At one time, this wouldn't have mattered too much, but now it does.
If the new offer turns out to be the best one, I will take it.
Should I try negotiating a large salary increase solely on my
performance, without mentioning an offer, or should I use both?
While I don't normally advise making job choices based solely on who will pay the most, you have already decided that you will go to the highest bidder.
Thus it makes sense that you push the bidding along by mentioning to your current company that you have another offer and that you will make your decision based on their offer.
But I've heard it is a bad idea to mention offers, as it makes me
seems "disloyal", and backfire, i.e. make a raise less likely. (I've
never really understood "loyalty" to a company, but I still would
rather play nice.)
If I do mention it, how should I do it in order not to seem ungrateful or hostile?
Well certainly it can be viewed as "disloyal". And it could "backfire" in the sense that one or both parties won't want to play the bidding game.
If you still decide you want to risk it and play the game, your best bet is to go to your current employer and indicate that you have a solid offer to go to your former company for a 25% increase.
You could indicate how grateful you are, that you really like your current company, and that you really like your current manager (if that's the truth).
You could point out how stellar your performance has been, and how valuable you are to the company.
You could also indicate that you understand you are being paid competitively, and that at one time, this kind of increase wouldn't have mattered too much, but now it does.
You then ask if they would be willing to match or beat your other offer.
That way, if they match or beat the other offer, you can still take two different paths:
- you could choose to play a somewhat riskier game and go back to your previous employer and try to get them to beat the new offer
- you could play it safer and choose to accept the new offer from your current company
And if they choose not to match your other offer, you thank your current company, and either
- accept whatever they do offer (if anything), or
- accept the 25% increase from your former company.