The hard part seems over. After a lengthy recruitment process, the client is delighted to make an offer. And then the deal flops, an increasingly common scenario as candidates become enticed by a counteroffer or interesting new options. Indeed, changing market dynamics now pose greater risks of rejected offers across all PE and VC industry players, for both recognized household names and lesser-known brands. Drawing on experiences around the globe, PER offers insights on what firms and search consultants can do together to keep declined offers at bay.
Recognize candidates, not clients, are in the driver’s seat

Individuals now have many new job opportunities to choose. In the past, there may have been one or two coveted roles within PE. Now, a person may be weighing ten options. Not only has the scope of job offerings in PE grown but people are being lured into jobs with startups and technology firms. With a power shift away from clients and into the hands of candidates, funds need a well-defined sales strategy, what makes them the employer of choice, what differentiates them in the market. 

Consultants work hard at the front-end to secure the interest from a prospective employee, but it is often the back-end work by the company that makes the difference in convincing the person. The message needs to be consistent from the very first meetings; PER has seen individuals withdraw even after just the first or second round of interviews. 

Some funds now have senior management get involved from the start, pitching the firm on its values, cultures, the work environment, etc. Successful employers also rely on social media to connect to the talent pool, posting stories on what it is like to work there, deploying a soft selling strategy on why people choose them.
Remember culture wins over money

Most rejected offers are based on culture, not money. Funds need to ask what makes the corporate culture different and inviting. Most counter offers mean more money but firms that sell culture can win. In PER’s experience, culture matters more than money. Clients need to demonstrate how the move will enhance a prospective employee’s personal and professional satisfaction. An emphasis on professional growth and a more dynamic career path can often win over an individual more rapidly than a salary increase. 

Flexibility counts as well. The unseen benefit in the pandemic is that people can work remotely with the same or greater productivity. Insisting that a person relocate him/herself is often the reason a candidate rejects the offer. More often than not, the individual’s decision is not taken alone, but includes the input of family where disruptions in routine, a spouse’s job or schools make a move impossible. Flexibility in the work environment counts as well. Can firms offer a flexible balance between work in the office and home? Some people will not even agree to participate in the process if there is no flexibility permitted. 

Pre-close the candidate

The offer negotiations start from when the search is launched. Once employers outline the specifics of the compensation package, consultants use this to pre-close the deal. PER will manage the individual’s expectations and transmit a consistent message on what the offer will entail. We also maintain open and frank discussions on what other options the person is evaluating and keep the information flowing to the prospective employer. Given market dynamics where firms often compete for the same star talent, management may need to be willing to stretch higher on the compensation front to hire their top choice. 

Even though PER manages client and candidate expectations throughout the process, expectations can shift based on competing offer(s) that an individual may suddenly have in hand. At a minimum, firms need to stay committed to the target compensation. There have been instances where funds have given a targeted compensation and then start lower, often because the person’s current package may be lower than the market. But people know the industry compensation and their worth. The strategy can backfire as the prospective employee may then rethink why they should work there if they have been told the offer would be higher. Candidates will question whether that means they will have to negotiate every time their bonus is on the table, viewing it more as a reflection of the culture. Even worse, the person may accept and be out the door as soon as a better offer comes along.

Run a timely process as speed counts

Top candidates frequently have multiple options and offers. Unless the company can move quickly by streamlining the interview process, there’s little chance for success. A fund that previously required individuals to interview with an average of six to eight people in the firm, all on separate occasions, streamlined the process to two meetings, a first round with HR and the hiring manager and a second with a superior and a peer. Other employers are trying a strategy of a first-round interview followed by a condensed half-day assessment to reach a decision – which includes a model and case study. Reducing the time in the recruitment process helps to maintain candidates’ enthusiasm; if there is a lapse of seven to eight weeks between interviews, people lose interest and focus elsewhere. If the offer needs to work its way through internal approval and organizational channels, keep the person up to date.

Ensure ESG is embedded in the values and culture

Developing a clear ESG policy is no easy task yet vitally important that management has implemented concrete ESG strategies. Some individuals are quick to walk away if they perceive the ESG framework, particularly when it comes to diversity, equity, and inclusion, as tokenism. In discussions with some women that rejected offers, they felt that they were just going to be the “symbolic female” on an all-male team with no real interest or effort to embrace team diversity in management style, strategy and decision making.
Secure the commitment and buy in from the candidate

It is much more difficult for a person to walk away once they commit. One strategy used often by some firms is to present the offer verbally first. Once the person has accepted, they will go in to sign the offer, which is the only document that they will have. It is much harder for an individual to negotiate a counteroffer with its current employer when the only document they have is a signed acceptance. Giving one’s word matters and goes to the heart of one’s character. Unfortunately, there are instances where a person may still renege but firms may have fortunately dodged a bullet if the individual is only in the business of shopping offers. 

PER will also be frank with the person, explaining how we have other people in the wing that we need to sign off but will not do so until we secure their commitment.

Keep in-touch between a verbal “yes”, signing and returning a contract, and handing in their notice

Some people accept offers but still remain active in the job market between the verbal acceptance and handing in their notice or even starting, either of their own initiative or other firms relentlessly pursue them. PER’s job is to maintain fluid communication during this time, a tricky endeavour if the person is still interviewing (and not telling us) or giving half truths about other processes. Whilst we cannot read minds, we do aim to read the room, look for potential signs, ask probing questions, and ensure that the person is truly committed.  Are they just buying time? Should we be suspicious? PER’s perceptions are generally on mark when we fear someone is being underhand, at which point PER will either get the person back on track or suggest alternative solutions and candidates to the client.

Recognize an accepted offer is not the finish line – they need to turn up

Regrettably, it is known for some people to wobble, even after they have signed their contract, especially younger ones. We have witnessed some examples where individuals do not turn up on the agreed start date. This is a particularly high risk when the start date is several months from the acceptance date. Having learned from these experiences, PER continues talking to candidates all the way through their notice periods to minimize the risk of surprise. Clients as well have been active on this front, involving them in informal meetings, even just a simple call or an occasional coffee makes a difference.
Mimi Cauley
Head of LatAm