Employee benefits glue people practices to profitability. This is a
thesis supported by many compelling statistics and anecdotes.
But an evolving workplace has seen the balance of that power
shift from cookie-cutter insurance and retirement savings plans
to a more tangible subset of service-oriented perks, each
customized to address an individual employee's unique everyday
needs. This is especially true for small and mid-size
businesses (SMBs) that must be more nimble and strategic to
compete with large companies in a sluggish economy that has
decimated employee loyalty and job satisfaction.
Leading organizations recognize how valuable personalized
"power perks" are for motivating and rewarding employees, and
fueling business performance. The secret formula is to focus on
convenience, relevance, and affordability - an approach that is
resonating with a workforce that has grown increasingly
restless with top-down reward structures and organizational
hierarchies; this is especially true for younger generations.
By using interesting perks that are simple and cost-effective,
businesses will reap a higher return on investment (ROI) in the
areas of employee engagement, morale, recruitment, and
retention, as well as improve productivity, innovation,
customer loyalty, and revenue.
Why Perks Matter
Employee benefits are more valuable than ever, according to
MetLife's 10th annual study of employee benefits trends, which
shows a strong relationship between satisfaction with benefits and overall job satisfaction. All types of employees place a high value on
personalized benefits, for which they are even willing to pay
the entire cost of those perks. But researchers caution that an
economic recovery could produce "unanticipated setbacks for
retention and productivity" for many employers unless they
treat their employees better. In 2011, U.S. workers became increasingly dissatisfied and disloyal, with as many as one-third of them
wishing they worked somewhere else within the coming year.
Several leading economic indicators warn of an impending jolt
to talent management at companies that cut corners during the
Great Recession. In January 2012, U.S. unemployment and layoff
rates were at their lowest levels in years, and there was an
increase in the number of people quitting their jobs. A Time
magazine poll in 2010 found that fewer than half of working
Americans were satisfied with their jobs - the lowest such
percentage since 1987. Nearly half (48 percent) of U.S.
employees are willing to leave their employers for companies
that clearly recognize their contributions, according to the
"Fall 2012 Globoforce Mood Tracker." As a corollary, 84 percent
of employees prefer to be rewarded with a wide variety of gift
cards, says the Society for Industrial and Organizational
Psychology.
While traditional incentive programs are important, they do not
affect as many employees as perks do. In a 2005 Maritz Poll,
just 27 percent of employees who seek award merchandise or gift
cards incentives receive such recognition. Perks, parties, and
other forms of recognition that are credible and sincere send a
symbolic message that it "is especially important to convey if
employees have endured a year of no raises, extra workloads,
threats of layoff, or many of the other conditions common in
workplaces right now," according to Kimberly Merriman, an
assistant professor of management and organization at
Pennsylvania State University. Power perks can help leverage
any investment in human capital that businesses already make
with standard employee benefit offerings. And they pay off in
organizations that don't treat employees like commoditized
goods.
"To be frank," says Peter Hart, president and CEO of Rideau
Recognition Solutions, "if you can't get the small stuff right,
forget about trying to get the big stuff right; you have to
crawl before you walk." He explains, "All too often, we're
focused on the running part and we forget about the smaller
steps. Small perks and actions are the foundation for having
programs that really work. If you can't recognize with words,
no amount of gift certificates, cash, or merchandise is really
going to do the trick to provide real and meaningful
recognition. That emotional connection just won't be there. You
build emotional connections with small things that happen in
your everyday life."
Providing an environment that promotes employee happiness is a
top priority at Zappos.com, according to Hollie Delaney, the company's senior
human resources manager. The world's largest Internet shoe store and a
subsidiary of Amazon.com, Zappos was recognized in 2009 by Fortune as one of the "100
Best Companies to Work For," debuting as the list's
highest-ranking newcomer that year.
Perks are an integral part of Zappos' everyday culture. They
include access to free lunches and vending machines, and
reduced prices on gourmet coffee, as well as reimbursement for
endurance events and a membership to Weight Watchers. There's
also a game room and nap room. "If you have happy employees,
all of the other things fall in line," Delaney says. She
credits the company's more than 3,000 employees with shaping
its corporate culture and core values. "It's imperative that we ask and listen to what matters
to our employees. We then take that information and turn it into tangible perks or benefits that will mean something to our
employee base."
Zappos employees have such a high level of engagement that acting friendly
toward customers comes naturally, observes Milton Moskowitz,
co-author of The 100 Best Companies to Work for in America -
the best-selling book that later was turned into an annual list
published in Fortune. "It's not something the company forces
them to do," he says. "They want to do it. They do it almost
impulsively."
Leigh Gallagher, the assistant managing editor of Fortune who
oversees this annual list, says power perks can produce happier
employees who "work harder, are more engaged, have stronger
feelings of attachment to the company and are less likely to
leave. They pay dividends in so many ways." One of her favorite
examples is free food, especially healthful and high-quality
fare, which she calls "a huge differentiator."
The Emergence of Power Perks
Perks that promote convenience or concierge services date back
many years. Dallas Salisbury, president and CEO of the Employee
Benefits Research Institute (EBRI), recalls how, in the 1980s,
Senator Bob Packwood (R-OR) credited auto repair, bank, and dry
cleaning services at General Mills for improving productivity.
"Concierge services are really very popular," says Rideau's Hart. "The things you don't
have time to do are very popular because they help people with achieving a work-life balance." From travel services and restaurant reservations to theater tickets and even housecleaning services, says Hart, those simple services can have a big
impact.
While retirement savings and insurance plans are always
appreciated, they may not be as tangible or relevant as some of
the smaller touches that could play a big role in helping to
engage employees. "What will attract someone to come and work
for you has to be a differentiator," says Hart. "Most small to
medium-size businesses don't have the power of a huge brand.
You have table stakes - adequate compensation and benefits -
but when the employee starts, that's when you can make an
impact."
Hart says that the key to building recognition and having
happier employees is creating a company culture. "You have to
create a culture that allows people to buy into the vision of
the company's overall mission value. If people can understand
mission/vision values and how they fit into the organization,
and make sure they have the tools to do their jobs, that's
ideal," he says. "If they don't have the personal tools, invest
in that personal development so they feel like they're
contributing to something that's larger than themselves; make
them feel like they're a part of that." Personal development
tools might include computer skill courses or language courses.
Employees increasingly value intangible benefits that tie in
with a company's overall culture and their lifestyle. An
emerging area that offers both convenience and camaraderie at
an affordable price involves online orders placed at local
restaurants for catered group lunches. Discounts on food
delivered in a timely manner can save on productivity and
foster innovation when employees across several departments
talk shop. The social component brings employees together and
helps build morale.
The prevalence of these types of perks will vary. For example,
as many as 74 percent of employers offer free coffee, while
nearly half (47 percent) stock on-site vending machine with
snacks and beverages, and almost 20 percent have a corporate
cafeteria, according to the "2012 Employee Benefits: The
Employee Benefits Landscape in a Recovering Economy" report
from the Society for Human Resource Management. But numerous
other services have failed to take hold. They include dry
cleaning (10 percent), employer-sponsored personal shopping
discounts (6 percent), prepared take-home meals (3 percent),
concierge services (2 percent) and on-site haircuts (3
percent).
Despite its below-the-radar ranking, there's a burgeoning
marketplace of online shopping opportunities that features deep
discounts from Groupon, which sends daily offers to more than
140 million employees. Competitors include LivingSocial,
Amazon, and Google. Recognizing the significance of this key
trend, some of the nation's leading consultants and brokers
have waded into these waters in hopes of helping their
corporate clients motivate, recognize and reward Web-savvy
employees. "You can do something that has a
greater-than-anticipated impact on morale for a very nominal
cost that offers employees a sense that the company cares about
them," says Bob Nelson, Ph.D., the best-selling author of 1001
Ways to Reward Employees and 1501 Ways to Reward Employees.
One such area is working Americans' growing preference for
gourmet coffee to help jump-start their morning. Nelson helped
to commission a national survey that found the average employee
spends $650 a year on cups of coffee outside the workplace,
which translates into about 38 hours away from work. His
suggestion: spend about $100 on a decent coffeemaker that will
provide a fresh cup available in many styles. Nelson also
advises SMBs to negotiate employee discounts with a local dry
cleaner in exchange for a steady volume of business. Such an
arrangement could include two weekly pickups and drop-offs,
with a front-lobby closet or similar office space used for
storing laundry. "It wouldn't cost the employer anything and it
provides a convenience to employees that makes their lives a
little bit easier," he says.
Free resources such as MyCollegeBenefit.com providesa 5 percent
match of an employee's 401(k) or any type of retirement plan
with guaranteed college scholarships. The 5 percent match is
given once a year and is based on a point system, with each
point equaling $1 worth of tuition reduction. For those without
such a plan, $500, $700, or $1,000 worth of points can be
accrued and applied toward this purpose through what's called
the Birthday Club. A registered child will receive points each
year on his or her birthday, with the number of points varying
by age. Scholarships are redeemable at nearly 300 private colleges and universities. A similar website is SaverNation.org, which
features cash-back discounts on items as well as an option to
funnel those dollars into a 401(k) plan with matching
contributions.
Many power perks can be extremely tailored. For example, dock
space is offered to kayaking commuters at WRQ, a Seattle
software firm that also features a nap room with futons and
on-site massages. Employees of Robert W. Baird, a
financial-services company in Milwaukee, are given membership
discounts to a local art museum as well as theater tickets. In
sharp contrast, production workers at steel processor and
plastic products manufacturer Worthington Industries in
Columbus, OH, enjoy $2 haircuts on company time. They also are
able to fish at a nearby pond when they're not working. A
handyman is available free of charge to employees of Wilton
Connor Packaging Inc. in Charlotte, NC (now a part of
Weyerhaeuser), while the cost of parts are deducted from
paychecks over several months.
How Perks Can Deliver ROI
The overall value of a carefully crafted employee benefits
package - long known as the "hidden paycheck" - surpasses
salary to a point where some perks may be worth 10 times their
cash equivalent. As such, this investment could be seen as a
deep discount on employee pay, especially when taking full
advantage of the tax code. For example, furnishing meals at the
office for a majority of workers is 100-percent tax deductible,
whereas only half of a reimbursed restaurant meal is deductible
(and can eat into productivity in terms of travel time). Full
deductions also are allowed for snacks and beverages served at
the worksite, as well as perks involving the transfer of
company property that are listed on an employee's W-2 form.
The potential payback of these creative efforts to raise the
level of employee engagement is surprisingly high. There's a
strong link between employers-of-choice and profitability.
Consider, for instance, the 10.6-percent annual return reported
among Fortune's "100 Best Companies to Work For" since 1998.
Companies that nurture this connection and build it into their
corporate culture are 44 percent more likely to have
above-average profits than those that do not adopt this
approach, according to the authors of Values Shift: The New
Work Ethic and What It Means for Business. Highly engaged
workforces generate, on average, 29 percent more revenue and
are 50 percent more likely to have above-average customer
loyalty, according to Right Management. Follow-up research
shows that engaged organizations report 44 percent higher
retention rates, say the authors of First, Break All the Rules.
A 10 percent increased investment in employee-engagement
practices can boost annual profits by $2,400 per employee,
while a 1 percent rise in employee commitment can spike monthly
sales 9 percent, says a 2011 IES/Work Foundation Report. One
seminal study by Towers Watson found that a highly engaged
workforce improved operating income by 19.2 percent within a
year's time, while a 32.7 percent decline was reported by
companies with low engagement scores during that same period.
Employee engagement also leads to innovation, with nearly 60
percent of these employees telling pollsters their job sparks
creative ideas compared to just 3 percent of those who are
disengaged, according to a Gallup poll. In addition, a mere 10
percent improvement in employee attitude can boost productivity
by 5 percent, as seen in "Worker Attitudes, Worker Behavior and
Productivity in the U.S. Automobile Industry, 1959-1976," by
J.R. Norsworthy and C.A. Zabala.
Nelson says employees who work in a culture of recognition are
five times more likely to feel valued than those who do not.
There's a 700 percent greater shareholder return in companies
whose employees report being more satisfied, Nelson says.
Reload Media, a small digital strategy company in Brisbane,
Australia, actually calculated its ROI on power perks. For
every $1 spent within a recent 12-month period on massage
therapists, iPhones, a games room, travel, and similar items
for about 40 staffers, $11 was returned. The figure was based
on an outlay of roughly $80,000 and factored in low turnover
that ran about 20 percent ahead of the industry average, as
well as an estimated $20,000 to train each employee. Client
revenue also shot up by $720,000.
Two large U.S. organizations known for delivering a high level
of customer service have been able to trace people power to
profitability. Take the Walt Disney World Resort, where a 15
percent increase in employee satisfaction with the type of
daily recognition provided by immediate supervisors produced high guest-satisfaction scores that
indicated a strong intent for repeat business, writes Kim
Harrison in "Why Employee Recognition Is So Important." There's also the case of Sears, Roebuck & Co.,
where every 5 percent increase in employee attitude scores
increased customer satisfaction by 1 to 3 percent, as well as revenue by 0.5 percent.
It behooves management to care deeply about the implications of
a disengaged workforce, which costs the U.S. economy an
estimated $370 billion a year in terms of lost productivity,
according to Gallup. The concern is deepest among SMBs, many of
which may not even have a human resources presence or the time
to assess the needs and desires of employees.
Employers who fail to engage their employees could end up
paying a terrible price down the line. Turnover and training
costs can be up to 2.5 times an employee's salary - an
assessment that also considers ambiguous measures such as
damage to morale and lost customers, says the National
Association for the Self-Employed.
With the nation's median job tenure stuck in neutral for more
than half a century at about four years, EBRI's Salisbury says
the result is a high-turnover society. Stable companies "might
end up with a quarter of the people that they hire staying for
25 or 30 years, but that's still three-fourths that don't," he
explains. "In most cases, roughly half of the people who are
hired leaving relatively quickly in most enterprises."
Salisbury points out that attitudinal surveys show a clear
"feel-good component" to low-cost, high-yield perks that help
employers reap corporate goodwill and improve loyalty,
regardless of whether or not they're actually used. "I never
heard of a company going broke doing these things," adds author
Moskowitz.
Looking Ahead
Personalization will continue to shape the workplace of
tomorrow much like it has permeated highly successful consumer
marketing campaigns from McDonalds' "making it your way" to
Nike's pro-size sneaker mass production. Some experts believe
that more creative compensation packages and a flattening of
hierarchies will also commence, with some employees working
remotely or off-peak hours, but everyone staying connected -
changes that will help employers better understand their
employees.
Smaller companies increasingly will continue to adopt the type
of perks that Google pioneered in order to compete for talent,
according to Fortune's Gallagher, who believes "there is more
awareness of workplace dynamics and workplace happiness among
smaller companies and even startups."
Hart says that although not every company will have the profit
margins that Google has to be able to offer power perks like
free meals, he says injecting "a feeling of camaraderie" is
just as effective. "Create a once-a-month potluck where
everyone brings food, for example," says Hart. "It doesn't
replace and never will replace a company-provided meal, but it
creates camaraderie and a feeling of togetherness. That's what
you really want to do. The objective of any of these programs
is really about building relationships."
However, one important caveat about power perks is that they
can quickly become viewed as an entitlement at companies that
lack the outstanding culture or outside-the-box thinking of a
Google or General Electric. Consequently, they can fail to
motivate employees, cautions John Hollon, vice president for
editorial of TLNT.com and the former editor of Workforce
Management. When Hollon worked at Pets.com, for example, he
recalls how the CEO eventually realized that many employees
hung around for subsidized dinners and then went home, which
defeated the purpose of helping to raise productivity.
Moskowitz believes more companies will strive to become an
employer of choice, even as they struggle to create jobs. He
cites stiff competition among hospitals that face a severe
shortage of nurses as an example of how it's critically
important for one particular industry sector to court talent.
Noting how a dozen such facilities have landed on the Fortune
list of 100 stellar workplaces, Moskowitz says hospitals have
been closing in droves and, for the first time, have been
forced to offer perks that have long been a hallmark of the
for-profit world. But developing a reputation for being an
employer of choice will help hospitals firm up their bottom
line, he adds.
Hart echoes Moskowitz's sentiments, saying that organizations can become employers of choice just
by paying attention to the smallest of details. "For example, with one of
our clients, if someone puts in a change of address with the
human resources department, we send them a housewarming gift.
It's a very small thing but there's a big return. People
appreciate that. With any perk or form of recognition, you're
trying to build a relationship between the company and its
workers, but you also want to create relationships within the
organization," says Hart. "People who work with their friends
have a harder time leaving and, simply put, they work better
with their friends."