Jack G. complained constantly that his fund did not pay him anywhere close to the value he produced. In his role as a Principal in XYZ Private Equity Fund, he had significant P&L attached to the portfolio companies he worked with, sat on two boards and a deal he originated was about to close. Two partners had no fees, originations or exits over the previous year but they kept their equity allocations. Jack’s equity had not changed since he was an Associate and he saw his bonus as adequate but nothing exciting.
Jack’s friend at another fund told him that one of their strategies needed a co-head and put Jack’s name into the hopper. Jack met the senior team, and the staff who would work for him. Everyone agreed that Jack was a great fit, and he received an offer with a great salary, one year bonus guarantee and significant equity. Jack would have a seat on the Investment Committee and the promise of partnership within two years.
Jack felt loyal to the partner who brought him into XYZ and told him about the offer for a gut check. The partners panicked at the idea of having to replace Jack during “The Great Resignation.” Knowing they would have to offer a much better package to a new hire, if they could find one in a reasonable period of time. The partners invited Jack to the founder’s home to discuss their plans for him, including a couple of junior staffers, more equity and potential partnership “down the road.” They flattered him and told him that the founder of the other fund was spending more and more time in Florida and neglecting the business. They convinced him that he would be foolish to leave since they were going to raise another fund shortly, and it would be his time to take on a much bigger role. Jack turned down the offer. A year later, the founder decided that he had had enough and as they exited their deals, they would wind down the fund. There would be no next fund.
That example is fictitious but is based on various scenarios we have witnessed as recruiters. Occasionally, accepting a counteroffer works out to the job seeker’s advantage but that is the exception. Typically, the disloyal employee misses out on promotions, larger bonuses, more responsibility, or other opportunities available elsewhere.
The Showtime television series Billions actually used this type of scenario in Season One, Episode 3, “Yum Time.” The career counselor Wendy who works at Axe Capital learns from the Axe COO that a key portfolio manager has received a job offer from another fund. She used that offer to try to get a better deal from Axe. The COO was so angry about her disloyalty that he planned to make her a counteroffer and then prevent her from getting and using information that she needed to make investment decisions. Without information, the PM would not be able to invest effectively and would fail to reach the returns needed to get her improved package. She would eventually be forced to leave and would no longer have her strong track record. Although that was also a fictional story, it did not come from Andrew Ross Sorkin’s imagination. It was likely based on stories he had heard.
When you have a job offer that you would like to accept, do not seek a counteroffer and if you are offered one, do not accept it! They rarely result in an improved position. If there were grand plans for you in your current firm, it should not have taken an outside offer for you to find out. If you take the counteroffer, do not believe that the outcome will be different for you. There is a slim chance that the promises will be realized but they probably won’t. This kind of job market does not come along often, and in the future, packages will not be as rich. Finding another offer of the same value in the market is not that likely to come around again.
If you found this article helpful you might also want to check out, “The Art of Resigning“
