are a massive blow to the company if they leave. you do what you need to do to keep them at any cost, not whine on a blog.

I think the essence of what he is trying to say is very true, although his approach may be a little dramatic.<p>Ultimately retention is about creating an environment that is pleasant for your employees. This means creating opportunity financially, professionally, and personally. It's hard for any employee to leave a job that appreciates them and fosters their all around growth. Money is certainly part of it but in the big picture the message is "Build a great workplace". It's a proactive approach of doing good instead of a reactive set of rules on what not to do.

It took me many years to learn the leave and counter game. The caveat is once you start playing this, you lose trustworthiness in the eyes of your employer. You get money, but lose promotions.<p>I think firms need to be consistent. Either play the game all the time, or never. If you waver, you might lose someone who just thinks it's a way to get a raise.<p>The investment banks are the worst at this.

Making or accepting counter offers only ends well when the employee is inexperienced and/or confused as to why he is quitting. In any other case, you're only delaying the inevitable, and in most cases the short-term benefits of that delay will be overshadowed by the mid- and long-term consequences (less need to fix the real problems that led to the employee quitting, employee growing restless again quickly because it in fact was <i>not</i> just about the money, etc).

"Management figures as long as they always match what someone is offered elsewhere, the employee will always prefer to stay, because that’s easier to do, and salaries are kept to the absolute minimum they can be with no real risk."<p>No. Could be they prefer to stay but have found out that their value is higher elsewhere. Nothing wrong with that. Also doesn't mean that the company is knowingly trying to save money and clearly knows the value of the employee or the position. If someone doesn't like their job and finds a job that is clearly better (maybe it's just closer to where they live with a little more money) they might not even care what the response is of the employer.<p>Besides, if the person didn't in some way desire to stay they wouldn't even present an offer to stay.<p>By the way, all this info pertains to the tech situation right now. In traditional business it's not always great to be paid the max of your value. Those are the people that are let go first when the boss has to cut costs. The people who provide the most value might very well be the ones to keep their job.

&#62; The most devoted, upstanding employees are the least paid, and the most conniving, disinterested ones are paid the most.<p>"disinterested" means impartial or unbiased.<p>"uninterested" means not interested.<p>I wasn't going to comment on this (and thereby be a grammardouche) but I've seen the word quoted/used in the comments so many times that I thought people might actually not know this!

The behavior described in the post sounds like the kind of intellectual and moral laziness that you'd have to expect when The Market is assumed to yield Truth, like some kind of modern Oracle of Delphi. And those who practice it risk serious rotator-cuff injury from constantly trying to pat themselves on the back for being so incredibly cynical... um, 'scuse me, <i>efficient</i>.<p>Management, done right, requires the ability to make <i>judgments</i>, including character judgments. Collapsing all possible human motivations into the single dimension of fear/greed may swell the bottom line of whoever can do it the most cynically, until at some point it doesn't, because over time (if not immediately), it will produce an atmosphere that is poisonous to innovation.

This post strikes a chord. Personal experience below, economics first.<p>It seems best for the species that wages be allocated to where they have the highest marginal impact on the final value of goods produced or services rendered. If a great employee happens to be too squeamish to ask for a raise, but he will still go on adding steady value to the widget, it strikes me as a societal waste to initiate a pay raise for him. However, there is this HUGE possibility of negative externalities from chronic under compensation (resentment of firm, shame of cowardice for not asking for more, laziness, obstinance, etc). This makes the problem of wages extremely difficult. Factor in the complexity that "market prices" based on outside offers are inflated to cover switching cost to the employee and it gets even harder to determine the RIGHT wage. Without quantifying these externalities, the best answer to what the right wage is, from the firm (and probably system) perspective, is the least amount of money you will take to perform the work. If this sounds un appealing to you as an employee, its probably good you're reading hacker news! THE PAIN of salary management comes from finding that "lowest amount" you're willing to take. Spending energy negotiating just to get to your scenario of indifference is slow torture. The winners in the whole process are probably below average people for whom salary reverts to the mean.<p>I left 100k USD in the midwest to become a west coast entrepreneur. In Chicago I got my salary raised three times in three years, first unsolicited for performance, second to counter a threat to leave, and third as a promotion. The threat to leave tied the promotion in dollar amount, but was highest in percntage terms at the time. The unsolicited raise for performance was so small that it set me down a destructive path of engineering larger pay raises which i thought i deserved and didn't receive.<p>What I Learned -Money feels VERY important when you hate your job -Big company jobs are comparitively more valuable to people with children and houses -While the employee-led raise environment is painfull to experience, it seems to produce an appropriate allocation of LABOR eventually<p>Hopefully one of us will someday solve the puzzle of quantifying the value of individual labor inputs to finished goods. This would have two amazing effects. 1) workers would be fairly compensated, 2) all workers would have empirical info on how to improve their value add.

The OP ignores the fact that at most decent tech companies, a TON of time is spent on annual or semi-annual reviews to determine raises and bonus comp for better performing employees. The exact reason this is done is to ensure they're being compensated fairly and don't go off shopping for offers.<p>It's not true that management has the goal of minimizing comp for employees. Management tries to minimize _total compensation expenses_, which includes the costs associated with replacing an employee (and those costs can equal a full YEAR of comp in most cases.) Not to mention the disruption to projects that occurs when a key team member departs.<p>Really smart tech companies take a step farther: if you're in good standing when you leave, they have a special process for hiring you back if you decide you want to come back later. It's smart: they expect that lots of the best employees will want to try their hand at a startup or smaller venture at some point, but they don't burn the bridge with someone they know is a good team member.

This is decent advice for companies. And I presume some will follow it "No $EMPLOYEE, it's for your own good that we don't make counter-offers, sorry!".<p>However they have to follow the other part of the advice: <i>"Have clear and consistent salary guidelines, and regularly give raises to people who are outperforming their pay level. Don’t be a tight-fisted, short-sighted moron."</i>

I kind of like the idea of only giving raises to employees when they have a offer letter for another job. That way there is no doubt in the employees mind about how much they are worth.<p>Why not turn the problem around, instead of only having your most "conniving, disinterested" employees looking for new jobs, why not encourage all your employees to have a look around. Why not even give them some work hours to "assess their own worth". Send out CV's and do phone interviews.<p>Then when your best employees come back with better offers you will be happy to pay them more. Even better, the guys who are not working out have somewhere better to go and everybody is happy.<p>Of course, it's a dangerous game and you might not be able to afford more.<p>.<p>I've never read a good plan for doing employee reviews and salary increases.<p>"Have clear and consistent salary guidelines, and regularly give raises to people who are outperforming their pay level."<p>The problem is right here, what is a pay level. Just because there is a number somewhere in a spreadsheet doesn't mean an employee will be happy with what you give.

My ideal company would have a culture where people would want to work there for free. Above a certain amount, money stops contributing to real happiness. Some people have even suggested that number is as low as $60,000 in the United States. [1]<p>Unfortunately jobs are not the stuff we often fall in love with. Those opportunities are few and far between. But I think it is a far nobler goal to try and make more places like that than to have the most competitive salary policies.<p>[1] <a href="http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory.html" rel="nofollow">http://www.ted.com/talks/daniel_kahneman_the_riddle_of_exper...</a> (see q&#38;a in at the end of the transcript)

Is this his only post? Or is there someway to browse this site that I'm missing?

Horrible advice. Having unilateral policies like this are things that give people excuses to stop treating people like people.<p>Each case is different. It depends on the individual employee, their performance and role in the organization.<p>And I don't much like how you are blaming the employee for "not wanting to work for you". Of course that will be true for some people, who simply need a change for change's sake. However, do you not share some of the blame for a high quality employee seeking outside employment? What happened to that employee to want to make them work some place else?

i've been on counter offer side of things a few times.. at first, it was nerve wrecking.. having to resign and admitting to have been "cheating" on your employer by secretly interviewing.. it feels horrible. but indeed, it was always well received (or maybe i was lucky in having rational bosses) in a do-what-is-best-for-your-career manner. and some of the counter offers were crazy good, but it would feel weird to stay based on that.. after all, while resigning i always listed other things that propelled me to do that (like being skipped for a promotion for 2 years because promotions were limited (to 1 per year) and other employees demanded them outright while i stayed quiet).<p>taking another offer is a big risk. you're leaving the cozy confines of your current job, where you know everyone and all the systems you've so carefully crafted over the years. Last time, the company i left for ended up laying off 60% of dev staff (myself included) 5 months after switching. But i am still glad i did it. i learned lots in those 6 months i wouldn't have if i stayed, and interestingly enough, when my old boss found out i was laid off he generously offered my old job back.<p>i have a friend, that outright tells his boss that once a year he'll be interviewing just to see what the market worth for his job is. This seems insane to me, but his boss is totally fine with that. My friend has a great job with amazing perks (sales) that would be very hard to beat elsewhere. This move does let his management know that he isn't going to stick around unless his growth at current place continues.

It assumes that all employees are informed about other employees playing a quit game. From a management perspective, it may be good strategy to make the counter offer, if you could ensure that it is kept quiet from office gossip. Also, an individual employee has no incentive to broadcast the fact that he is using the threat of quitting, and is likely to play into that stratey if he receives what he wants in pay/status/hours etc.

This discussion has overlooked the last paragraph of Bram's post, which is that counteroffers are a non-solution when the manager has already failed. Don't give counteroffers, because you should avoiding do situations where your employees get competitive offers from outside. There are good ways (money, respect, excitement) and evil (sweatshop campuses) to achieve that

Bram Cohen was laid off just prior to inventing BitTorrent, right? No doubt that experience (and being a founder) colors his perspective.

Or better yet, pay your employees what they're actually worth to you, and remind yourself regularly to evaluate them for raises.

Usually there is more going on than $$$ when someone entertains the offer to leave a company. Getting more $$$ only plugs one of the holes in the dike and usually (in my experience) that person is going in 6 months anyway.<p>I never entertain counter offers simply because I consider it a firm agreement with that other company that I already accepted.

The advise is similar to tricks to train dogs

Sorry, guys, I am going to have to disagree with both this article and the suggestion that counter-offers should be turned down by employees.<p>The truth is that despite the fact that lots of hn (yc) type startups have employees working for enough to cover their rent or whatever, and a bit of equity that has absolutely no defined value, when the company does take off, it's only fair to ask: All right, thanks for sticking by me, now what are you guys really worth! What is this killer graphics designer worth ; what is this DBA back-end coder worth who has just scaled us from a bedroom to millions of customers ; what is this accountant worth.<p>If they don't have other offers, there is NO answer to that question. You can't appeal to the cost of their bedroom or car, you can't appeal to the chance to build something great, none of this is external or fair.<p>Fair is what the market says.<p>I remember somewhere years ago on Slashdot that it's impossible to be "ripped off" in a transaction, reasoning thus: "When you have a fistful of cash in one hand, and the offered good or service in front of you (forget what the example was), and you say 'ok' and get it, that's your choice, if you get what you thought you would get giving the money that was asked, you physically can't be ripped off. The money was in your hand and it was your choice".<p>Well, sorry slashdot poster from years ago: that's false. When you have a fistful of money and buy something, but you are radically misinformed about the market price (to your disadvantage) then you just got ripped off. If you sell your vintage gold (whatever) for a couple of bucks, being told it's just for the value in gold, but a vintage gold (whatever) is worth 100x what you just paid: then you just got ripped off.<p>The thing about talent like this is there is no market price because everyone is unique. The market price is whatever other offers you get.<p>In the vintage gold whatever example, if someone says "This only has a tiny bit of gold in it, I can give you $100 for it", but in the same town five out of the five other specialists you would sell it to if this person wasn't in front of you offer at least $3,000 - then you just got ripped off.<p>I'm not talking about if you were to sell it yourself (instead of to a specailists) to another buyer: maybe buyers themselves pay $8,000. I'm talking about other opportunities in the exact same circumstances and market.<p>The fact is, "intrinsic" arguments (like how many ounces of gold is in something), what food and rent costs, what you paid the last guy, whatever, are worthless:<p>the ONLY thing that establishes the market price in my market of my graphics designer is their other offers (not their own other work, which is a different market).. The ONLY thing that establishes the market price of my back-end engineer is their other offers (again, not their consulting work, which is a different market).<p>I want to be fair with my employees, and I want to be treated fairly. I don't want to rip anyone off, nor do I want to be ripped off.<p>The ONLY way to do this is to explore market prices, and the best mechanism to do this is through other offers (since no one is fungible with other people in this industry; you can't just 'look it up').<p>So I'm going to have to strongly disagree on all points here.

I disagree strongly. Management has better things to do than push unasked-for money on employees, especially in a young company. An employee who wants more money can and should ask for it.

I love it when intellectual property thieves lecture others about how to compensate intellectual property creators.