Your trusted team member walks into your office with an unexpected announcement. They’ve been offered a position at another company and plan to leave. What’s your immediate reaction? For many hiring managers and HR professionals, it’s to consider extending a counteroffer. After all, this employee is valuable, knows your processes, and losing them would be disruptive. But before you write that offer letter, it’s worth pausing to consider the potential downsides of counteroffers.

While they may feel like a quick solution, counteroffers often have unintended and lasting consequences.

Why Do People Start Looking for Another Job?

Employees rarely start looking for new opportunities solely because of money. While compensation can play a role, it’s often just one piece of a much larger puzzle. Many times, employees begin their job search because they feel stuck in their current role, with no clear path for growth or development. For instance, a high-performing team member might become frustrated if they’re repeatedly overlooked for promotions or challenging projects.

Dissatisfaction with company culture is another common trigger. Employees may feel disengaged if their values don’t align with the organization or if the workplace lacks a supportive, collaborative environment. A toxic atmosphere, poor management, or even a lack of work-life balance can push someone to explore other options.

Recognition—or the lack thereof—is also a major factor. When hard work goes unnoticed or unappreciated, employees can feel undervalued and unmotivated. For example, someone who consistently exceeds expectations but doesn’t receive acknowledgment may start to wonder if their efforts matter.

Ultimately, these deeper issues—whether it’s a lack of growth, a misaligned culture, or feeling unappreciated—drive employees to look elsewhere. Addressing these factors at their root is far more effective than offering temporary fixes like pay raises after they’ve already decided to leave.

By the time employees have made the decision to leave, they are often already mentally and emotionally disengaged from their role. Their commitment to the organization erodes as they begin to picture themselves elsewhere, and attempts to re-engage them at this stage are frequently too late. This highlights the importance of proactive measures to address workplace issues before they reach a critical point.

The Risks of Counteroffers

1. Questionable Loyalties

If an employee accepts a counteroffer under financial persuasion, their loyalty can naturally become questionable. Why? Because their continued employment may feel more transactional than relationship-driven. This can lead managers to view them differently, eroding mutual trust.

Similarly, the employee may continue to have one foot out the door. Accepting the counteroffer doesn’t eliminate their previous feelings of dissatisfaction. If those underlying issues remain unaddressed, they are likely to start searching again in the near future.

2. Impact on Team Dynamics

Counteroffers can ripple through your team and organization beyond just the employee in question. Other team members may view the process unfavorably:

• Perceived inequality: When word of a counteroffer makes its way around the office, it can create feelings of unfairness. Why wasn’t I rewarded for staying loyal? Will I have to threaten resignation for a raise? This can damage morale and lead to resentment.
• Loss of trust within the team: Employees may start viewing each other’s motivations with skepticism. If someone accepted a counteroffer, are they truly committed to the team’s goals?

Maintaining a harmonious and trusting work environment should always be a priority for effective leadership.

3. Short-Lived Solution

Statistics reveal a concerning truth about counteroffers. Studies show that 80% of employees who accept counteroffers leave the company within six months to a year. Why? Because counteroffers rarely solve the core challenges driving dissatisfaction.

By keeping an employee who was ready to leave, the company might only be delaying the inevitable. While this could buy time, it can also lead to operational challenges, particularly if their eventual departure is poorly timed.

4. Cultural Implications

Your organization’s culture is influenced by every decision leadership makes. Offering counteroffers when employees resign can unintentionally create a negative precedent:

• Employees may rely on external job offers as negotiation leverage.
• Managers may feel undermined if employees hold leverage over their decisions.
• An overall imbalance can develop, which poses risks to culture cohesion and leadership authority.

A Smarter Approach? Proactively Engage and Retain

Rather than relying on counteroffers, there are strategic steps hiring managers and HR professionals can take to proactively retain key employees. The goal is to address the root causes of dissatisfaction before they lead to a resignation letter.

1. Regular Check-Ins

Have an open and ongoing dialogue with employees to identify any frustrations, career goals, or challenges early. Don’t wait for the annual performance review to ask how they’re feeling about their role and trajectory.

2. Growth Opportunities

Ambitious employees want room to grow. Consider how you can provide additional development opportunities through promotions, skill-based training, or expanded responsibilities.

3. Fair Compensation and Recognition

Evaluate whether your reward structures adequately reflect the value your team members bring to the table. Offering competitive compensation, bonuses for exceptional performance, and recognizing employees regularly makes quitting for a raise far less tempting.

4. Strong Culture and Leadership

Employees are more loyal to organizations that foster trust, shared purpose, and strong leadership. Cultivate a workplace culture that employees feel genuinely proud to be a part of.

5. Most Important: Genuinely Care—It Pays!

Demonstrating genuine care for your employees is a priceless investment that yields lasting loyalty and commitment. People excel in environments where they feel valued, respected, and supported beyond just their professional roles. It’s not enough to pretend or offer surface-level gestures—employees can easily distinguish between sincere concern and performative actions.

When leadership actions fail to align with their words, the cracks in workplace morale deepen. Consider a CEO who insists on involving employees in general meetings on topics irrelevant to their interests or expertise while ignoring the genuine challenges and concerns they face. This discrepancy creates a culture of disengagement, as employees feel their time and input are undervalued. The situation becomes even more frustrating when, in these very meetings, the CEO boldly claims everyone is happy, part of a family, and actively involved in decision-making. Such declarations ring hollow in the face of employee dissatisfaction and rising turnover rates.

Authentic care is reflected in meaningful actions, such as listening to their challenges, supporting their growth, and ensuring a healthy work-life balance. When employees see their leaders actively advocating for their well-being, they are far more likely to stay engaged and dedicated to the organization.

Setting Your Team (and Your Business) Up for Success

Counteroffers can seem like an easy solution to avoid the disruption of losing key employees, but they are often nothing more than a temporary band-aid. Instead of relying on this reactive approach, businesses can benefit significantly from proactive, long-term strategies that cultivate a healthy, satisfied, and engaged workforce.

By investing in sustainable employee retention strategies, you’re not only protecting your business operations but also reinforcing the core values that make your organization a desirable place to work.

You can implement countless programs, but they hold little value if you don’t truly care about your workforce. Above all, prioritize genuine care for the people who work alongside you!