Operational problems and Benefit plans

A wise man once told me: “Never fix your operational problems with a benefits plan”. Good and solid advice that I have re-issued many times after that.

In one of the companies that we acquired during my career, the salary increases had pretty much been handled by local plant managers. They seemed to have lots of leverage in the compensation and benefits area and some of them had used the premiums for the healthcare insurance as ways to boost net income for the workers. As our company had a policy of moving employees around the system to share expertise and create challenging careers, we were confronted with the issues of having not only different salary lines across that whole company but also varying benefits premiums for similar offerings.

Benefit plans are usually designed for the longer term. Benefits plans do not relate directly to your work. You save money, you go to the doctor, you feel secure with your insurances etc. It has no relation with your work. This also fits with the Two Factor Theory by Herzberg, where these benefit plans fall under the category “hygiene factors” and can not be used to motivate the employees. Get it wrong though and dissatisfaction will cause the employees to be demotivated. Motivation only comes from the job intrinsic factors; meaningful work, a great boss, challenging environment etc.

Hammer and screw, isolated on white background

Benefit offerings and their premiums have an impact on your family income. Changes in benefits plans will affect the family income. Promoting your benefit plans or boosting them to attract and retain talent is the wrong move however. You don’t want your company to be known as a great place to get sick, retire or die, you want your company to be known as a great place to work.

Once you let operational factors creep into your benefit plan decisions, you run the risk of being overly competitive and thus wasting your money as people don’t come for benefits but for great jobs. Job content will motivate but the long term motivational value of benefits is questionable. You also run the risk of not being competitive enough in which case you will have issues recruiting as people need to see a package with all “hygiene factors” in place before they want to work for you.

Benefit plans are just the wrong tool to fix your operational issues.

So keep the operational issues out of the benefit plans but don’t forget, that offering appropriate  benefit plans that are competitive in your industry is a requirement to ensure you won’t run into issues with the “hygiene factors”.