hr-esource Pay and Benefits — Retention — 03/26/2001
At Blue Squirrel, an Internet software company, allowances for drinks and snacks, quarterly team bonuses for sales, and matching 401(k) plan contributions have disappeared. The company has even stopped providing tissues in its offices. At iXL, a high-tech consulting firm, employees now pay for their massages. And, at online furniture retailer Living.com, the weekly happy hour is a thing of the past. What’s happening at these organizations? In short, they’re looking for ways to reduce their expenses in order to stay afloat in an environment in which they can’t count on new infusions of venture capital. Struggling to slow their “burn rate,” or the speed at which they are exhausting their existing capital, these companies are reevaluating the worth of perks offered to employees at the height of the dot-com boom. These companies are not alone. Many dot-com and high-tech companies are facing the same challenge. As a result, employees across the country are facing the loss of perks that were once de rigeur for organizations like theirs.
While eliminating the perks may make sense from a financial perspective, altering the benefits and perks available to employees also can have negative consequences if not handled properly. The culture at dot-com companies was, in large part, derived from a hard-driving, perk-filled atmosphere. Salaries may not have been high, but weekly massages, breaks for foosball or Sega games, free food and frequent happy hours bonded employees to the company and one another. Doing away with these practices inevitably will change the corporate culture.
Still, for many organizations, potential damage to the corporate culture and employee morale is secondary to pressure from investors and stakeholders to make the company profitable, making elimination of at least some perks unavoidable. Given this, HRWire has prepared the following suggestions for making the process a little less painful:
Make the business case for reducing perks to employees. If employees understand that cutting perks will help keep the company afloat, they will be more receptive to scaling back. Show the employees how much money will be saved and how it will be redeployed. If it can’t be shown that eliminating a perk will result in meaningful savings, reconsider the decision to slice it–it’s not worth damaging morale for a negligible return.
Give employees input into which perks are eliminated. Liz Ryan, vice president of human resources at Ucentric, a home networking company, tells HRWire that “not only shareholders and management teams, but employees themselves have strong opinions about how dot-com-type perks should fit into a company’s budget now that dollars are tight.”
As a result, she says, “smart employers are polling employees to find out which perks make sense to keep, if any.” Some perks, such as concierge services, can actually improve the bottom line, she points out. “Others, like pool tables or foosball are already paid for and don’t cost more to the company over time.”
Consider the consequences of offering perks while engaging in layoffs. Savvy companies are trying perk reductions before resorting to layoffs. Few employees are going to agreeably accept news of their layoff if their former co-workers are continuing to enjoy free massages and lattes or setting sail on a company cruise.
Ryan warns, “even if company parties are traditional to the organization, if you throw a party when employees are being laid off, you’ll have hell to pay!” While it is tempting to continue to offer perks to those employees who remain on staff in order to keep them motivated, consider how these benefits will appear to terminated employees, shareholders and the public.
Be very honest. Don’t try to pass off a reduction or elimination in a perk as anything other than a cost-savings measure. Employees will feel doubly aggrieved–not only are they losing the perk, but the company does not trust them enough to be honest about the circumstances.
Usually, it’s not the loss of the perk that troubles employees, but the way it was handled. Sprint PCS in Kansas City learned this the hard way when, in Fortune magazine, an employee very publicly aired his disgust with the company’s handling of its decision to stop supplying coffee cups and utensils to employees. “They spun it as being environmentally conscious, but we knew it was just a code for cutting expenses,” he said.
Consider reducing perks, not completely eliminating them. Peter Belvin and Devorah Slavin, executives at Stress Recess, a Georgia-based provider of workplace massages, tell HRWire that they are working with companies to help them find ways to maintain at least some of their benefits. In some cases, they say, it is appropriate for companies to tell employees, “you can still play, but you have to pay.”
Under this scenario, employers still make the benefit available, but shift the costs to employees. This is what iXL has done. Companies also should keep in mind that “cutting back doesn’t have to mean cutting off,” Belvin and Slavin say. “Instead of paying for massage therapists to visit several times a week, companies are scaling back to once a week or bi-weekly visits.”
Keep the door open to restoring the perks. Sherri Paddock, a spokesperson at Blue Squirrel, tells HRWire that “the tech industry is suffering right now, everyone’s stocks are at all-time lows. Our employees realize this and are willing to ride the waves for awhile until the storm clears. When it does, we may be able to reinstate some of the perks.”
Ultimately, reducing perks may be unavoidable, but it does not have to be accompanied by stress and turmoil. Taking the time to make the business case, gathering employee input, and communicating frequently and honestly about the importance of scaling back will help make the transition to a changing benefits environment less challenging.