Providing Compensation and Benefits That Matter to Employees
What would an employee consider to be the product? Just as with the external customer, the employee is also receiving goods and services. The important thing is to make sure that you are selling what your internal customers want to buy. Consider the Customer Compass and your core values and vision—what do employees regard as valuable? Working to consistently deliver these offerings with high quality is a very wise investment. This chapter offers several guidelines.
World-class organizations understand that the benefits and compensation packages they offer are real products that they can “sell” to their employees. When you view the employee as an internal customer, it becomes apparent that they have similar options regarding “doing business with you”—or not. Ultimately, your employees will judge whether it makes sense to remain with you or not—or to simply stay and generate less effort.
According to the 15th annual MetLife (2017) study of employee benefits trends, employee retention is the top benefits objective among employers—edging out controlling costs. Employee retention was identified as the most important benefits objective by more than half (57 percent) of employers overall. Certain industries, such as retail (64 percent) and services (60 percent), were even more likely to place importance on workplace benefits as a retention strategy.
One important insight: Consider compensation and benefits as far more than insurance packages and vacation time. Employees also “benefit” from the corporate culture in less tangible ways. Our focus here is to think of compensation and benefits in the same way you would think about the products and services you offer your external customers. In that light, you want to provide your employees with a world-class product that not only attracts and keeps them, but makes them loyal and engaged with your business.
Pay: The Bigger Picture
There’s no question that greater pay to an employee is as attractive as the lowest price is to a consumer. To that end, Fortune (2018) has listed the 25 top-paying companies and what they do to the financial bottom line of their employees. If you are a lawyer, a nurse, or even a secretary, you can see just how much others are making. But being the highest-paying company is much like being the lowest-cost provider of goods and services. You will, ultimately, become a commodity—always in competition to be the top provider in terms of pay, competing with those who also want to have bragging rights. Moreover, you will tend to attract employees who believe pay is the most important aspect of their work. Do you want an employee who values money over serving your customers? Finally, what if another company tries to lure them away over price? Then you may find yourself in a no-win game of trying to retain employees chasing an ever-escalating salary—not a sustainable, or desirable, situation.
Instead, choose a better way. World-class organizations focus on developing an entire package to attract the best employees possible. This doesn’t mean that they don’t seriously consider salary. They simply make pay just high enough so that it doesn’t become a deterrent, causing great talent to flee elsewhere. The best organizations will pay an above-average salary, but they refuse to position themselves in the highest percentile. Instead, they focus on creating a culture-based package.
Packaging Employee Benefits
The MetLife study also reveals a strong correlation between benefits satisfaction and job satisfaction. Among employees who were highly satisfied with their benefits, 81 percent indicated strong job satisfaction, up from 70 percent in the previous year’s study. Of the employees surveyed, 78 percent said workplace benefits were a reason for joining their current employer, and 86 percent said they were a factor in remaining there.
It’s more than basic insurance and an annual picnic. There are a variety of employee benefit offerings to consider (Table 9-1).
Table 9-1. Employee Benefits to Consider
|Professional and Career Development||
• Corporate university: culture development, brand development, technical skills development, leadership development
• On-site learning services: library services, career resources, brown bag workshops, web and video seminars, computer-assisted learning
• Higher education: on-site college courses, educational reimbursement plans
• Medical plans, prescription plans, dental plans, group life insurance, long-term care insurance
|Complimentary and Discounted Offerings||
• Complimentary use of services and facilities, visiting retailers, discounts to local retailers, discounts on products and services, corporate retreats
• Food and beverage: break rooms and kitchens, cafeteria
• Personal: spa, hair stylist, day care
• Corporate stores: convenience items, logo items, limited edition items
• Earnings before interest, taxes, depreciation, and amortization; pension plans; employee stock purchase program; savings bond purchase plan; insurance services
• Credit union, payroll deduction, saving accounts, flexible spending accounts, notary
|Time Off/Leaves of Absence||
• Personal time off; sick pay, medical leave, and extended illness bank; family leave; holidays, both shared and variable; vacation; jury duty; bereavement catastrophic leave; military leave
• Life-management tools: self-management, finding caregivers, parenting, special needs/disabilities, education, choosing schools and finding financial aid, caring for older relatives, preparing for parenthood/adoption
• Employee assistance programs: stress management, relationship management, crisis intervention, psychiatric counseling
• Wellness programs: health fairs, walk/run events, office gyms, self-defense programs, weight management programs, nutritional programs
• Sports leagues and events: sports leagues, sports tournaments, sports trips, youth sports leagues, access to sports tickets
• Clubs: service groups, environmental groups, religious organizations, Civersity groups, hobby groups
Branding Your Benefits
Some of the items mentioned in Table 9-1 are typical. Others are more unusual. Here are some examples of non-salary-related benefits that world-class companies have introduced to show they care for their employees:
• Many organizations provide childcare. The Methodist Hospital System in Houston significantly subsidizes childcare for any employee earning less than a certain amount.
• Zillow, the online real estate database, along with outdoor goods retailer Timberland, allows its employees up to 40 hours of paid time to volunteer in the community.
• Cornell University—ranked number 1 by AARP for best employer for workers over 50 years of age—offers a special program called Opportunities for Healthy Agencies, which targets health and fitness issues older adults face.
• Starbucks offers healthcare for part-time employees—an important feature for such workers. Full tuition reimbursement is also offered through an ASU online bachelor’s program.
• Similar to Google, Genentech offers unique on-site amenities such as car washes, haircuts, a childcare center, a mobile spa, and a dentist.
• Bain & Company fosters teamwork by holding an annual two-day global “Bain World Cup” soccer tournament in such locations as Brussels and Los Angeles.
• Scripps Health offers pet health insurance for employees’ cats and dogs.
• Patagonia believes that its employees should enjoy the lifestyle that aligns with their outdoor clothing and equipment. So it provides company bikes, volleyball courts, and on-site yoga. Plus, in the West Coast stores, the reception desk provides daily surf reports and encourages employees to catch a wave or two in the middle of the workday.
• Microsoft matches any employee charitable contribution dollar for dollar, up to $15,000 a year.
• PWC offers its employees $1,200 a year to put toward student loan debt.
• TD Industries has declared that no one at this employee-owned construction firm earns more than 10 times anyone else.
• Ruby Receptionists, a live virtual receptionist answering service, offers a popular employee benefit that encourages loyalty in an industry that typically has a high turnover rate. Employees who serve five years in good standing qualify for the “Five at Five” program—a paid five-week sabbatical—along with a $1,000 grant.
• Senior executives at JetBlue match employee contributions to a charity fund, dollar for dollar.
The primary message from these examples is that what makes a benefit great is making it valuable to your employee and unique to your culture and brand. It’s one thing to match what others are offering as benefits. It’s another to create benefits that really stand out in ways that align with your employees’ values (what your company has in common with employees who are the “right fit”). This approach adds value to the products you offer your employees, in a way only you can provide— giving you a competitive employment edge.
The Dangers in Cutting Benefits
A common practice among corporations, particularly in difficult times, is to cheapen the products provided to employees. This shortsighted approach to your internal customers often results in severely undermining the trust and value of the working relationship.
Keep in mind the Six Ps Customer Formula (see chapter 4); the promise and price aspects of the formula will be affected by any change in the delivery portions (the middle four Ps) of the experience. Think about how external customers would react; would cheapening the product be acceptable to them? Would it affect their loyalty—and possibly your bottom line?
One way to avoid this trap is to involve your employees in the process of making any changes to their internal products. If circumstances warrant a change, share the details openly with employees and then include their suggestions; this will often reveal solutions you wouldn’t have considered. Showing a continued commitment to the original promise and employees’ value of the experience will generate goodwill and provide perspective for whatever action must be taken to address the situation. Ensuring buy-in during this process will allow for a seamless commitment from your employees as everyone transitions through the challenging phase.
Rather than thinking about how to cut back on tangible benefits, consider focusing on improving the mental benefits of working for you as the leader. While there are clear benefits that come from working for a world-class organization, there’s an even more influential consideration: It’s been said that people don’t leave companies; they leave bosses. People generally stay not because of the brick, mortar, or logo but because of the people with whom they enjoy associating and how they get to do their work. Though these benefits can’t always be calculated in monetary terms, they are often measured in terms of employee engagement.
Employee engagement is a key component in the Chain Reaction of Excellence we described in chapter 1. Engagement is achieved by improving the entire culture defined by the Six Ps Customer Formula. Note how employee engagement is defined by research leaders like Gallup. With more than 40 years of in-depth behavioral economic research involving more than 12 million employees, Gallup determined that the most critical elements of employee engagement came down to 12 core activities, known as the Q12 (Gallup 2018a). These statements suggest that employee engagement dramatically increases when employees understand what is expected of them, when they have the tools and resources necessary to do their job, or even when they have a best friend at work. Gallup has proven quantitatively that this works, and that those who are highly engaged truly see greater results in financial performance or customer satisfaction.
The real need regarding employee engagement is best viewed in public-sector organizations. Often these employees stay with their employers for 25 years or more. If a private-sector business had customers who had been loyal for 25 or 30 years or more, they would be elated. The experience and wisdom of long-term engaged employees are invaluable to most organizations. But when disengaged, employees can be very disruptive to an organization. We refer to these disengaged employees as “ROAD” warriors—that is, retired on active duty. They are the ones who say, “Just another seven years until I get my retirement benefits and I’m out of here!” In reality, these individuals must be re-engaged or they will become toxic to the culture.
The engagement level is important. According to Gallup (2018b):
• A staggering 87 percent of employees worldwide are not engaged. Many companies are experiencing a crisis of engagement and aren’t aware of it. The level of employee engagement among the best organizations is more than 21 times the rate of workforces globally.
• Companies with highly engaged workforces outperform their peers by 147 percent in earnings per share.
Clearly, there are opportunities for improvement. The product for employees may not be as tangible as it is to external customers—a vehicle, a hotel room stay, or a gym membership, for example—but it is very real, and it remains at the heart of what creates a culture. See the following example of how Disney does it.
Leading Example: The Disney Difference
As Walt Disney World grew in terms of the number of parks, resorts, and other recreational offerings, it became increasingly difficult to hire and retain employees. Furthermore, competition grew in the marketplace, bringing efforts to lure Disney employees away to work elsewhere in the community. Some employers sounded more exciting to work for, or, at least, they were something different than being with Disney, which was for years the primary employment option in town. Competitive organizations included major hotel or restaurant chains with outstanding benefits already in place. Other competitors were simply more convenient to commute to. After all, because of Disney’s geographical size, it takes considerably more effort to get to work there than it does elsewhere. In fact, working in the parks required being shuttled in and out of the employee parking area to reach your workplace.
Even then, Disney knew it had to compete. In the early days, the resort was so far away from anything that employees had to make great sacrifices to show up. There wasn’t even a nearby gas station, so one of the first unusual benefits Walt Disney World established was an employee gas station backstage, where employees could get gas at a lower-than-marketplace price.
Then and now, Disney does what it must to compete in today’s marketplace. Though Disney’s pay may be only slightly above what other local businesses offer, it has created a significant compensation package known as the Disney Difference. Essentially, this difference is composed of all the discounts, services, and offerings available to cast members and their families. First of these is the ability to enjoy the parks by yourself, or with your family and friends, for free. But the Disney Difference is much more, including:
• entire booklets dedicated to discounted savings in food and merchandise not just on Disney property but in the surrounding community
• an employee-exclusive recreation area with a beach, pools, and a sports field
• a Disney VoluntEARS group with a wide array of creative community service projects
• a number of diversity resource groups that support the unique and diverse employee population
• your work costume provided to you, with options to have it cleaned and ironed for you
• a dedicated pool and recreation area for Disney Cruise Line crew members
• several on-site day care facilities
• apartments dedicated to international and college program employees
• on-site healthcare facilities and a range of programs that encourage health and fitness
• reward and recognition programs that are distinctly Disney and particularly performance based
• one-of-a-kind cast member activities like the annual canoe races or Goofy’s Mystery Tour competition.
Beyond this, Disney spends much effort not only communicating these benefits to existing and prospective employees but also branding them like a Disney movie by using Tinkerbell as a sort of mascot. Disney aggressively seeks new recruits who would be attracted to not just a job but also an employment experience—a position that includes ongoing development and all the benefits that occur over an extended career. Moreover, it keeps current cast members focused on the size and scope of the benefit package, constantly updating them on the benefits that are available. The goal is to encourage employees to use their benefits, so they are getting as much extra value from being a Disney cast member as possible.
The Disney Difference is far more than just what is found in the employee newsletter. Equally important is employees’ engagement level. To that end, Disney many years ago began measuring for employee engagement, recognizing that leaders were as responsible for the morale and involvement of cast members as they were for improving the guest experience, or paying attention to the financial bottom line. Indeed, to be effective, leaders couldn’t succeed if they were autocratic. They had to listen to their employees and engage them in Disney’s operation.
The cumulative effect is that the Disney Difference attracts and retains the kind of employees Disney wants to have on board. In every one of Disney’s 3,000 job categories, retention levels are much higher than the national average. Moreover, the company has retained people who largely love the heritage and offerings Disney provides its guests and find joy in being part of such a unique experience. Indeed, many cast members are passionate about working in such a magical place—even though they are the people who make the place magical.
Providing products that motivate your employees is about adding value aligned with your organization’s culture. You may not be as big as Disney or have the ability to provide as wide a selection of benefits as it can for its more than 70,000 employees, but you can make your benefit package as unique as your brand. Just as leaders need to think through the products and services their brand offers, they also need to consider how they are striving to add value to their employees’ experiences.
Next Steps for Building the Culture Through Product:
How does pay factor into your entire benefits package? How do your benefits stand out from the competition?
Do you promote your benefits in the same way that you promote your brand?
Is quality or choice the most important aspect of your employee offerings?
How are you balancing your overhead with providing the best benefit offerings?
Is there support to make the benefits you offer available and accessible?
How do you go about improving benefits while maintaining their cost-effectiveness?