Benefits Gone Wild

Corporation after corporation is adding benefits and perks to their employee reward packages. There was a time when there was a standard list of benefits and forms of cash compensation that most companies used. Today, things have changed. Thanks in part to the "creativity" of Silicon Valley firms, there is almost an unlimited variety of "extras" that employers now offer their employees.

Among the many different kinds of extra benefits that employers offer are unlimited vacations, child care, educational programs of all sorts, exercise programs, concierge services, and food 24 hours a day. Almost no research has looked at the effectiveness of these extras. Still, based on what we know about organization behavior it is possible to reach some conclusions about what their impact might be on organizational effectiveness.

The rewards individuals receive from an organization have been shown to strongly and directly influence the attractiveness of working there, the motivation to perform well, and the culture that the organization develops. Let's look at these separately.

In order to be effective sources of attraction and retention rewards have to be valued by employees. Most of the new extras that are being offered are likely to be valued by a significant number of employees, but not all. As a result, two questions need to be asked: Are these rewards more valuable to the typical employee than their cost? If they are not, cash is a better reward.

The exception is that a particular set of rewards may be attractive to certain types of employees--ones that are critical to the success of the organization. In this case, it may make sense to offer them in order to attract and retain critical employees. An example might be support for going to conferences and various organization educational programs in the case of a technology company.

Being a motivator of performance requires that a reward be important to employees and related to performance. Most of the new extras do not meet the second condition. They are not tied to performance. However, if they are and are important, they can be a motivator of performance.

Even though they do not motivate performance some kinds of rewards might increase performance in the right kind of organization. These include rewards that free up an individual's time in ways that enable them to do more work. This seems to be true in organizations like Google where they have concierge services, a car support service, and a whole series of amenities and services that make it more attractive for the employee to work instead of doing errands and maintenance. This seems to work at Google but there is an important reason for this.

Google has a culture of hard work and rewards for performance that takes care of motivation and helps ensure that individuals will take advantage of the extra benefits that free up time for them to perform their work--not to have more "leisure time". The key question that any organization needs to ask before they take these workplace-enhancing and time-freeing actions is whether the employees will use that time to do more work or simply to engage in greater amounts of leisure.

What's the answer? Should organizations offer childcare, concierges, shuttles, paternity leave, etc.? Obviously, there is no simple answer to this question. They need to do a careful analysis of what impact it will have on the performance of an individual and whether it can be justified, unless they simply think it's the right thing to do.