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Why Benefits Do Not Improve Employee Performance

2nd June 2015 | John G Fisher

Let me start by slaying a big motivational dragon. In the business world, companies often use employee benefits in the hope that this will drive through an improved work ethic and, in turn, increase profits. While it’s great for businesses to provide these benefits, they do not actually promote better performance from individuals.

The reason? Employee benefits and perks do not recognise or reward improved behaviour. If workers know that receiving these benefits is a given, no matter how well they perform, there is no motivation to improve. The technical reference for this is Herzberg’s two-factor theory which was first published way back in 1968.

Despite this, benefits have a huge presence in business today. Some estimates are that they account for around 30% of total employee costs in large companies. Which begs the question - what is their purpose, if not to improve profits?

The concept originated in the UK in the 19th Century as a way to encourage those living in rural areas to move to growing urban populations and support the Industrial Revolution. Famous employers such as Cadbury built entire villages and communities with the aim of caring for their workers as part of their Christian duty as an employer. Whilst much has changed since those pioneering days, the key use of employee benefits has remained the same – acquiring and retaining the good will of employees.  

Providing employee benefits is beneficial for companies in that they can be effective in attracting new employees and encouraging them to stay longer than you would normally expect. (There is a cost to recruitment which can be mitigated by a sound benefits package.)

Free healthcare, childcare subsidies and even perks such as gym membership can be part of a valued remuneration package that will make employees hesitant to leave and can also cause new applicants to favour your organization over other possible workplaces.

However, it is important to note that benefits are not the main factor affecting staff loyalty and very few leave because their ‘perks and benefits’ were not good enough. A more likely reason to leave would be because they do not get on with their manager or some other aspect of supervisory policy.

If your aim is to increase individual performance the focus should be on individual achievement, recognition and incentives rather than adjusting benefit levels. Incentives and communication programmes to promote recognition will increase your employees’ motivation to improve and achieve their work goals.

The decision to provide benefits or incentives should to employees ultimately lies with their overall aim.

If you want to retain and attract employees, employee benefits can be a good solution and is exactly what they were originally designed for. They can be justified by improvements in retention and attracting new staff.

However, if you hope to increase individual performance or reinforce achievement habits, the solution should be to use behaviour-based programmes, such as recognition and incentive programmes. Applying knowledge of human behaviour correctly and in the right context will help you to incentivise employees in a much more effective way and could even save you a lot of money, especially if large numbers are involved.

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