Employee demanding company to guarantee counter-offer isn't his last promotion at this company

Question

I recently had to take over for a second software team, "team Bravo", in addition to my own team, "team Alpha", due to Bravo's manager, "Bob", having to go on leave. This is particularly stressful, since each team is quite large (50 people per team with multiple reporting/management levels), and this puts a lot of pressure on me.

The "senior software architect" (the senior-most technical person) on Bravo, "Felix", has, unfortunately, made himself indispensable (i.e. Felix is the only person who has kept various certifications up-to-date and understands certain complex technology like cloud computing inside-out; members of the team just know their individual pieces, but in honesty, 2x Felix'es could likely do the work of the entire 50 person team). In my opinion, Felix should have just been promoted to manage this team, and he's even expressed interest in doing so. Unfortunately, he was "too honest" (I'm told) at his previous annual review, and he just wants to earn as much money as possible "while he's still young", and doesn't care if it's engineering or engineering-management: "I excel at anything I do; may as well earn more while I'm at it." So, senior management has written him off as a replacement manager for at least another year due to being "too mercenary" and "not focused enough".

Felix setup a one-on-one meeting with me last week, where he pretty much stated the points above (i.e. he knows he's necessary for the team/project to survive), and has a job offer from another company in our field. He stated he likes working here in general, and the only downside was lack of raises/promotions/etc., which he feels he's earned. I provide a generic counteroffer (20% raise), and he declines, stating his new offer is double his current pay. He'd consider staying for a mere 40% raise, but he doesn't want the counteroffer to be the last promotion he accepts at this company. I try to assure him this won't be the case, but he's now insisting his severance agreement be updated to unreasonable terms.

• The current company plan is 12 weeks of severance, plus 3 weeks for every year worked at the company, up to a max of 1 year of severance after 13 years of service.
• He wants it to cap at 5 years...
• At a new salary: 140% of his current rate (i.e. 40% raise).
• ... and to have it set to cash out unconditionally (i.e. even if he quits), so that no company "legal mumbo jumbo" can "screw him out" of his severance.
• He also wants it upped to 2 years, right now.

He then explains this whole "strategy" is to prove he wants to stay with the company, but he wants to make sure the company doesn't "mothball" him a second time. He even has a PowerPoint presentation showing his earnings over time, stressing the importance of "getting that base salary high early on to benefit from the integral".

I've tried offering stock bonuses (large ones), but he's only interested if they instantly vest (instead of over 4 years), so the company can't "claw them back". I can't match double his current salary, and this absurd severance plan would have me laughed out of the company if I present it to my boss. In fact, my bosses have made me personally responsible for ensuring this new project succeeds, and if Felix leaves, we'll have to shelve it and likely lay off at least 30-40 people, and I might be on the chopping block myself.

What can I offer an employee like this? Honestly, the only thing that comes to mind is laying off some under-performing/junior engineers so I can fund this cutthroat's extortion/severance fund. I'm planning on retiring in 6 years from this company, so I can't just "brush off my resume and find a new job that pays better" in this time in my life (or in this **** economy). It feels disgusting having to lay off hardworking employees to fund this mercenary of an engineer. Being honest here: I'll do whatever I need to do (that is legal) in order to keep my own job for 6 more years, but I'd rather not have to fire loyal employees to pay off Felix.

Answer 1

Replace Him

Felix is likely a lost cause, and replacing him is your primary option.

You are now in charge of 2 50-person orgs. Is there no one that can fill in for Felix? On teams A or B? Out of 100 people? Really? Or coming off a project somewhere else in the org that you can horse-trade for, or...?

If not, there are these things called “recruiters” which will allow you to hire someone who knows such newfangled technology as cloud computing. In the current pandemic there are hordes of layoffs of even very highly skilled senior people you can get quickly. A recruiter costs some money, but in an org with 100 engineers some role is going to be not filled that can pay for it, you don’t have to “lay off employees” to fund it. (Unless you do really pay everyone 50% of market, so even getting rid of Felix doesn’t pay for a replacement?)

Then you primarily task him with tech transfer/documentation.

I’m pretty confused how someone over 100 engineers has absolutely no thoughts on staffing solutions to a problem like this. That seems very unlikely. Perhaps you’re just omitting them for some reason but it comes across as very hapless to present this as the only binary choice you have to make. Letting an employee become a single point of failure, having 50 employees that are apparently a complete waste of space, etc. are probably better places to invest your time in correcting than this one guy. Perhaps you should unload 10 people and hire 5 good ones to start.

Retain Him

You can try to keep him, but it’s unlikely to work. A combination of him being a goon and his having lost confidence in your organization are a toxic mix. You should only retain him if he’s worth retaining and not going to be more trouble than he’s worth.

1. If he’s really completely motivated by base salary, it's unlikely he really has an offer in hand for double his salary, or else he would have taken it already. And generally people don’t get double unless your current company is complete, complete junk (or it's not apples to apples, like a contract position).

2. If he is really worth 120% or 140% of his current salary (easily verified by checking going rates for that kind of engineer - again, a recruiter can probably very quickly verify what salary expectations are for that role) then offer it to him. All the shenanigans about severance, you just say “No.” Come on, 2 years salary even if he quits tomorrow? Why are you even humoring that discussion?

3. Better to work on his long term prospects in a positive manner if that's what he's really concerned about. You say “You’re right. I think you’re very skilled and I’d like to work with you so you can continue to move up in this organization. But ridiculous demands aren’t the way to do that. I’ll get you a 40% raise, and coaching and, if that coaching goes well, my sponsorship to continue to move up in the organization - based on you contributing to its success.”

Answer 2

in honesty, 2x Felix'es could likely do the work of the entire 50 person team.

It sounds like he’s been underpaid and mistreated for quite some time and he knows it. This seems to be the sentiment expressed in these outrageous severance demands.

At this point, you’ve already lost him. I would immediately accept his resignation and ask him to spend his notice period documenting and transitioning his current workload to other devs. Consider offering a reasonable short-term severance if this is met with resistance. If there’s really no one else there with the skills to do what he does, consider bringing in a contractor on a temporary basis until you can find a permanent replacement.

Answer 3

He is trying to screw you

Just one of the items he wants, namely that severance kicks in even if he resigns, is far outside normal boundaries of employment. With that in place, nothing stops him quitting next week and getting a boatload of money from your company, and still going to the job he has been offered. Which is probably the result he is looking for.

Draw the first line right there. Severance will not be paid if he resigns or is fired with cause. Without that clause the rest of the severance terms shouldn't make that much difference to him. The fact that 3 of his 4 demands are about severance is a major red flag. It means he is focussed on what happens when he leaves your company, not how well he will be rewarded if he stays.

A 40% pay raise is absolutely up to your company. If you really think that he is worth 25 ordinary developers, then yes, pay him. However beware of the effect on other people. Does everyone who works with him agree? If not they may resent him getting a pay raise when they don't.

As for future promotion, offer him a position you know he can do, but you can't promise him one he hasn't shown himself capable of yet. But since he seems to be interested more in money than position, try promising him that his salary won't max out in his current position - I.e he will keep getting pay raises without a job title change for as.

Answer 4

Your management has already accepted Felix is a "mercenary". Capitalize on that.

Explain to Felix that you can't retain him as an employee, because the gap between his demands and the company's possible offers is just too large. But offer him an alternative: re-hire him as an independent consultant, at 200% of his current rate. That's not unreasonable, considering his other offer and his value to the company. It's more than the 40% raise he's asking for, but contractors don't get severance and other employee benefits.

The contract can also specify a minimum duration, including "early termination fees" in lieu of severance pay. The chief benefit is that Felix can't just walk out on the contract. You can be pretty sure he's available for the next 2 years, giving you ample time to get the projects into a sane state and replacements trained. Even if you need to hire that replacement, now would be a good time to pick up some talented people.

Answer 5

I have two options for you:

Option 1: Give him a mega bonus to stay long enough to train someone.

How long would it take for someone to be as useful as Felix? You have 100 engineers and surely there are some promising candidates in there. Offer Felix 2.5x the pay (between salary and stock options) for 6 months of training his replacement. It will be an eye-popping number to any innumerate people in management, but run them through the numbers to show the savings vs giving him the 40% raise permanently. Let the stock options vest in each month and maybe tack on a performance bonus based on what the trainees can do in month 5.

Offer a profitable exit for a graceful exit.

Option 2: This is in large part about respect, not salary. Let him do your job unofficially with the goal of making him the new team lead.

When he says that he optimizes for salary, I do not believe him. A 100% raise means that he has been underpaid for a while. He does calculus for his earnings but does not check whether his pay is at market rate? I think he has known for a while but expected his loyalty to be rewarded. He enjoys the company, but feels undervalued and disrespected there, especially when passed over to lead the team.

What you could do is give him a chance to get what he originally wanted. Let him unofficially lead team Bravo with the goal of you recommending to management that he be made the permanent lead for Bravo. In your conversation with him, empathize with him and tell him that you think he should have been chosen to be the new leader.

In addition, there must be some bright people on your current team who you trust. Transfer them to Bravo. Frame it as giving him the resources to succeed and blow management away. Tell those people to learn all they can about the system from Felix.

Some people might see this as the Trojan Horse it is, but plenty of others are greedy and are intoxicated by the thought of power. And greed is quite a set of blinders too.

After a while, depending on what happens, you can decide what to do. Unhappy with him? Fire him and replace him with one of the people you sent to support him. Happy with him? Recommend to management that he be made the permanent lead with a generous helping of options for success stages in the project. Either way, you retain critical knowledge and protect against a future shakedown.

Answer 6

Money is no problem. You say two like him would do the work of your team of 50. Fire two of them, add that to Felix’ salary. Money problem solved. You say they are hard working? Maybe, but what are the results?

Fact is that he will be leaving. I’d try offering a one year contract with the salary he wants, then replacing the 50 guys with fewer, but competent ones, who know software development and have one year time to learn everything about the business.

Answer 7

I would like to introduce a slightly different point of view. I agree that Felix request does seem like he wants to screw the company by getting new job and nice severance. But let's just think what would be his reasoning for asking for those conditions if he is not trying to get the advantage out of a company.

He is very competent person and he is a pillar of the team. He knows that. He expressed very clearly that he wants to progress in a way that will maximize his profits. Yet he's been shut down. Now he says he has a better job offer. You countered this with generic pay increase at first.

This is what I would be thinking in Felix's shoes. I see that my ambitions are not met with understanding and consideration. I received a generic counter offer even though my departure will likely mean that the project will fail. I've been on sites like SE Workplace and I know that most times when company makes a counter offer is to buy themselves time to find or train a replacement. I would like to stay at my team as I like the job but I do not want to find myself out of work in a 12-18 months when it will be less likely that my departure will cause hectic in the project. And I do not want to just get a slightly better raise now and be stuck in this position with this salary for next few years.

So the question is how can Felix trust you that you won't screw him over if he accepts the counter offer? Especially how he can trust your word that his promotion won't be stopped? By asking for severance even in case if he quits he gets the upper hand and if his promotion or raise won't come along he will quit with benefits. This point in the contract will make you keep your promise.

His demands may be too broad, meaning that it gives him severance even if you make him a manager next year and he still decides to quit. However, I think those demands may not be just to try screw the company but to find a way to make sure he won't get shut down. If his offer is so generous it will be foolish to stay with the current company without any ironclad assurance that he has a future with you.

Answer 8

I read once of a (putatively) Japanese management practice.

If an employee was found to be indispensable, he/she was fired. This forced the company to address the issue. You can find multiple articles arguing this point such this one with a quick web search on "fire the indipensable employee".

(Disclaimer: I am not and never have been in management)

Answer 9

Going to add this as an answer because it's too big for a comment:

I'm going to leave wether or not you can/are willing to pay him 140% to you, but I wanted to suggest a counter requirement:
Make him teach others what he knows. Think about wether you want to keep him in the long run when you choose your phrazing, but at this point, his leaving can cause 40 people to get fired?! Give him the responsibility to work to improve that, get others involved. Create more of a team.

If you want, you can choose wording along the line of that those kind of skills (teambuilding, working as a team to improve overal throughput, being the discuss-it-with-guy instead of the only-he-knows-guy, etc) improve his value long term, and therefor his salary options, wether at this company or a future one. He is willing to show commitment to the company, this is a perfect way for everyone.

Answer 10

Here's the dirty little secret everyone knows but nobody will say: The only reason anyone works at all is for the money. This is universally true for everyone at all times always and if you say you're different then you're a liar, period. Felix has simply chosen to say what everyone else is thinking, and got hammered for it: "I work for money; I will work more for someone who pays me more. You want me to work more? Pay me, or I'll find someone else who will."

Without knowing your salary structure at your company or knowing Felix's salary, it's hard to know if I should agree with his assertion that he's being paid too little, or to think reasonable of his assertion that his competing offer is double his current salary. However, you have this information, so here's a thought experiment: If you had Felix's skill level, do you think you could make twice as much as Felix is making? If so, then Felix probably has a real complaint, he's being underpaid and he found someone who will pay him what he's worth. If you want to retain him, you better step up and compete.

Felix is right about being benched. You said he was passed over for a promotion, and he knows it. He's rightfully pissed off and rightfully afraid of being passed over a second, third, or fourth time and rightfully telling you that you have to guarantee that this won't happen if you want to retain him. While none of this is your fault personally, it is all the fault of your organization for passing over a person who is clearly qualified, and it is now your responsibility to give him the guarantees he wants or to part ways with him.

As for the specific terms of his agreement that he is demanding: You are asking him to turn down a salary increase of 100%, which is an unreasonable ask. He's asking you for something in return. Someone has to meet in the middle somewhere, so let's go down the line:

The current company plan is 12 weeks of severance, plus 3 weeks for every year worked at the company, up to a max of 1 year of severance after 13 years of service. He wants it to cap at 5 years...

This is not unreasonable, but you explain to him that he will have to work 65 years to get 5 years of severance (13 years/1 year of severance = 65 years). He's not likely to want to work until he's 100 years old, and even less likely he'll do so at the same company, so it's unlikely he'll ever actually hit this cap. You can probably negotiate him down to 2 years on this.

At a new salary: 140% of his current rate (i.e. 40% raise).

You're asking him to turn down a 100% raise, you should at least give him 40%.

... and to have it set to cash out unconditionally (i.e. even if he quits), so that no company "legal mumbo jumbo" can "screw him out" of his severance.

This is the part that's kind of screwy, because he's asking for something reasonable, he's just asking in a really screwed up way. Here's what you counter with:

You would like an unconditional severance, to be paid when you leave the company for any reason even if you quit. As I see it, this is basically a lump-sum cash payment that you would like to cash out at any time. While we can't do that, we can give you the same amount of money, except over time and not as a lump sum. By my calculation, the amount we would be adding to your severance each year of service would be 7.6% of your salary. What if we just give you an additional 10% salary increase so that you don't have to worry about the headache of the severance?

This would up your commitment to a 50% salary increase over the 40% you've offered, but once again, he's turning down a 100% increase; 50% is a reasonable ask. Plus, he's asked for 7.6%, you're offering him 10%, this makes you look like the good guy.

He also wants it upped to 2 years, right now.

Well, does he deserve it? Calculate the market rate for his skill, what you're paying him, and see what those numbers look like. If not, then turn this down.

As for what to do going forward:

1. You've said that 2 Felix's could do the entire of your 50-man team. That means 49 of those people are probably not doing their jobs properly. Cut the slackers to pay Felix more, and recruit better people in the future. It sounds like you may have "too many cooks in the kitchen", except all those cooks are actually McDonalds assembly line workers pretending to be Gordon Ramsey, which are the worst types of cooks. Fire some people. Jeff Bezos popularized the idea of a "two-pizza team", I suggest you look into it, there's lots of resources online.

2. Felix is a liability; if you give into him now, he knows he has some amount of power over you. Unfortunately, that's the truth. However, in exchange for his demands, he has to relinquish some of his power. You should include in your negotiation that Felix has to train people to do some of what he does. My suggestion would be to take your 50-man team, and have Felix pick 10 people on that team, and have Felix be the team leader of that team, responsible for training those 10 people to be able to, collectively, do everything he does. Maybe not every one of those 10 people can do everything Felix does, but collectively all 10 of those people should be able to do everything Felix does. Now instead of having one "devops guy" who, if he decides to take a 3 week vacation none of your apps get deployed to production, you have a "devops team" who can be responsible for your deployment. And then next time Felix decides to be greedy (if this is indeed greedy and not honest concern from Felix; it could legitimately be either) you can tell him to take a hike because he's not a liability anymore.

Answer 11

To echo what AffableAmbler said:

Let him go (albeit regrettably), Felix maybe a highly skilled person and he may be severely underpaid-ed but your company issue isn't Felix, it is the 50 other people. If you come to an agreement with Felix you still have the outstanding issue of your 50 other staff and there skills or lack of skills and if Felix then decides in a year or less to walk you still have the underlying issue to solve. This is where you need to focus so plan for and solve that issue now it wont go away just because your one good/skilled staff member has decided to stay for an unspecific amount of time.

Answer 12

This is a no-brainer. Offer him his 40%, but without the ridiculous severance agreement. If that's not enough for him, let him go.

Answer 13

"Did Felix give an explanation for why he is willing to even consider turning down the additional 60% pay at the other employer? For most people, to turn down such a huge pay difference, it would take a very strong tie to the current company (to the people or mission or something) or a dislike of the new employer (their location, industry, business model, something). – stannius "

There are several good reasons:

1. Felix likes where he is.
2. Felix knows that he'll have to ramp up in any new company, which would lose a year or so of superb productivity.
3. Felix knows that he has a chance of jumping into a bad situation (even after trying to vet the new place).

And remember that Felix is not simply giving his notice. Almost all advice I've seen on The Workplace is for a person in Felix' shoes to simply find their pay raise by moving on. If Felix followed that conventional wisdom, then the OP (in the USA) would have just received two weeks' notice from Felix, and would be trying to bring multiple programmers up by a factor of a lot, all within 10 working days.