What makes a perk work

FT

July 22, 2013 4:51 pm

By Philip Delves Broughton

Serious play: companies such as Google provide entertaining opportunities for interaction at work, which they also assess for effects on employee behaviour   

When the French bank Crédit Agricole recently slashed travel and entertainment costs for its bankers, the angry response from employees was about far more than simply the diminished quality of lunches and hotels. After all, who wouldn’t prefer to stay in the downtown Four Seasons over the airport Holiday Inn? Rather, the outrage reflected the diminution in status of investment bankers more generally.

No longer the swashbuckling big spenders of global business, they are having to adapt to the reduced perks of more ordinary corporate executives. WalMart’s executives are expected to share motel rooms, after all, and their employer makes consistent profits.

Perks are often a powerful indicator of a company’s health and of management’s attitude to its employees. Applied thoughtfully, they can have a positive effect on employee effectiveness and morale. Applied recklessly – or offered and then withdrawn – they can cause damage.

Gallup’s latest State of the American Workplace report concludes that perks have less effect on employees’ wellbeing than is generally assumed. You can throw all the flexitime and pingpong tables you like at a worker but if they feel their work is trivial or they are not making progress, they won’t feel engaged by it, and won’t be effective. “At the end of the day, an intrinsic connection to one’s work and one’s company is what truly drives performance, inspires discretionary effort and improves wellbeing,” the report concluded. “If these basic needs are not fulfilled, then even the most extravagant perks will be little more than window dressing.”

Yet many companies, particularly in the technology sector, are engaged in what seems like a perks arms race. At the very top are companies such as Google and Facebook, which have used their vast financial resources to create corporate Disneylands from which employees need never venture. They can eat for free, have their laundry done, see doctors and dentists, have their hair cut and their bikes repaired, not to mention work out and nap. They have created juiced-up versions of the college campuses many of their employees recently left to come to work.

But even much smaller start-ups use perks to compete to win over the scarce resource of tech-savvy employees. In New York City, gourmet coffee, fridges full of beer and letting people bring their dogs to work are so standard they barely qualify as perks any more. Warby Parker, which sells glasses online, has a “fun committee” to ensure its start-up spirit does not die as the company grows.

Why one person’s benefit can leave another person cold

Nancy Rothbard, a professor at the Wharton School at the University of Pennsylvania, distinguishes between “integrators” and “segmentors” among employees and has looked at how perks are seen by each group.

Integrators like to blend work with the rest of their life.

They value:
● “Concierge” perks that streamline their lives to allow them to spend more time at work, such as laundry services or office childcare.
● Perks that reinforce a corporate culture to which they are already very sympathetic – such as game rooms, company outings and parties.
● Ego-boosting perks such as luxury hotels while on business trips, which reinforce their personal and professional status.

Segmentors maintain a clear division between work and
the rest of their life.

They value:
● Flexibility on working hours, which shows a respect for their non-work commitments.
● Education/training, because it improves their skills.
● Enhanced medical benefits for themselves and their families.

But does any of this work? Just as the volume and variety of perks has increased, so has measurement of their effectiveness. Google employs an entire department of people analytics, which tracks, among many other things, the effect of perks on employee behaviour.

Sociometric Solutions, a company that consults on organisational design, grew out of work done at the MIT Media Lab measuring human interactions. Ben Waber, its chief executive, says perks fall into two broad categories: those that affect people individually, such as massages, and those that get people to connect with each other.

Mr Waber’s company uses sensing technology to track the effect of various perks. At an online travel company, for example, he equipped employees with electronic monitoring badges in order to see who talked to whom. The company started offering free beer on Friday afternoons: an enjoyable treat, but what made the perk work in encouraging interaction was not just the availability of beer but the fact that the company offered the beer in just one location, so people had to go and see each other to get it.

These events, says Mr Waber, “dramatically increased the amount of interaction, and made it much more likely that employees would talk to people they did not talk to the rest of the week. They were an organisational tool to help the cross-fertilisation of ideas. They became a profit-generator rather than a cost.”

There is science behind Google’s free food for employees, he notes. They have to go to a cafeteria to get the food, and the chances are they will have to wait in line, so they start talking to other people from other parts of the organisation. The offer of perks such as coffee or food can reward careful thought about where and how they are offered.

In the sales division of another company, Mr Waber found that there was a coffee machine for every five employees. This glut of machines made it too expensive to provide good coffee, and meant employees rarely bumped into anyone at the machines. Yet the company’s own research had found that sales employees who talked regularly to colleagues in other parts of the sales division tended to sell 10 per cent more than those who didn’t. Cutting back the number of coffee machines, offering much better coffee and clustering the few machines in one place dramatically increased social interaction in the company.

Measuring and improving interaction in this way can work in blue- collar and white-collar settings alike. In call centres, for example, it has been found that enabling employees to take their breaks together rather than separately gives them a chance to socialise and vent their feelings about work, which has the positive outcome of driving down staff turnover.

Nancy Rothbard, a professor at the Wharton School at the University of Pennsylvania, who has studied workplace benefits extensively, distinguishes between what she calls “concierge service” perks – which are designed to keep people happy about their company, and also keep them in the office – and perks that are designed to make work more fun. These would be the pingpong tables in the lobby and free beer. Zappos, the online retailer, for example, arranges Nerf Dart wars for its employees.

She says different types of perks play differently with employees depending on whether they are “integrators”, who maintain little distinction between their work and personal lives, or “segmentors”, who keep them well apart.

Prof Rothbard says that whichever perks a company chooses to offer, what matters more than anything is how the employee perceives them. Are the perks designed to help them or to tie them their desk? Different people will view identical perks in different ways. Some may love Nerf Dart wars, others hate them.

“Preconceptions really matter,” she says. “Employees ask themselves, ‘is management trying to eke more out of me with this perk, or do they care about me?’”

She also suggests that perks be tailored to account for the fact that one person might want more flexible hours while another will love the free beer or the corporate picnic. There is no point applying a set of perks and thinking they will elicit the same reaction in everyone. “Managers need to take a more hands-on approach to offering perks, and create a more individualised, personalised approach.”

Perks must be part of a more complete offering management makes to employees to help make them more effective. They also need to be consistent with the broader values of the company, as once you give them, they can be very hard to change.

As for Crédit Agricole’s disgruntled bankers, no amount of free beer and pizza days will ever compensate for the indignity of having to stay in a motel.