Thursday 24 September, 2020

The overrated benefits of benefits

With Bradley Hall

Recently, a CNN crew visited Shenzhen to learn companies in about China’s Silicon Valley. They were particularly interested in Huawei, a $92B enterprise that is the country’s biggest tech company, and the #3 seller of smartphones worldwide.

With more than 50,000 staff in Shenzhen, Huawei has one of the world’s largest corporate campuses. Impressive, for sure, but the CNN crew wanted to get video of the fun stuff typically associated with fast-growing tech companies. Where were the pool tables and bean bag chairs? Where were the free haircuts?

Huawei’s answer: We don’t provide those things. In China, Huawei pays the lowest benefits allowed by law. Minimal health insurance. No paid vacation. The last Saturday of each month is a full working day. No subsidized cafeteria food or buses. And no employee smartphone discounts. 

Work from home? No. Flex time? No. And in China, employees punch the clock, badging in when they get to work and badging out when they leave.

The disappointed CNN crew concluded that Huawei had not yet caught up to its more enlightened counterparts in Silicon Valley. But is that a reasonable conclusion?

Maybe not. Nearly every year, Universum, an employer branding consultancy based in Stockholm, rates Huawei as the #1 employer in China – a country with more than 40.6 million privately owned companies and more than 3,000 public ones listed domestically.

Why would Huawei, with its parsimonious benefits, be the top choice of China’s job-seekers?

The answer lies in the relationship between satisfaction and success.

Many companies have got a fundamental premise backwards: they believe that making employees satisfied will cause them to be successful.

By contrast, Huawei believes that helping people succeed will cause them to feel satisfied.

Say you’re a sales manager talking to a group of 10 sales reps, all struggling to meet their quotas. Will they cheer up if you announce a bowling night? Or might they instead prefer that you help them make their quotas and get their bonuses? 

Employees don't want to be pampered, they want to be successful. Satisfaction flows from success.

Organizational psychologists have known this for years. In 2009, Ed Lawler, a University of Southern California professor and the author of 51 books on HR and leadership, said definitively: “Satisfaction does not lead to performance; it is caused by it.”

Yet since 1998, Fortune has published an annual ranking of America’s Best Companies to Work For. Want to make the list? Turn your company into a five-star hotel. Free massages, on-site dry cleaning, free gourmet lunches. 

But do these benefits really create a foundation for greatness? Of the 2017 Best Companies to Work For, only two cracked the top 20 that year on Fortune’s list of the Most Admired Companies. The relationship between benefits and company success appears weak at best. 

Need more proof? In 2016 Universum published the Top Companies for MBA Graduates. Of the top 20 Best Companies to Work For, only three made the top 20 on Universum’s MBA list (Apple, KPMG, and Boston Consulting Group). 

In America and China, the best people aren’t choosing companies that provide the most generous benefits. They’re choosing to work in environments that test their mettle. 

That’s why the Universum list includes firms like Goldman Sachs that are famous for working their people to death, sometimes literally. It also includes many consulting firms such as McKinsey and BCG with up-or-out cultures. Every year, the bottom 10% to 15% get shown the door. 

Or take the Marines. Lots of people join, and it’s not for the free haircuts. It’s because of the Marines’ employer brand: the toughest of all military jobs.

What about the Navy SEALS? Their brutal training regimen is legendary. No one joins for the money, or needs an incentive to perform well. SEALs want to show themselves, and the world, how tough they are.

Several years ago, a friend of mine joined Merck, the giant pharmaceutical firm. As it happens, Merck’s health insurance covered laser eye surgery for employees. I asked my friend if this influenced his decision. “Do we have that?" he said. Then I asked about other Merck benefits with which he seemed equally unfamiliar.

When I asked, "Why did you join?" his face lit up. He talked about Merck’s research culture and world-class labs. He wanted to be successful. Merck convinced him that this was the place to do it.

“But,” you might say, “China’s a completely different culture. Chinese don’t mind hardship.” 

Oh, they mind. But great talent does not choose a company because of free stuff. Talent gravitates toward what HR types call the most compelling Employment Value Proposition (EVP). An EVP answers the question, “Why should I work here?”

Huawei’s EVP is extraordinarily clear. Many newly minted graduates are posted overseas early in their career. They become experienced international managers at a young age. They learn English. They work with the latest technologies and influence global technology standards. And high performers get wealthy through large, performance-based bonuses and profit sharing. 

Given those perks, paying full price at the cafeteria doesn’t seem like such a hardship after all. 

Pampering employees runs counter to behavioral science and flies in the face of real-world data on employment branding. 

Companies that give employees a way to succeed, create happy people. Find the right people, make good use of their talents, and give them the tools they need to succeed.

Happiness will take care of itself.

Bradley Hall, Ph.D., is a Senior Human Resources Adviser at Huawei Technologies and author of The New Human Capital Strategy.

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