I own a small electrical company and have been blessed with LOTS of work. Almost too busy. With the three employees and myself we are barely keeping up with the demand. One of my workers is asking for an early raise which he is scheduled to receive in a couple months. I told him I'd think about it. About a week goes by and he says that another company contacted him and he says they offered him what he was asking for. At first I was pissed that he should put me in this position but need some advice on how to handle this.
However you choose to handle the situation, consider your response carefully. Yes, consider his contribution to the organization. Is the raise deserving? How are raises determined in your organization? Is this something you need to consider changing? Are you comfortable making an exception? Are you willing to make an exception for the next person that asks?
No employee is irreplaceable. Bottomline, an employee is trying to force your hand. In my experience, counteroffers rarely work. If an employee is already considering leaving, this is likely what he will do at some point, even if he accepts your counter now.