The Find: Cutting perks like may seem like an easy way to cut costs in a tough business environment, but experts warn that doing so can create an unexpectedly ferocious backlash from employees.- The Source: An article in Knowledge@Wharton.
The Takeaway: Knowledge@Wharton kicks off the article with a cautionary tale from Google. Usually lauded for its employee perks, the company got into hot water with staff earlier this year when it raised the price of day care from $1,425 to $2,500 a month and the cost for two children from $33,000 to $57,000 a year.
Googlista parents faced a big price hike, sure, but the experts at Wharton warn that trying to cut any perk, even if its just Thursday donut day, is likely to enrage employees. Why? Wharton management professor Nancy Rothbard explains: “Once you have the perk, to take it away is seen as a violation of a psychological contract you have with your employee.” Another Wharton management professor, Sigal Barsade, concurs: “I do not recommend taking away perks… management needs to remember that taking things away from people almost always leads to feelings of unfairness.”
But what if belt-tightening demands that a perk get the axe? The only solution is a good explanation, and “increasing shareholder value” is unlikely to fly, says management professor Peter Capelli:
If you are taking anything away from employees, it’s important to explain the need for doing it. 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.
Fail to take people’s feeling of ownership for their perks into account when you take them away and you’re like to face some type of passive aggressive retaliation from employees such as working less hard or feeling less commitment to the company — and that can hit your bottom line as hard as the cost of the original perk. For much more on the pros and cons of reducing perks, check out the full article.
The Question: Would you face a mutiny if you took away donut day?
See also Peter Galuszka’s take on the Wharton article in The Corner Office.
(Image of perks license plate by The Web President, CC 2.0)
