The Multi-Million Dollar Soda Venturebeat gives us something to think about today.
“Do you know how much our company is spending on free sodas and snacks?” And to answer her own question she presented the spreadsheet totaling it all up. There were some experienced VC’s in the room and I was waiting for them to educate her about startup culture. But my jaw dropped when the board agreed that the “free stuff” had to go. “We’re too big for that now” was the shared opinion. But we’ll sell them soda “cheap.” Uh oh I had lived through this same conversation four times in my career, and each time it ended as an example of unintended consequences.
No one on the board or the executive staff was trying to be stupid. But to save $10,000 or so, they unintentionally launched an exodus of their best engineers. This company had grown from the founders, who hired an early team of superstars, many now managing their own teams. All these engineers were still heads-down, working their tails off, just as they had been doing since the first few months of the company. Too busy working, most were oblivious to the changes that success and growth had brought to the company.
One day the engineering team was clustered in the snack room looking at the soda machine. The sign said “Soda now 50 cents.” The uproar began. Engineers started complaining about the price of the soda. Someone noticed that instead of the informal reimbursement system for dinners when they were working late, there was now a formal expense report system. Some had already been irritated when “professional” managers had been hired over their teams with reportedly more stock than the early engineers had. Lots of email was exchanged about “how things were changing for the worse.” A few engineers went to the see the CEO. But the damage had been done.
The most talented and senior engineers looked up from their desks and noticed the company was no longer the one they loved. It had changed. And not in a way they were happy with.
There’s an important lesson to be learned here, and it isn’t that you should just give everything away forever and ever. The lesson is that if you want to keep your best and brightest, you sometimes have to continue to provide the intangibles. In the example, those intangibles were simple: free sodas and a liberal dinner reimbursement policy made the company a nice place to work. The atmosphere wasn’t overly corporate or controlling, and employees happily provided the labor needed to keep the company moving. When the company stopped realizing that the relationship between doing extra work and a few extra perks were directly intertwined, things moved downhill and eventually ruined the company.
While the person crowing to the executive staff about how they had “discovered” an additional $10,000 that they couldn’t afford, they were ignoring how much that $10,000 meant to the people who drove the company: the engineers. While you could make the case that employees, paid well enough, could afford to buy a soda or a snack, that isn’t really the point. Part of what makes a company pleasant to work for is the atmosphere, and part of what makes the atmosphere acceptable is a tacit understanding that there is a give and take. In this example, the engineers worked extremely hard and put in the time necessary to grow the company. The “free” snacks and sodas made those people feel as if their efforts were appreciated. Engineers surely understood it was a cost for the company, but they (correctly in the real world; incorrectly in this case) understood that the provision of these “goodies” was the company going above and beyond to reciprocate for them going above and beyond. When that stopped, they left because it was no longer a two-way street.
This goes very much toward my video from two weeks ago about employment being a two-way street. It’s fine to look at the bottom line, but not every relationship you have with your employees can be quantified on a spreadsheet. It isn’t always about money, either. Sometimes it really is about principle. Before you yank a perk away from the people who work for you day in and day out, weigh the cost of that perk against losing employees and damaging company morale. If the numbers jive for you, or if you can justify it, then by all means go for it, but don’t be surprised if there is a backlash and you lose some of your best and brightest over a bag of pretzels in the break room.
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Today’s article is from KnowHR contributor Vincent Ferrari. Vinnie’s not in HR. He’s a regular working guy. Smart, tech-savvy, straight shooter (he lives in the Bronx — the nice part — but it’s the Bronx, and they call people on BS), and a friend of ours. We’re delighted to have Vinnie’s thoughts here at KnowHR. He’s going to start writing as a regular contributor to this site. You can also follow him on Twitter @vincenzof and at his blog Insignificant Thoughts. Don’t say I didn’t warn you about the straight shooter part! — Frank
{ 16 comments… read them below or add one }
Vinny, this is such an excellent point…companies look for places to make little cuts that have huge implications. Let’s keep the pretzels coming!
It’s particularly bad in this economy because those companies are only seeing bottom lines and not thinking about consequences. It’s not a good scene and it’s ripe for an epic fail like the one the author of the original post mentioned.
@Vinnie. You are so right. This kind of think gets me so riled up that I almost can’t organize my thoughts about it. It’s exactly what’s wrong with American business today. Let adults be adults. Let people close to the decisions make them. Let managers manage. More controls lead to less extra effort. I believe that. Companies need to hire trustworthy people… and create environments where they can thrive. I know that’s not simple. But… even without knowing the facts, I could have told them it would cost them more than $10k to lose any one of their key contributors.
Reminds me of a story a friend told: He owned a business with a vehicle fleet. All his foreman had gas cards. He knew that the foreman were filling their own gas tanks with his cards. he let it slide because the work they did was easily worth an extra tank of gas each week. he chose his battles.
@Greg…something about the little things and having perspective. Nice.
Choosing battles is key. That’s something most people could learn to do better.
Congratulations! This post was selected as one of the five best independent business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.
http://blog.threestarleadership.com/2009/12/30/123009-midweek-look-at-the-independent-business-blogs.aspx
Wally Bock
Thanks, Wally. Vinnie will be delighted to hear that.
You will be surprised this comment is coming from a business operations guy. It is part of our daily duties to keep the waste of resources down and make the company tick like a fine Swiss watch. We do tend to be ferocious guards of the organization.
After spending 12 years exclusively in high-growth startups I have learned a major lesson:
Don’t give anyone anything you may need to take away!
That goes for perks, tools, etc. etc. etc. You have to be conservative from employee #1. Before you start bringing in those cases of beer, think about the fact how much it will cost you when you have 100+ employees. Are you willing to commit to that expense?
I am not saying don’t do it. Heck, I am the biggest advocate of those little perks employees seem to value so much (which, based on my experience, have fantastic ROI). What I am saying is to really think twice about what precedent you are setting and AVOID following what everyone else does.
Just because Google has something, does not mean you have to. In several of the startups I was part of we managed to attract some cream of the crop guys and gals (devs and other professionals), though we definitely could not match their compensation they have probably received at the big companies.
@Apollo…Great point…once something is given it can only be a takeaway after that. It’s being responsible early that matters later. Thanks for that good thought.
That’s a good point. I think it’s obvious, though, that there’s a world of difference between never giving something away and then suddenly deciding that it’s a good cost savings to take away something you have been giving away.
Secondly, your point about those perks attracting talent when they can’t necessarily be paid what they could get elsewhere is a very good one as well. It’s not always money that makes a person’s choice on where they work and in the real world, sometimes a free lunch is worth more than a larger salary (and often comes at a much lower price for the employer!).
This reminds me of a junior software developer approach:
This works fine with my test set of data. Surely we’ll never see a null thrown or more than 10 rows in this query result… [checks code into production]
While most in the MIS/IT world might nodding their heads in a been-there-done/seen-that way, the folks tasked with the ‘numbers’ are just as prone to the junior mistake of operating with an incomplete set of data — and then checking their ‘code’ into ‘production’.
The informal phrase I’ve heard is “you got MBA’d” when folks describe the effect of a whizkid or seasoned exec that finds a whopping 0.x% somewhere that gives everyone upstream the jollies. The changes are made. The staff reacts. The exec team either continues for a period of time before finding a new pond to wade into or… the exec team resigns when key accounts are lost due to deleterious impact to revenue forecast and revenue waterfall in the wake of customer renewals.
For want of a Diet Coke and frikkin pizza the code sprint was lost.
For want of a code sprint the developer was lost.
For want of a developer the team was lost.
For want of a team the product was lost.
For want of a product the company was lost.
And all for the want of a Diet Coke and a frikkin pizza.
@Jay Hi, buddy!
Yep, for the want of a nail, the kingdom was lost. All for a frikkin pizza. Great thoughts, man, as always.
I appreciate you coming by!
I wonder, if the company needed the $10k so much, why didn’t they go to the engineers and put it to them. I find that being transparent and letting your team make suggestions can be a very good (and sometimes eye-opening) way to solve problems. Who knows what would have happened if they sat down with the employees and said that they enjoyed offering the snacks but the cost was getting a bit prohibitive and could they suggest another way to save that money so they could continue to provide that perk.
Just a thought – sometimes more heads (from different levels, departments, etc) is better than a few. (Caveat: sometimes not).
Good post!
@Amy There’s an idea…ask employees.
Seems so much like the right thing to do. Talk to people. Ask what they think. That would have worked.
Thanks for your thoughts and for stopping by.
Maybe another lesson to be learned. Once you start giving stuff away, you can’t stop. If you started out charging $2.00 ea. and lowered the price to .50 cents the would be kissing your keester.
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