You can't afford a bidding war, but you need to keep the employee. Larger salaries are not the answer.
More money is, at best, a temporary solution.
Furthermore, it sends the message that management can be blackmailed. Instead, the most effective managers create a compensation package that inspires critical employees to work hard and stay the course. One way the pros create golden handcuffs is by structuring compensation packages that recognize employees' unique and specific contributions to the firm's overall success. In essence, they make leaving so expensive as to be foolhardy. Performance oriented rewards work best for employees whose personal talents greatly contribute to the company's fortunes.