December 2000   

An ever-growing economy combined with a changing work ethic in younger employees have brought many companies, small and large, online and brick-and-mortar, to a staffing crisis. Today's 20- to 30-year-olds are not content to stay with one company just for the sake of a pension plan, the way their parents did. "It's harder to retain that younger generation," says Joan Burge, founder and CEO of Office Dynamics, an administrative and employee relations consulting firm. "They're fast trackers. It isn't their dream to stay in one job very long." She laughingly refers to these younger employees as the Nintendo generation. "They'll go where they get the most bang, the most exposure."

The New World of Benefits

Companies that rely on long-term benefits such as 401k programs and health insurance are finding that employees view that as ho-hum. "It's the old economy versus the new economy," says Brad Elman, a benefits specialist for Northwestern Mutual Financial Services and a member of the Million Dollar Round Table, an association of financial service professionals. "The old economy looked at benefits as a way to provide security for a family. The new economy isn't looking for security. They see benefits as a productivity tool. The most successful companies are finding out what's relevant to their employees."

Burge agrees. "Job satisfaction is critical to retention, but it's not just the job itself. You'd be surprised what people really want -- that's why employers must find out what motivates their employees."

Make no mistake, 401k programs and health insurance have not gone the way of the dinosaur. They're still an integral part of most benefit packages, and employees in full-time positions expect them, but they're no longer the highest reward for a job well done. Companies across the United States are finding that employees want their benefits with a twist, which often involves immediate gratification rather than long-term investment.

Money Isn't Everything

A study by American Express Incentive Services (AEIS) and the research firm Wirthlin Worldwide showed that even cash bonuses no longer have the allure they once did. While most respondents felt that cash was a nice reward, 20 percent felt that the motivating value of such a reward decreased in proportion to the share taken by Uncle Sam. Most of the employees' share, said 29 percent, was lost to bills and groceries, and an additional 18 percent couldn't remember where it went at all. Over 30 percent felt it made no difference whatsoever in the way they viewed the job and their work performance.

That's why such bonuses fail to retain employees, says Darryl Hutson, Chief Executive Officer of AEIS. "Ideally, employees would use cash incentives to treat themselves to something special, and then remember when and why they earned the specific reward. However, those good intentions often fall by the wayside when the check is cashed." He feels employers need to be more creative in rewarding employees. "What this says to businesses is, if you really want to reward me, don't show me the money," he says. "An employer's best bet is personalized incentives and rewards."

Innovative Perks

Even though many of the new perks can be costly, so can the cost of recruiting and training new employees. "This is the worst labor shortage in 30 years, and all indications are that the shortage will continue for at least the next 10 years," says Joan Stewart, an independent recruiting and human resource consultant. "It often costs one and a half times a person's salary to replace them. If you can retain, you won't have to worry about how to recruit."

An increasing number of companies are turning to unusual perks that would have been unheard of -- and disapproved of -- twenty or thirty years ago. "We began by asking our employees," says Christopher Dobens, Chief Cultural Officer of Magnet Communications. "We learned that 'adult treatment' was one of the things most desired." In response to that, the punch clock disappeared at Magnet, as did the concept of a straight 9-5 day. Employees were given more flexibility in managing their hours. But not all of their solutions were so, well, mature. "We offer biweekly personal massages and are about to offer free French classes," notes Dobens. "We have a dog -- Merlin -- whose official title, and yes, he has business cards, is Director of Stress Management. And earlier this year we had the second annual 'Bring Our Parents/Spouses to Work Day.'"

Dobens is not alone in offering unusual retention methods. Elman has seen clients offer everything but the kitchen sink: gourmet lunches and dinners, gym memberships, liberal tuition reimbursement, even acupuncture programs. Burge cites examples of employers offering nap rooms, top-of-the-line daycare centers, and concierge services that allow employees to have someone else run their tedious errands, such as picking up dry-cleaning or shopping for birthday gifts. Innovative perks like these are rising rapidly in popularity.

One company taking advantage of the need for unique incentives is Employeesavings.com, an incentive company that designs custom corporate discount programs. They create a base of vendors, both local and national, that offer discounts for employees who purchase or reserve services through the company's program. For example, an employee can make purchases through Barnes & Noble or set up an oil change at the local garage, both of which will offer a discount off normal prices. "People are just realizing more and more that what used to be standard benefits are not enough in this economic market," says Judy Meleliat, Senior Vice President of Employeesavings.com. "This talent war is not going to end anytime soon."

Karl Weiss manages work/life and recognition programs for Eddie Bauer, which utilizes the Employeesavings.com program. "It makes my job so much easier," he said. "Our employees love it. It's really an innovative program." As for why employees would want something like that, Weiss says it's a simple matter of ... time. "Time is the great benefit of the new millennium," he says. "People are juggling work, family, private time. They love not having to stop at the mall on the way home or on their day off."

Perks that Please: Elevating the Creativity Scale

Some employers have taken it a step further, going not just for time benefits, but for sheer silliness or luxury. "We're trying to make the work environment fun," says Steve Sydness, chief executive officer of BizLand.com. "We want employees to want to get out of bed and come to work." To that end, his company offers employees a $15 monthly fun budget, to be spent any way they like. Recently the office has seen a proliferation of Nerf guns. "It could be worse," notes Sydness wryly. "I dread seeing a Supersoaker come through on an expense report." More luxurious, and less frequent (quarterly), performance awards have included a Ferrari rental for a weekend, a gourmet chef for an evening, or a day at a spa. According to Sydness, the point of such amenities is to reward the employee by giving them something they might really want, but something they either couldn't afford or wouldn't spend their own money on.

Success of Innovative Perks

Do these perks work? The jury is still out on these new options, although employers are cautiously optimistic. Dobens notes his tactics have reduced his turnover to less than 10 percent; Sydness didn't have specific numbers, but notes that the proliferation of Nerf guns has actually improved the recruiting process. "Candidates look at us like, 'is this for real?' Then the first Nerf gun gets aimed at them, and they're hooked," he says. "They see that the workplace is relaxed, there's camaraderie. That's very attractive to many people."

Janice Baldwin, employee benefits and executive compensation lawyer for the Winston-Salem, North Carolina, law firm of Womble Carlyle, notes that employers should be creative, but they should also be careful. "We are seeing more and more employees who are willing to forego the financial incentives in favor of 'quality of life' perks," she said. While some of those perks, like a casual dress day, have no cost or tax implications, she points to other incentives that need to be thought through carefully before implementation. "A lot of employers are implementing these so-called employee assistance plans, which assist employees with life issues and crises. Unless the plan is structured as a referral plan only, the Department of Labor generally takes the position that the program is a welfare-benefit plan, subject to filing and potential tax issues." But, she says, employers shouldn't turn their backs on such programs because of added paperwork and tax considerations. "Based on today's culture, I don't think plain old pay raises will take care of the employee loyalty issue," she says. "I think pay raises with the 'quality of life' perks are more likely to create loyalty. I think this trend is likely to stay around."