Adding extraordinary benefits appears on the surface to be a generous move.
I certainly support the practice, but corporate leaders need to realize that these extraordinary benefits can also, unfortunately, have many unintended negative consequences.
There is a saying that “no good deed goes unpunished,” and if HR leaders do not precisely manage an extraordinary benefit, they are likely to be surprised and hurt by its many possible unintended business and HR consequences.
If you don’t believe me, ask the CEO of Gravity Payments (who recently increased the minimum pay of his workers to $70,000) who now, unfortunately, is experiencing some of those possible negative consequences. That’s why the Netflix decision to offer unlimited maternity (and paternity) leave as a benefit may be a bad idea.
12 possible unintended consequences for Netflix
- Performance might decrease – Having employees away from the workplace and not doing work for months (without hiring temporary replacements) will likely reduce team productivity. Unfortunately, the open ended-ness and the uncertainty of when the maternity/paternity benefit will be used makes workforce planning for a manager extremely difficult. Under Netflix “it’s your choice” approach, both men and women will have to choose how much leave to take, and when. That will invariably impact the employee’s productivity and add pressure to get it right to an already stressful situation.
- It may negatively affect the recruiting of employees in their childbirth years — Hiring managers may consciously or subconsciously reject potential employees that they perceive as likely to have children. On the premise that these new hires will be away from the team for long periods of time and because no temporary replacements will be hired, that will negatively impact their team’s performance.
- It may hurt an employee’s career progression – Whether it is true or not, employees may believe that utilizing the full benefit may make them “look bad” to their manager. And if a manager perceives that an employee may utilize this benefit, they may give the employee fewer important and long-term assignments. If the employee uses the full year, they may return with outdated skills. If an employee were to use too much over several years, it may actually severely hinder their career progression at the firm.
- Employees may utilize the full benefit and then quit – Unless the benefit is designed correctly, the employees that use the maternity/paternity benefit could quit immediately after using it. This could cause an even longer delay in team performance during the time that the replacement is sought (this has happened in the case of sabbaticals).
- Potential users versus non-users conflict – During the time when an employee takes advantage of this new child benefit, they will obviously not be doing work. This will increase the workload and the family stress for those not currently receiving the benefit. This may create animosity or jealousy between the users of the benefit and the currently working employees, especially if the at work employees perceive that the employee’s time off is not really necessary or that it is not being used for the intended purpose. And, since the benefit only applies to corporate employees, it may drive an even bigger “us against them” wedge between corporate employees and the firm’s fulfillment employees.
- Potential women against men conflict – Female employees may actually perceive that men taking “equal time off” is unfair because they haven’t suffered through the physical and mental strain of childbirth (the same negative perception may be true for women that adopt). And if women employees perceive that the men are abusing the benefit by taking the time off to do non-child related things, the animosity could get worse. In addition to the potential conflict, the actual or perceived pressure on men to use less may cause them to take a significantly smaller portion of their allowed time off, negating some of the benefits to the firm and the family.
- Shareholders might not like it – Since the extra compensation is not related to performance, shareholders may view it as money not well spent. Having employees spend fewer hours working, as a general rule, is not a good idea for shareholders. The individuals taking advantage of the benefit might not be top performers and they may even be low performers with little commitment to corporate goals.
- It may draw new hires that come just to utilize the benefit – There is a significant chance that the publicity around the benefit will draw potential employees that are coming merely to utilize the benefit. If the young TV mom Michelle Duggar were to join the firm, her benefit costs would certainly outweigh her value added as an employee.
- Customers might not like it – Customers at some companies may view the added benefits as an indication that prices are likely to go up while service quality will go down because there will be fewer workers on the job. Major customers that view it as “socialism” may do less business with you (this happened at Gravity Payments) and you will certainly develop some enemies at other firms that will now have to increase their costs and offer similar benefits.
- Unequal compensation issues – Employees that are less likely to have or adopt a child (i.e. older employees and those that have completed or don’t want a family) are essentially getting less compensation for time worked than those that will take advantage of the maternity/paternity benefit. Knowing that they will never likely use the benefit will mean that it will not be a motivator — and it can even become a demotivator.
- No proof of its impact on recruiting and retention – Employees that qualify, that don’t want to be out of the loop, may end up working a significant number of hours while they are on leave, negating some of the intended bonding benefits. In my experience, only a small percentage of the employees may actually utilize the full benefit, reducing its impact, but also its cost. Most organizations have no hard data to prove that the investment results in a significant improvement in recruiting, motivation, productivity and retention. There is frequently also no effort to determine which other benefit covering all employees might have had a higher ROI (flexible work hours, work at home or support for child care may have more of a positive family impact).
- The father could be an absentee dad – If the father of the child is not actively involved with the family, the benefit may not have the desired effect of helping the mother, sharing “the burden,” and bonding with the child. If the couple is not legally married or in a legal partnership, the dad will not, in most cases, be able to use the extended parental leave policies.
Of course, the PR and the employer branding boost that Netflix received as a result of the benefit has a tremendous value. So the lesson to be learned here is not to avoid offering extraordinary benefits because firms like Google and Facebook have successfully determined how to effectively design them.
Instead, the lesson is that any major changes to compensation, benefits and motivators will have many positive but perhaps an equal number of negative consequences. So make sure you identify all potential problems before you complete the program design.
And before you implement it, be sure and thoroughly vet it and then pretest it with your female (and male) employees.