India Knowledge@Wharton | The hazards of ‘de-perking’

India Knowledge@Wharton | The hazards of ‘de-perking’
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First Published: Sun, Aug 10 2008. 10 16 PM IST

(Illustration: Malay Karmakar / Mint)
(Illustration: Malay Karmakar / Mint)
Updated: Sun, Aug 10 2008. 10 16 PM IST
Earlier this summer, when employees first learnt of a Google Inc. plan to upgrade and dramatically raise the price of its day-care programme, they wept, according to an article in The New York Times.
The price for infant care rose from $1,425 (about Rs60,560) to $2,500 a month and the cost for two children in the day-care programme went up from $33,000 to $57,000 a year. The two-year waiting list of 700 families fell by more than half. And Google, which has enjoyed a largely charmed reputation in the press, was chided in a Times headline for making a “rare fumble” with the changes to its day-care programme.
The Wharton faculty says the flap over Google’s decision to change its employee day-care programme illustrates the difficulty in eliminating any employee perk. “Once you have the perk, to take it away is seen as a violation of a psychological contract you have with your employee,” says Wharton management professor Nancy Rothbard.
(Illustration: Malay Karmakar / Mint)
Employee perks can range from traditional offerings—such as a company car, use of the corporate jet and extended retirement benefits—to highly personalized perks such as personal trainers, laundry service and pet-friendly offices. At Google, parents get $500 to spend on takeout dinners during their first weeks with a new baby.
The current economic slump could trigger a round of “de-perking” at companies, says Wharton management professor Peter Cappelli. “The issue is whether these practices are important in recruiting and retaining people,” he says.
Cappelli suggests that inexpensive or no-cost perks—such as casual dress days, free coffee and food discounts—may not add much to employee morale or productivity but they do not hurt the bottom line much either. And companies should be careful about how they go about reducing or eliminating them. “If you are taking anything away from employees, it’s important to explain the need for doing it,” he says. “It helps a lot if the need is something driven by factors outside the firm. The need to improve share price isn’t going to satisfy a lot of people.”
Wharton management professor Sigal Barsade agrees. “I do not recommend taking away perks but if a company has to, management needs to remember that taking things away from people almost always leads to feelings of unfairness,” she says, noting that employees typically feel that even a small perk is something they “own”. To remove it is one of the most direct routes to employee anger, which in turn leads to lower levels of motivation and retaliatory behaviour. The retaliation can take on a psychological form, such as less commitment to the job, or a behavioural form, such as not working so hard. “If management does such a thing, it has to be very sure to explain very, very clearly why it was necessary—in a way that seems fair to the employees,” says Barsade.
How firms can tap into the online ‘groundswell’
Mini USA, the American branch of BMW’s Mini Cooper line, tracks everything being said about its brand everywhere online—in blogs, discussion groups, forums, MySpace pages and much more—then uses what it learns to guide advertising campaigns.
At Hewlett-Packard Co., 50 executives log into their individual blogs each morning to join the ongoing online conversation about each of their product lines, responding immediately to customer problems and concerns.
Ernst and Young recruits many of the 3,500 college graduates it hires every year using a career group on Facebook, the online social networking site, where it not only posts job information but also answers individual questions from prospective employees.
These are all examples of companies savvy enough to participate in the “groundswell”, according to Charlene Li, vice-president and principal analyst at Forrester Research. “The groundswell is a social trend in which people use technologies to get the things they need from each other, rather than from traditional institutions like corporations.”
Li was a speaker at the recent Supernova conference, an annual technology event in San Francisco organized by Wharton legal studies and business ethics professor Kevin Werbach. Li and Forrester colleague Josh Bernoff have co-authored a book on the subject: Groundswell: Winning in a World Transformed by Social Technologies.
“The more you know and understand the individuals who make up the groundswell around your brand and your company, the more you can use the new social networking phenomenon to your advantage,” she says.
Such understanding comes from going well beyond traditional user surveys, however. According to Li and other speakers at the conference, too few companies study how people actually interact with the Web and utilize online collaborative tools.
Li cited Forrester research on the range of behaviour on the Web, which is sometimes based on skill and demographics and at other times is linked more to a user’s stage of life. So-called “Alpha Moms,” for example, “are comfortable with technology, interested in parenting and have above average incomes”, says Li, “but they have no time. So, if you’re trying to reach them you don’t give them blogs. You give them communities of their peers with opportunities for feedback.”
Classifying users can give organizations a better understanding of how consumers are behaving online, says Li. “Any successful strategy to tap into the groundswell has to begin with assessing customers’ social activities. Then you can decide what you want to accomplish, plan for how your relationship with your customers will change and finally decide what social technology to use.”
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First Published: Sun, Aug 10 2008. 10 16 PM IST
More Topics: Perks | Bonus | Incentive | Employer | Motivation |