Free benefits come with a price

You never know when a simple comment will have a significant impact; sometimes that’s not even the source’s intention.

This happened to me while talking with my mother about renewing our company’s medical insurance package. While she isn’t involved in day-to-day business activities, she’s aware of what’s going on and offers her experience and insight about such matters, and I’m good with that because the increasing complexity requires more than one set of eyes.

During our discussion, she made an observation that I realized afterwards was noteworthy. She said, “You know, free benefits and perks to employees aren’t a good idea, because when the time comes that you have to cut them or ask employees to contribute, it creates a lot of stress and difficulty.” Unfortunately, she’s right. I’ve come to the sobering reality that offering them often backfires, not providing the loyalty and appreciation you would think.

This situation goes back a few years, when business was robust and benefits were generally more affordable. In an effort to enhance employee enthusiasm and make our shop a more attractive place to work, I recommended we pay 100 percent of all employees’ medical insurance premiums, a benefit I was convinced would be appreciated. Indeed, a few who had worked for other companies realized this was a nice perk; however, many lost sight of this benefit within its first year of existence, because they became accustomed to the additional income for company-paid health insurance premiums, so any change to that revenue stream created financial difficulties.

Fast-forward to 2015, when insurance premiums have drastically increased and economic conditions are not as robust. The reasons and rationale could be debated from here to eternity, but what I had considered an incredibly positive benefit hasn’t improved employee productivity. Productive, efficient employees are still that, and those who only meet the minimum requirements still only meet those requirements—with or without nice benefits.

Sadly, my mother was correct about the hidden downside to all the paid premiums, early Friday closings, paid days off, free company shirts and caps and gift cards to nice restaurants when employees had babies. Even so, I’m not implying a shop owner or manager should be overly cynical and uncaring. There are those who are very grateful for anything offered. Unfortunately, they’ve become the exception. Being too generous with benefits and perks creates an expectation that can eat into your profits, especially in a down economy.

In the end, my retired parents have generously shown confidence in my abilities to run a busy and growing shop. Even when we have had differing views, things were generally done as I saw fit. However, my good mom is correct: Employees need “skin in the game.” Effective owners and managers should be able to admit something didn’t work well, even if it was their idea. Treating employees with respect and listening to their ideas is worthwhile, but don’t be overly generous. The company’s survival takes precedence over nice perks—and cutting them isn’t easy, even when it’s needed. CTE

Keith Jennings: President of Crow Corp., Tomball, Texas, a family-owned company focusing on machining, metal fabrication and metal stamping, kjennings@jwr.com