An exchange of ideas will enhance delivery of benefits

Employees will also self-segment the exchange within the staff-employer relationship and will measure the value of what is offered to them, says Stephen Perkins, professor of human resource management, London Metropolitan University.

There’s no shortage of ideas on techniques for the design and delivery of benefits. But more reflexive employers and their HR advisers temper attention on technical factors by drawing on management and social science literature.

Employee benefits are a central feature of the employment relationship – and relationships are risky for both parties. Put another way: employment relationships mean uncertainty on both sides regarding the outcomes. Think about it. Offering benefits to individuals and groups of employees in return for the purposeful application of their labour represents a relationship of exchange. Parties to a socio-economic relationship are required to make strategic choices about the way they invest scarce resources, with the risk of miscalculation. In the employer’s case, this revolves largely around the decision to make a financial commitment. In turn, employees must evaluate the deal for permitting management to access their skills and energies.

Cause and effect prediction around the management of employee benefits remains problematic. We know from strategy literature, however, that making effective choices carries the need for clarity on organisational priorities and best efforts to anticipate the likely choices of others. Managers may be able to limit some of the risks by systematically thinking through the kinds of expectations and priorities they have about the returns on these investments, as well as the measures they apply to decide whether or not a valuable exchange has been secured. They would do well too, to reflect on how employees are working through the same mental processes. Remember, competitive strategy tells us always to bear in mind the likely response of others rather than assume our own choices will deliver uncontested advantages.

Risk management decisions are needed both in terms of the level and composition of benefits, and the mode(s) of delivery. The workforce will be segmented not only by managerial initiative, for example, between occupational groupings, and into core peripheral organisation members. Employees will also self-segment and approach the benefits exchange relationship accordingly. They will measure the value of the exchange offered to them, and make choices about the degree to which they will offer up a discretionary effort to their employer’s cause in return.

The risk management strategy BT put in place associated with its recent overhaul of pay and benefits arrangements illustrates the point. In May 2006, BT’s then HR director of reward and employee relations was quoted in Employee Benefits on the risks the company’s management had to address, otherwise the changes would flounder due to the demographic character of the UK workforce. A mature, long-serving, and highly-educated workforce could understand the changes to employment benefits intellectually, in particular the shift towards external comparability rather than an inwardly-focused equity principle. But they had difficulty emotionally in grasping the step away from long-standing practice dating back to the public sector era of conjoined Post Office and telecommunications. Corporate attention has been essential to manage the risk of switching off key people with skills and energies business-critical to delighting customers under the modern-day service focus. Significant managerial effort has been needed to get people engaged and helping to make them aware of BT’s trading context, with knock-on consequences for benefits design and delivery.

Benefits designers can work through a checklist of points that need a managerial viewpoint, transparently articulated. These include factors such as: the precise nature of the contribution employers expect in exchange for employment benefits, how they will communicate the nature of the exchange deal, and how it will be measured from the managerial side in terms employees will comprehend and act on. Critically, a final consideration should be how a perspective can be avoided that treats the workforce as though employees may be regarded as a single mass, instead paying attention to identifying the diversity of employee circumstances and consequential priorities in approaching the employment benefits exchange.

Attention to these factors may help improve the quality of managerial decision taking.

Stephen Perkins, professor of human resource management, London Metropolitan University