Return On Investment of Perks | The HBS Blog

As a successful entrepreneur, if you run a stable company with a decent profit, you should consider going out of your way right now to pamper your employees in some meaningful way. You need to be considering things like Aeron™ Chairs, their choice of great computers, snacks, fruit, meals, fitness programs, game rooms, lounge areas, beer, and even the encouragement of watching funny videos. Most likely you now spend some effort trying to curb these activities.  However, you’d be well advised to pick a few, and strategically implement them. In these perks lurks a significant long-term competitive edge.

These perks make employees happy and studies show that “Happy Companies” achieve higher sales and profits. In fact, according to one report, companies that enhance employee satisfaction by 20% can improve financial performance by as much as 42%. Fortune’s ‘100 Best Companies To Work For’ outperform the S&P considerably and consistently. Conversely, companies with disinterested employees (40% or less engagement) had a total shareholder return that was 44 percent lower than average.

A recent Wall Street Journal  article suggests that watching humorous videos, drinking beer and relaxing increases creativity. These activities cause a spike in the superior anterior temporal gyrus (aSTG), the part of the brain responsible for drawing together distantly related information. It enhances creativity, engagement and innovation - precisely what's needed when working on a brilliant solution to a hard problem.

The first thought most entrepreneurs have is that activities like ping pong and taking a nap, or a budget item like providing meals have immediate and visible costs and reduce performance due to the down-time.

With certain controls, however, these items can actually be a sound investment.

Let’s say providing a hot catered lunch to employees costs $25 per employee. Try it. It produces many positive unintended consequences such as increased appreciation for the entrepreneur in charge, increased camaraderie and better attendance on the day you provide the lunch. It’s a benefit employees can enjoy if it’s really delicious, so go first class!

Maybe it will become one of the reasons a key person stays with the company. Maybe it will attract the best new hires. For sure, your employees are now talking with others, most likely about work, and most likely about the wonderful meals you provide.

Encouraging a nap at work is still a very hard leap for employers. However, keep in mind sleep deprivation cost US businesses as much as $150 billion annually in absenteeism and lost productivity. A short nap makes employees more alert, reduces stress and improves cognitive functioning. The Better Sleep Council says poor sleep affects accuracy and attitude on the job. From Nike to AOL to Huffington Post to Ben & Jerry’s, more companies are recognizing this as area to focus on.

There is very compelling and similar evidence for programs like child care, health and wellness programs and education courses, exists. What could seem a distraction or an expense, can offer increased energy, productivity and reduce turnover.  PERKS like these also attract great new talent as well as justifying lower starting salaries.  If you use recruiters ($10k ~ $20,000 per hire) then reducing these costs alone can justify these efforts.

As a forward thinking and advanced leader you need to create positive leading indicators. This is an expense that can drive increased productivity and lower costs. Lean on frequent communication, clear expectations and accountability to counter possible pitfalls of these PERKS, then sit back and let your people enjoy work even more and all it offers!

Where have you invested in your people and culture and what returns have you seen?