Filiawati Lim has been an HR professional for close to 16 years and counting. One would assume making counteroffers is something she is adept at. Yet, she has only made one counteroffer so far throughout her entire career. The only reason she made that offer was because she was caught off-guard. Six years ago, Lim was barely three months into her job when the disgruntled manager threw his resignation letter in a huff. It left her with insufficient time to meet him in person to understand and address his reasons for leaving. Lim could only react by extending a counteroffer because the valve solutions company she was working for then needed this employee’s technical expertise and couldn’t afford to let him leave.
As it turns out, the employee was treated poorly by his previous boss and he got fed up with being severely underpaid when compared to his peers and, worse, his direct reports. So without even looking at what his new job offer was, Lim made him a counteroffer which was a 40% jump from his salary, 10% more than the market rate and 20% higher than the new job offer. Yes, it was an extremely high counteroffer, but as Lim rationalises it: “I just did what was fair to address the sins of the past and it was what he deserved.”
The last Lim heard, this particular employee is still with the same company he wanted to quit five years ago. This definitely goes against research by various consultancy firms which found that more than 50% of employees who accept counteroffers normally leave the organisation within six months. Then again, it was an unusual situation for her.
Under normal circumstances, Lim would have never made a counteroffer to an employee who seemed bent on leaving. To her, when someone decides to take up a new opportunity elsewhere, it usually means their heart is no longer with the company. “There is no point in trying to keep them back in the company, especially with a counteroffer.”
Double-edged sword
Making counteroffers to employees who want to leave is a doubled-edged sword, says Steven Fang, group CEO of cord blood services provider Cordlife. No doubt, it’s a good way to communicate to the employee that the company values him or her and is prepared to address their needs. But there is also potential backlash. “It has come to a point where employees use this [new job offer] as a mechanism to secure higher pay without the relevant increase in productivity,” he says.
Companies should always be more pre-emptive to the person’s compensation requirements to avoid landing themselves in a position where counteroffers become the only retention solution available. “If the person is really good and is paid below market value, it is the company’s responsibility to make the appropriate adjustments,” Fang says. “Or in the event where the person’s role has changed, the company is obligated to look at how they can make relevant adjustments to the person’s compensation.”
Naturally, a company should also start taking a proactive approach towards its employees’ career-development planning. Consistently chart and map out an employee’s career, says Fang. Not only is it easier to align any remuneration rewards to new changes in the role, employees feel you genuinely care about them and you reduce chances of them thinking about leaving.
As the head of HR for shipping company Maersk, Filiawati Lim convinced her employer to adopt a similar stand on making counteroffers. The top retention concern for her is to “take care of the people we want to keep”. As long as employees who want to leave are not in the top 30% tier, Lim says it’s a healthy natural attrition rate. Besides, more than 50% of Maersk employees who quit aren’t from the top 30%, giving the organisation the flexibility to pay its top performers higher than the market rate. “If they are being taken care of not only in terms of their [compensation] package but as well as their careers, usually there is no reason for them to leave.”
No one is indispensable
What if the employee has no intention of leaving but he or she decided that making up a fictional job offer would give them the pay increase they desire? The bluff would completely destroy that person’s credibility, Fang says. “We have very little tolerance for people who try to pull a fast one so to speak.”
Honesty, integrity and being open with each other are values Cordlife advocates and Fang feels communication is a two-way street. Both parties need to have that opportunity to discuss any issues they have with one another before deciding the next move. Issues such as workplace conflict, lack of job challenges, long commute or wage concerns might be easily addressed if given early notice. But for some, it might be too late. “What makes you think this would be the last time they are doing this?” Lim questions back. These employees wouldn’t be considered worth retaining and her senior management supports her completely in this. Retention starts from the beginning of the employee’s tenure. She adds: “You have to know which group of people you can’t afford to lose and you have to do whatever it takes to keep them motivated working in the company.”
Let’s say the median pay in the market is currently pegged at 50% and the company is willing to pay star performers up to 75 to 90 percentile, which is 20% higher than usual, as well as taking good care of their careers. Maersk would even expatriate top talent who requested for a global or regional assignment to other countries. Lim says, “But after all that you’ve done, they don’t appreciate it and they still want more, why should the company keep them?”
But if there is indeed a better job offer for the employee, companies have to first look from his or her standpoint, explains Fang, and not react immediately with a counteroffer. That isn’t the right solution. If the other opportunity is better for the person in terms of personality fit, location, individual and family needs, Fang wouldn’t stand in the way of his employee’s future. There isn’t a plan B for him. “If your heart is not with the company because you have other pull factors, you should move on with our well-wishes.”
Promoting someone to a regional job with a higher pay when the employee can’t travel due to certain reasons would only create more problems for him or her, explains Fang. “You fix a short-term problem [with the counteroffer] but you create a longer term problem for the individual.” But neither should an employer wait too long to decide if it’s wise to make a counteroffer. Fang says, “If you sit on it for three or four weeks while the person is serving his notice, it’s doing a disservice to him and the company.”
But is there ever a right time to make a counteroffer? So far, the resignations Lim has received haven’t changed her stance towards counteroffers haven’t changed her stance towards counteroffers because she feels employees are already receiving salaries pegged at or even above the market rate. Increasing the money aspect should be evaluated on a case-by-case basis. “You have to know the background of why the person is leaving,” she says. “If the reason is because the company is not taking care of this person then yes, you can make a counteroffer.”
Metaphorical kick up the arse
While Cordlife relies on the usual published salary reports from various HR consultancy firms to gauge the standard compensation rates for various positions across industries, Maersk has no such luck. From surveys, Lim can sieve salary data for support functions such as HR, finance, IT and admin which aren’t specific to shipping, but there is insufficient market research for niche shipping positions. There is, however, an exclusive salary survey catered specially for shipping firms and the data has given Lim the impetus to push for a new retention scheme for Maersk’s high performers.
In the last two years, the shipping firm’s compensation structure has changed from rewarding everyone almost the same amount annually to a performance-linked pay grade. Maersk now pays its top employees 30% above the market rate, while those who are in the middle tier are paid on par to the industry average. Employees at the bottom 10%, on the other hand, do not receive any salary increments. With the average turnover rate for shipping companies at 6%, Maersk’s attrition rate has remained a constant single digit and feedback from business leaders was overwhelmingly positive. Almost 100% of them told Lim “this should have been done a long time ago” because employee complacency was setting in. Long-serving employees needed a good metaphorical kick up the arse. “It’s common sense,” says Lim. “We can only win if we take care of those top performers.”
Besides rewarding employees who score a four or five on their performance appraisal scorecards, Lim is pushing for a higher level of differentiation between the top performers’ and the average performers’ variable bonus payout. Her proposal tentatively means those who maintain a similar four or five rating year after year will receive extra one-time payout on top of their variable bonus. So if they score a four again this year, depending on the job position and performance objectives, they will receive an additional fixed monetary reward but there is a kicker. The company will only pay this amount one year later and as there is no pro-rated payout if they leave halfway, Lim is effectively anchoring these top performers to stay with the company for an extra year.
While it appears as though Lim is “throwing more money” as a retention strategy, she says the monetary incentive works as an excellent carrot as well, otherwise performance levels will remain stagnant. “You will be mediocre without these top performers so they need to be paid well,” she says. “We have to keep our performers motivated. We want them to do more [every year], not just enough to stay the same level.”
Even precautions have been taken against potential rivals who might tap up Maersk’s star performers. If the extra performance incentive is fixed at 20% of their basic annual pay, a competitor has to offer the employee way more than the usual 20% salary increment to sweeten the deal for him or her to leave. Tying in the variable bonus payout with the company profit levels also ensures everyone remains attuned to its financial report every quarter. If Maersk performs well on its financial scorecard, employees would earn a higher bonus too. “So if you don’t reach a certain amount by the next timeline, people will tend to work harder,” says Lim.
For many of Cordlife’s staff, they feel a similar sense of ownership, much like how Maersk engages their employees, because they own the company. Well, sort of. Established in 2004, the remuneration board decides who qualifies for the stock options based on performance level and seniority in the company. While more details can’t be disclosed without breaking financial regulations, at least 85% of Cordlife’s workforce who are based in Singapore has qualified for the programme. Fang says when you are a shareholder of the company, you’d naturally want the company to do well. But Fang reiterates that holding shares isn’t the only factor ensuring people stay with the company, citing that there were cases of employees leaving after receiving shares. “People stay because they want to and this is the right place for them.”
Personal gratification
Ask any HR professional about a common issue employees are unhappy with and they would tell you employees constantly assume they are being paid below their market value. But people forget that gaining a 10% to 20% pay increment when you move to a new company doesn’t necessarily equate to a new reflection of your market value. It simply means you have a different job with that 20% pay raise. “You can’t go from a sales manager to another sales manager position and expect a 50% increase,” says Lim. “You can only get an increase if there is a change in your responsibility.”
It’s not as if Cordlife is paying employees more than their competitors in similar industries. “We are an SME,” says Fang. “We cannot afford to keep throwing money at people and hope to retain them because the next MNC that comes along will easily out pay us so salary is typically the last thing we discuss [during interviews].” Cordlife compensates that by offering opportunities employees wouldn’t normally see in an MNC environment, which is fast-track career growth coupled with continual training and development. “Even if you’re a laboratory-trained person, we will not confine you to a lab for the rest of your career,” says Fang. “You can transition into sales, customer service and other areas.”
But if HR professionals think they are getting the short end of the stick having to keep people happy, they should hear about the challenge Saleemah Ismail has. As president of non-governmental organisation UNIFEM, Ismail lacks the funds to offer core volunteers, who are much like fulltime employees, a decent wage let alone a counteroffer. What she does on a daily basis is getting to know her volunteers better and taking time out to show her appreciation. Sometimes UNIFEM would organise barbecues or, if Ismail sees that certain volunteers like coffee, she would give them coffee vouchers. “I can’t pay them in cash so the least I can do is let them know how much I appreciate them.”
Ismail would also help her volunteers out in other ways. Two years ago, she had Shi Chen, a volunteer who came in with a desire to become a fashion writer, so Ismail made her UNIFEM’s newsletter editor. Even though Shi Chen believed in the organisation’s cause and she was good at her job, Ismail knew her true passion was with the fashion industry. So she made it one of her KPIs to help Shi Chen fulfill her dream and a few months ago, Shi Chen was hired by a local fashion magazine. “It’s OK for us to be an incubator of talent and skills. I don’t see it as a loss for UNIFEM if they [the volunteers] grow and learn new skills and move on,” says Ismail. “Even though they have moved on, they have always remained a big supporter.”
Contractual loyalty
After all, it’s very hard to secure someone’s loyalty contractually. “We’d rather secure the person’s mind and heart,” Fang says, because employees who are very happy at work “perform better and has better productivity”. That’s not all, according to Lim. “If you feel happy being taken care of by your company, you wouldn’t even budge even if a head-hunter comes calling,” she explains, citing her own experiences with head-hunters. “Here, I have trust from top management and respect from employees. I can see the difference I have made in these people’s lives,” she says. “Why would I want to leave?”
What matters is the company has “nothing to hide” in their compensation structure. Lim is open about showing employees salary survey benchmarks for their positions so they would know the company is paying them a fair wage. “Once people know you are being fair with what you offer them, they will trust you and be happy in their work.” Thus, diminishing the risk of counteroffers.
Of course, the biggest flattery for Cordlife today is many MNCs are trying to poach its people. Fang says, “At any one point in time, as many as 20% to 25% of our staff get approached [by head-hunters] on a daily basis.” But there aren’t any hush-hush phone calls or secretive late-night meetings scheduled. Like Lim in Maersk, employees would instead go up to them and candidly talk about the offers they received. But they’d laugh it off because they aren’t interested in leaving. Fang is prepared though for the day when their heads are turned with offers of greener pastures. “If they leave, they go with our blessings. Who knows, maybe one day our paths will cross again?”
