The Purpose of Benefits

So what is the purpose and role of fringe benefits in a for-profit firm? You explored three different perspectives on this question in today's discussion board.

Lets begin our discussion acknowledging that benefits are expensive. Herzberg cites the cost as 25% of a person's base pay. The cost today is closer to 30%, and maybe more. Yet, as businesses have recognized from the early days of "welfare work" (remember that conversation & reading from the first week of the semester?), offering benefits beyond pay to employees has distinct advantages.

Libby Sartain offers a classic argument for the advantages of fringe benefits. They are a tangible demonstration of the company's care and interest in each individual employee. And at their best, benefits are a differentiator in a company's employment value proposition.

Chewning offers his benefits philosophy from Christian worldview; many of you appreciated his perspective. His argument would be consistent with that of many of the early welfare work proponents, including the Cadbury brothers in England, and Milton Hershey (at least based on his family background). Employers have a moral responsibility to help care for the whole person, not just the body that shows-up for work every morning. Of course, this was one of Henry Ford's frustration. He is famously quoted as saying, "All I need are a pair of hands, but I keep getting the whole person!" (my paraphrase).

Herzberg presents us with a view of pay and benefits through the lens of his motivator-hygiene theory. Those of you who are in or have taken BUSA 390 will recognize this theory.

Figure 1: Herzberg's Motivator-Hygiene Theory

The point Herzberg is trying to make in his article is that benefits keep getting more and more expensive because employers are using benefits to achieve the wrong purpose. Benefits in Herzberg's model are hygiene factors. Mitchell begins to help us understand this in his post.

Recall that hygiene factors can result in dissatisfaction if not present, but not satisfaction. Only motivators can bring people satisfaction on the job and result in intrinsic motivation. As noted in figure 1 above, motivators include recognition, opportunity for advancement, challenging work, etc. These factors on the job result in intrinsic motivation. Extrinsic motivators such as benefits can never do this, though they can cause dissatisfaction if not present.

So what does all of this have to do with Van Duzer and creating meaningful work where people can use their God-given creativity? One approach to providing meaningful work might include designing work with Herzberg's motivators in mind. These characteristics of work do not fully define "meaningfulness" in one's work, but they might give us a good start. Second, leaning on Chewning's argument -- designing benefits to address family needs, or the needs of the "whole" employee -- certainly frees our coworkers from the some of the concerns of this life, enabling them to more completely dedicate themselves to their work and the organization, including using their God-given creativity.

And the end of the day, all of this still costs money, which means our benefits philosophy needs to be clear and then baked into our business strategy and plans.

We'll continue our pay & benefits conversation on Monday with some practical work on constructing a pay range. We'll come back to this complicated issue of balancing our moral commitments with market forces and the needs of the business next Friday in our online discussion of just wages.

Enjoy the weekend, and see you on Monday!