I always hear this, but where do you people work that this is the case? As some who has been on the other side of the table this was never how it worked. Losing a team member sucks. A counter offer is an attempt to avoid that. The idea that your boss would secretly interview your replacement before firing you just seems silly to me. At the most practical level doing something so cold hearted would send every other member of my team searching for a job.
Giving the counteroffer anyway will get every other member of your team searching for a job. There's this company I stayed at for a whole 6 months. I came in after negotiation a sensible salary: Nothing spectacular, but still pretty good. Early inquiries at the job made me realize I was paid 25K more than any of my teammates! While I was the most senior, I wasn't quite that far ahead: They were getting underpaid. Realizing this too, one of them quit, and got a counteroffer to be paid just like I was. News spread like wildfire, and entire teams were interviewing out there. Some people stayed with the counteroffers, but many were lost.
When you are not paying people what you are really willing to pay them, eventually they'll learn about this, and hell will break loose. You either have to change the way you pay, or be OK with losing people. Counteroffers get you the worst of both worlds, and on top of that, they are wonderful sources of lawsuits in the long run, as the people that won't complain are typically women and minorities.
The one counteroffer that make sense is to go and say 'look, now we realized that we are underpaying, but we want to keep you all, so we are doing an immediate salary review'. You still look like someone that isn't on the ball, but at least you show you are trying to have equitable pay.
But being paid below market rate also sucks. By making a counter-offer and having it accepted, you're now setting a precedent. All of that person's peers will now see that the way to get a raise at this company is to constantly be interviewing and threatening to leave. Is that the environment you're trying to foster?
I think the disconnect is that most people imagine their boss is allied with their company against them. In reality they are a mediator between the two (or maybe I'm in the minority with that line of thinking, but it is the best way I can both do the job and sleep at night). I want everyone on my team to be paid fair market value. I fight for it come budget time. If someone who I think is underpaid comes to me with an offer, I will go to my boss for more money. If someone who I think is fairly paid comes to me with an offer, I might simply shake their hand and wish them luck. A counter offer is not guaranteed. It is only offered to employees that we want to keep long term at whatever their new rate would be.
Trying to get a raise with another offer is a bluff. You have to live with that fact that you might be called on that bluff.
> Trying to get a raise with another offer is a bluff. You have to live with that fact that you might be called on that bluff.
I think you meant to say "without another offer". When you indeed have an offer, it's not a bluff. Whether you get a counter or not, the outcome for you is you win. Now, if you DON'T have another offer, but try to get a raise by claiming to have another offer--well, that's an advanced tactic and very risky.
I meant it as I wrote it because it was in response to your original comment below:
>the way to get a raise at this company is to constantly be interviewing and threatening to leave
If your goal is to get a raise and keep your job, coming in with another offer is a bluff. The way to get a raise at my company isn't to constantly be interviewing because we won't counter offer everyone and we generally won't offer repeated counters.
There is a solution: Pay your employees the true market rate and they won't be leaving for more money. Oh, but you say you want to keep paying everyone [who doesn't call you out by getting outside offers] below market? Too bad.
Where is this mythical "market rate" that I as an employee or employer can constantly get access to?
Every employee has their own market rate and that rate is determined by BATNA negotiations. If I'm hiring someone, I don't have market rate for them in mind which I try to pay under.
As a manager at a small company, you barely have more info on market rates than employees do. Sometimes savvy employees even have more info than I do (they can go out an interview to assess the market, while I can't interview people just to see what offer they'd accept).
Of course, there are also cases of flagrant underpayment (ex. paying <$100k for an engineer in SV) which should drive you away automatically.
That depends on the management culture. Some companies will not consider a raise unless you have another offer, some will refuse a raise no matter what you can get elsewhere, some will lie straight to your face to keep you some more and may even backstab you later.
I've seen most of the options in action. The workplace can be an evil place.
There may be some disparity in the way this happens due to the size of the company. Most of my jobs have been with very large corporations, and the way it usually works is they don't put you on new high visibility projects. When the next round of layoffs come you're the most expendable.
