The Value of Perks

Discussion
Apr 30, 2008

By Tom Ryan

While some may be driven by promises of big raises or bonuses, small perks are the primary motivators for many employees. What’s worse is that taking the free coffee or catered lunches away can take its toll on employee morale.

“The little perks make people feel like they want to go the extra mile to get the job done,” Phil Wallner, president of Provident Link, an IT information technology recruiting firm, told Workforce Management. “When you remove those perks and you’re asking someone to still go above and beyond, you’re setting yourself up for some turnover problems.”

Human resource consultants said management often feel perks are expendable during tough economic times. But small perks show that employers care. In some cases, the free after-hour pizza can motivate a crew in the final stretch of a project. More problematically, removing them often symbolizes trouble within a company.

“It can make them start looking around,” says John Ryan, president of executive search firm RSMR Global Resources Inc. “The first reaction is, ‘We’re having financial problems. Maybe I should look for a new job.'”

Beyond free coffee and periodically a free lunch, perks may include health clubs on premises, flex hours, free subway cards, petty-cash for Halloween parties, or even the annual holiday party.

The article offered few easy solutions on how to smoothly remove perks during cost-saving periods. One consultant advised underscoring to employees how they will benefit in other ways. Another said it should be crystal clear why the perks are being taken away.

“If a company can be transparent enough to indicate that they’re just trying to cut back costs by 5 percent, maybe they can stave off any gossip or rumors,” says Mr. Ryan.

Carol Sladek, national leader of work/life consulting for Hewitt Associates, says employers must understand which perks, small or large, engender loyalty in their staff before taking any away.

“Perhaps you take the free coffee out of coffee stations, then you find 95 percent of the population really valued it,” Ms. Sladek says. “These fun little perks are near and dear to people.”

Indeed, at the former workplace of Aaron Andersen, a nonprofit exec in Chicago, employees didn’t care when management eliminated their free bottles of apple, orange and cranberry juice. But replacing Starbucks coffee in the break room with a private label generic offering was taken as a symbol of larger problems that would later come to fruition.

“People felt undervalued,” Mr. Anderson told Workforce Management. It was “really, really bad coffee.”

Discussion Questions: Is it worth the cost savings to cut back on small perks during tough economic times? How should management decide which perks to take away, and how should they do it?

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18 Comments on "The Value of Perks"


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John Lansdale
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John Lansdale
14 years 18 days ago

Perks are a very inexpensive way of saying we respect you, we’re a team, you’re on it, let’s get to work.

Michael Murphy, Ph.D.
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Michael Murphy, Ph.D.
14 years 18 days ago

I agree with the other commentaries that underscore the value of small perks on the quality of day-to-day life within an organization. They may not seem like a lot, but take them away and you have disgruntled, if not mutinous, employees on your hands. You are better off evaluating the big costs that can be cut than taking away little things bit-by-bit.

In addition, it’s all in how you communicate about the change. Maintain positivity while not seeming ingenuous.

Mel Kleiman
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14 years 18 days ago

If you have gotten this far, hopefully you took the survey at the beginning. When I took it this morning it was 100% saying small perks are important. I think that is the first time I have seen any poll with 100% agreement.

Perks are a form of recognition and in many cases, they are what help establish your culture. If you are going to change the culture, you are in for a change in your people, because they came to work for you and stay because of who the company is and what it represents. Actions always speak louder then words.

Yes, you may want to evaluate the perks you offer from time to time. But this is one place to get the group buying into it and consensus before you make the change.

Susan Rider
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Susan Rider
14 years 18 days ago
This seems like a simple question that many executives will blow off. But it is so very important. Small perks are very important, they are perceived as a form of recognition and appreciation. Making the wrong decision on reducing perks and benefits can have a dramatic impact. It can change the employees’ attitude and performance immensely. The best way to decide on what to do is ask the employees, make them a part of the decision, tell them the cost of free coffee, ballgame suites, etc, and get their input on reductions. Who knows? They may come up with other savings that you don’t see that will add big dollars to bottom line. While working with one company, the staff identified a total of $250,000 in office supply savings. In another company offering single and family health programs, they cut out health care for the family, won’t even offer it. They lost three of their key workers within six months. A fabulous company culture is a gold nugget that others strive for and should be… Read more »
Len Lewis
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Len Lewis
14 years 18 days ago

Sometimes it’s not so much a matter of giving out company-wide perks but occasional small ones to people who do an outstanding job.

I used to know an independent who always carried passes to movie theaters, gas cards, McDonald’s gift certificates and other things in his pocket. He’d spot a clerk having a friendly conversation with a customer or showing them where things are or hustling to get shelves stocked and he’d just go up to them say thanks and hand them a little gift.

People appreciate the recognition.

Dick Seesel
Guest
14 years 18 days ago

I completely agree with the other panelists who have weighed in on this subject. Perks are as much a symbol of a corporate culture as they are a reason for people to join a company in the first place. These may look like low-hanging fruit in terms of cost-cutting in an economic downturn but in fact may add to costs as a company is faced with higher turnover, expenses of hiring and training new associates, lower morale and lower productivity. Companies should be wary of adding perks unless they’re prepared to stick with them during cyclical downturns.

Max Goldberg
Guest
14 years 18 days ago

In tough economic times, employers need even more from employees. Smart companies don’t look to save pennies, they evaluate their core story, identify and clarity their priorities and look for ways to increase business from existing customers, while bringing in new customers. All this takes extra effort, both physically and emotionally from employees. It is precisely the time when a company needs its employees to be on top of their game. Cutting back simple perks could have a negative impact on business.

Bob Phibbs
Guest
14 years 18 days ago
You destroy the culture, you destroy the company. I worked with a fast growing company. The first year they gave Bose noise-canceling headphones as holiday gifts. The next year an iPod shuffle. The next, a sheet of stamps with their picture on them. The next year nothing except three traveling reps who received collapsible power strips. Everyone talked about it. The company lost half of their employees the following year–they all could see the writing on the wall. While it is true you can always find someone to work, the message sent by such short-sighted cost management is indeed, “we’re in trouble.” Better to put on a good face and hold the culture in tough times than to make people wonder if their paycheck will clear on Friday. Final thought: how much would it cost to acquire new employees (assuming the old were doing a good job of course) vs. any “perks” offered? Ads in the papers, recruiters or lost time from absent employees seems much greater than for example, the cost difference between Starbucks… Read more »
David Biernbaum
Guest
14 years 18 days ago

When times get tough many employers tend to sweat the small stuff while chasing pennies rather than concentrating on the right strategies that will truly make a difference. Small perks such as coffee refills for employees should never be eliminated until desperation sets in. Find ways to cut your cost of doing business without hurting your employees and customers. Dig deeper and find the real gold.

Gene Hoffman
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Gene Hoffman
14 years 18 days ago

Small perks have big value to the little guy. Free coffee makes an employee feel he/she is part of “the family.” The best perks to shave during slower economic times are the gigantic rewards being bestowed on the “top five” at the top.

David Livingston
Guest
14 years 18 days ago

An easy way to solve the problem is to put everyone on commission and bonus based on profits. If the employees can see that the savings can increase their paychecks, cutting back on the small perks won’t be so bad.

Ted Hurlbut
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Ted Hurlbut
14 years 18 days ago

Perks are a reflection of management’s attitude toward its people. That attitude manifests itself in a number of ways, day in and day out. If people are fundamental to the core mission of the company, management will invest both tangibly and intangibly in their people, regardless of the immediate situation. If people are not considered fundamental to the mission, then people-related expenses will be cut at their earliest opportunity, if for no other reason than employment expenses are typically one of a retailers largest expense items.

Li McClelland
Guest
Li McClelland
14 years 18 days ago

Sometimes companies get it way wrong about which perks and freebies are valuable and appreciated by employees. From years of experience I call it the “coffee mug T-shirt syndrome.” Very much corporate cash has been wasted on such give-away items when, if they even make it home, they so often land in the garage, then the thrift shop and ultimately the landfill. (I recently said goodbye to a “Second to None in ’91” mug that had been languishing in my attic for some time, along with a chintzy apron that spouted the slogan “Cooking up Sales!”)

When money is tight, companies need to be sure they are spending it wisely and on perks employees can appreciate, and will use.

Tom McGoldrick
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Tom McGoldrick
14 years 18 days ago

We all seem to be in agreement on this issue. While companies are not and can not be a democracy, it does not mean the employee opinion doesn’t need to be managed.

I have surveyed hundreds of thousands of employees over the course of my career and it has always been my impression that even the lowest employee in the food chain has a more sophisticated view of the company than most managers give them credit for. People want to be proud of where they work, and given the chance most people will work hard for their employer.

Instead of cutting perks, it is always a better idea to empower small teams of employees to find ways to become more efficient or improve quality; either of which will have a much larger impact on the bottom line. Companies that work to create a strong culture and empower their employees almost always come out on top in the long run.

Doron Levy
Guest
Doron Levy
14 years 18 days ago

Perks for front line staff are almost an expected benefit in retail. Taking those away will likely affect productivity. Communication as to why things are being removed is key to getting staff on board with any new directive. What I like to see is minor incentives when certain goals are met. Pizza parties if sales exceed a certain amount or lunch when a project is completed in a specified time frame with predetermined hours used. This sets staff up for motivation in achieving goals for the store.

Sam Horton
Guest
Sam Horton
14 years 18 days ago

Years ago, I heard a saying, “never, ever, ever cancel the Christmas Party.”

As other folks have said in this forum, perks such as free coffee, subsidized lunch, half-day Fridays, casual Fridays, whatever they are…build a sense of culture that a company can never replace. There are so many other ways to find cost savings or use resources more efficiently that if you open the lines of communication and band together as a team, it would exceed the short-sighted savings from eliminating perks.

Mark Lilien
Guest
14 years 18 days ago

Just think of all the great companies that could be in business today if only they’d eliminated free coffee earlier. I’m sure that W.T. Grant, Montgomery Ward, Gimbels, Korvette’s, B. Altman, and so many more would be thriving. Wondering how to save all those floundering banks? You guessed it! Eliminate the free coffee and the Federal Reserve governors will sleep soundly every night.

Christopher P. Ramey
Guest
14 years 17 days ago

Perks don’t build relationships. Consequently, they don’t drive loyalty either. Even worse, the employees feel entitled to them.

My suggestion is to build relationships based on trust and respect with your employees, but keep perks to a bare minimum.

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