Firms that treat their employees well have a bona fide competitive advantage over their rivals. Happy employees are generally more productive and serve the underlying customers well, which helps the bottom line, which, in turn, helps shareholders in public companies and investors in private ones. Below are three important perks that businesses should give their employees.
There are many management styles, but a perk that few companies, or managers, give their employees, is sufficient space to do their jobs. There are a number of names for this type of perk, including “empowerment,” “a decentralized management structure,” or “trusting employees” and leaving them alone to best perform their tasks. Another way to explain this style is to look at what it is not. It is certainly the opposite of micro-managing; it is less hierarchical than many management structures; and it lets an organization lead from the bottom, not the top.
Earlier this year, Berkshire Hathaway, Inc. (BRK-A) (BRK-B) acquired Van Tuyl Group, a group of 78 auto chains, and Warren Buffett’s management style was reported to favor a fairly decentralized organizational structure. Mr. Buffett has been known to buy a company and leave the management team completely alone, with some managers only talking to the home office once or twice per year. As long as the profits come in and growth is acceptable, Buffett will leave his employees completely empowered.
A new model is being imposed by Zappos, a leading online footwear retailer that was acquired by Amazon.com, Inc. (AMZN) and has been called “holacracy.” According to Zappos' website, which devotes an entire page to explain its approach to holacracy, it is meant to replace the more traditional top-down style where a CEO and upper level management set the tone and require lower level employees to follow suit. Instead of managers telling employees what to do, employees get to decide how to best serve the underlying client, and in the words of Zappos founder Tony Hsieh, to be able “to act more like entrepreneurs.”
Giving employees the ability to have a healthy mix of work and non-work lives is another valuable and under-utilized perk. A decentralized and empowered workplace environment can definitely allow a better work/life balance. As long as employees get their jobs done and achieve their goals (which can be self-directed), then there should be plenty of time for them to mix in a trip to the doctor’s office or a kid’s baseball game during normal work hours. This environment can lead to more balanced and happy workers. Of course, hiring an employee who can thrive in this type of environment and not take advantage of the situation is key.
Robert Half International, Inc. (RHI) is a publicly traded recruiter that offers some advice on how firms can encourage a work/life balance without sacrificing work quality. Alternative work schedules, such as four 10-hour days or being able to commute on off times to save on the time wasted in traffic and traveling, can usually easily be implemented. Simply coming in early and leaving early, or vice versa, can help employees. Offering childcare in the office can also be a huge time saver and can easily help recruit and retain the best employees.
Working from home can be a double-edged sword because more hierarchical/traditional firms may fear not being able to closely monitor employees, but it saves on commuting time and can actually allow self-motivated employees to be more productive. Even a flexible schedule that allows it every now and then can be a great perk that helps employee morale. This type of more flexible schedule can also attract talented leaders, including women who are still underrepresented in Fortune 500 companies.
Setting the Right Incentives
A generous salary will make many employees happy, but the right incentives must be in place for workers to be productive and rewarded. It may seem like a perk that generates the firm, but an employee that knows what he is working toward appealing rewards can be quite happy, productive and fulfilled. Incentives that are thought to improve CEO performance include salary and bonus potential, stock awards and options, as well as a real risk of getting fired if incentive goals aren’t met. Most of these are clearly earnings-based.
Returning to Berkshire Hathaway’s philosophies, the company also focuses on providing the right incentives. Look at the incentive, and you’ll see how employees act, including for the worse. For instance, a real estate broker is incentivized to close a deal. Otherwise, he or she doesn’t get paid. In this example, he or she might not be as focused on getting the right price for an underlying client, who might be better served looking at additional properties or driving a harder bargain. The same can be said for investment managers such as the employees at Legg Mason Inc. (LM), who are paid a percent of assets under management, regardless of how an underlying portfolio performs.
The Bottom Line
Creating a work place environment where employees are productive and fulfilled is difficult, but these three perks can help move a firm in the right direction. Empowering employees and treating them like trusted adults can provide benefits, financial and otherwise, for all parties involved.