When Perks Go Bad: Unintended Consequences

Who doesn’t like a few perks with a job, right? After all, as talent management and HR practitioners, you know you have to offer a competitive package of compensation and benefits to attract and retain the top talent you need. But it’s also worth considering what can happen when you take perks too far.

2015-04-03_1602You may be wondering how there could possibly be a downside to perks in the first place. I’ll explain it is simply as possible. When you were in college you may have had to take a basic macroeconomics course, probably called Econ 101. Do you remember something called the law of diminishing marginal utility? It’s the idea that as you keep consuming more of something, you eventually start getting less and less utility from consuming more of it. Think about your favorite food. That first helping is so enjoyable, you have a second, maybe even a third. But you’ll start enjoying it less the more of it you consume. You might even wind up giving yourself a serious stomach ache. That’s the law of diminishing marginal utility at work. If you graph it out, it looks like an inverted U.

If you want some really thought-provoking examples of applying the inverted U phenomenon, read Malcolm Gladwell’s book David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. He describes how the inverted U means that for a while, more of something has great benefits, but then you reach a point where those benefits level off, and if you keep adding more of it, then you may find yourself on the right side of the curve where more of the same thing actually does more harm than good (which makes it the wrong side of the curve to be on). He applies it to reducing educational class sizes (where there is ample research and experience to show that classes really can be too small) and even criminal punishment (where you reach a point when adding punishment actually causes more crime than it deters). I submit to you that the inverted U applies strongly to job perks.

When are perks too sweet? Look at this way – let’s say you’ve got some employees who are underperforming and are disengaged. They’d probably leave if it weren’t for all those sweet perks your company offers. What if your perks are actually helping you retain less productive talent that ought to be moving on? Suddenly all those perks aren’t such great things after all. When it comes to employee engagement, there’s a saying that seems highly applicable: The engaged stay for what they can give, the disengaged stay for what they can get.

I also think that in addition to retaining unproductive workers, going too far with corporate perks can harm your best talent as well. When you think about a company like Google, which prides itself on meeting so many employee needs with all kinds of perks (free food, workout rooms and showers, innovation budgets, shuttle services, amazing new-parent benefits, even more amazing death benefits, tech shops to replace missing parts you broke or forgot on your equipment, being pet-friendly, on-site doctors and nurses, and the list goes on), it can get to the point where a company inadvertently is preventing employees from ever leaving the office, or only reluctantly. That means too many perks can really wreck a person’s work-life balance, and once that happens, things can get really messy.

I think another potential problem is how so many perks could stifle dissension. Who’s going to speak up and take the company to task when they enjoy so many perks? And yet the creative friction that comes from empowered employees challenging the company’s status quo is an essential part of overall success.

So the next time your company considers adding yet another juicy perk to its menu, think about the inverted U and realize that it could send you to the wrong side of that curve.

March 31, 2015   Updated :April 3, 2015   compensation management, perks, talent management   

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