Are Killer Benefits Poised to Kill Employee Morale and Your Bottom Line?

Chris Young
July 30, 2008 — 2,690 views  
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In a the July 5, 2008 NYT article, On Daycare, Google Makes a Rare Fumble furtherer insights into the benefits of being a Google employee emerge.

Quite frankly, these insights are fascinating and scary. 

I have always been fascinated by Google.  It is the classic "rags to riches" success story where the founders created extreme shareholder value out of nothing. 

Google has what any large Silicon Valley company has - on-site daycare.  What is different from Google's daycare relative to others in the area is the incredible quality of care and instruction that employee's children receive.  Facilities are top notch, children/teacher ratios are low, and teachers are the best that can be found and hired.  Googlers, understandably, have become quite fond of this employment benefit. 

Unfortunately for Google parents someone at the Googleplex put down their ping pong paddle and took it upon themselves to take a look at the financial costs of providing daycare benefits and realized that Google has been subsidizing employee daycare to the tune of $37,000 per child - over three times the Silicon Valley average.  With its stock price down 28% from their highs in November of 2007 these figures did not go unnoticed by the top brass at Google who are reportedly planning to raise employee daycare costs 75% from $1425 a month to $2500 a month.   


It seems that Google is not the only "high flying" organization to announce serious cuts in employee benefits.  Internet darling Facebook is reported by Valleywag to be eliminating a much beloved $600 housing subsidy paid to employees who live near Facebook's Palo Alto, CA headquarters.  As you might imagine, this isn't going over well with Facebook employees either...

I think these recent examples raise serious questions about the use "killer benefits" to attract and retain talent, and what happens when these benefits are cut. 

Clearly benefits such as top notch daycare or a sizable housing subsidy are a great way to attract the best talent available.  After all... who wouldn't be enticed by these work perks? 

Unfortunately, when these "killer benefits" are cut employees can feel a real sense of betrayal and loss of financial security that can seriously diminish their view of their employer and what it means to work for that organization.  Not surprisingly employee morale and job satisfaction take a real hit when these cuts are announced, which can have a measurable impact on a firm's bottom line.

will the savings associated with these cut benefits outweigh the impact of reduced morale and associated turnover?  It's hard to say, and only time will tell...  One can't help but wonder however, what these organizations were thinking in the first place when they offered such enticing benefits rarely seen in "normal" organizations. 

Call me crazy, but I would suggest that companies such as Google and Facebook weren't thinking strategically when they offered these benefits.  The problem is that companies like Google and Facebook get caught up in all the excitement that accompanies their rapid growth.  When the sky is the limit and stock prices are soaring, providing $37,000 in child care benefits or $7,000 a year to help pay the rent can seem like a great idea... 

However, the bubble always seems to burst and the leaders of companies such as Google and Facebook are forced to face the financial reality that they, like all other companies, must watch their expenses carefully - including employee benefits - to ensure sustainable bottom line growth and keep stockholders happy.

Much can be learned from companies such as Google and Facebook when it comes to offering "killer benefits."   Great benefits that far exceed the market norm quickly become a right of entitlement for working for that organization.  Take away these benefits and you are likely to have some seriously upset and disgruntled employees on your hands.  Fail to bring these benefits in line with that of similar organizations and you can expect to have some seriously disgruntled stockholders on your hands who are upset they aren't receiving the incredible return on investment that seemed like a "sure thing."

they expected given the media hype over an organization where only the sky is the limit.

Bottom line... Organizational periods of hyper growth are rarely sustainable in the long term.  While "Killer Benefits" are a great way to attract and retain the best talent during periods of rapid growth, they can become a real liability to your organization when things slow down and expenses must be kept in check. 

Now go maximize possibility!

Chris Young

The Rainmaker Group



Chris Young


The Rainmaker Group is a human talent maximization company specializing in helping organization maximize their bottom lines by improving employee retention, hiring the best talent possible, and strategic talent management and coaching services. From the Fortune 50 corporation to the small medical office, The Rainmaker Group guarantees lasting organizational change via a unique blend of energy, insight, and science to maximize talent, transform organizational culture, and provide strategic intervention.