Why Employee Freebies Are Bad for Quality

A mobile services company provides free mobile services to its employees. The employees never receive a bill for voice or data services. If an employee faces a problem, he just talks to a colleague in the relevant department (or somebody who knows somebody) and gets the problem fixed.

A chain of luxury hotels offers its employees a free stay at its properties in various cities. Employees receive special attention when they are guests at their company’s hotels. The more senior the employee, the more special the service is.

A television manufacturing company provides free televisions to its employees. If an employee complains about a quality problem with her TV, it gets attended to promptly, or the TV is just replaced.

A large chain of hospitals offers free medical treatment to its employees. When an employee is admitted as a patient, he receives attention and treatment that is usually superior to what “ordinary” patients get.

An airline provides free tickets to its employees. When an employee is a passenger (often in first or business class), she receives the sort of service that other passengers can only dream about.

Now, nobody grudges hard-working employees a few perks. If their employers can afford it, what’s the problem? Providing freebies to employees may be tempting to employers because the actual direct cost to the company may not be very much. It may be a small price that they may be willing to pay to keep their employees happy.

However, experience in many companies shows that such practices can be bad for quality. Let me explain why, using the example of the mobile services company mentioned above.

Whenever this company received complaints from its customers—the people who actually pay for the company’s service—about network quality issues or an error on their bill, customer-service employees were sympathetic but not capable of understanding the customer’s problem in its entirety. The reason, of course, is that none of the employees ever personally experienced what the customers did. Although many employees used the company’s products and services, they didn’t have the opportunity to gain the same experience that a real customer had.

For example, a number of customers complained about errors on their mobile bill, and others complained about receiving bills late. For employees, on the other hand, the mobile service was free; they never received a bill. How can the company expect its employees to genuinely relate to or empathize with the customer’s issues? At best, they can only try to imagine what their customers are telling them. Imagine if your company was full of such employees, where nobody had firsthand experience of what your customers go through.

Not surprisingly, this mobile company lost customers to competitors that did not offer such freebies to their employees. At those companies, many employees were actual customers who paid for the company’s products. When they had a problem, they contacted customer support like any other customer. These companies provided neither freebies nor shortcuts to employees. Naturally, this enabled the employees to relate better to issues raised by customers. Haven’t you noticed how you can understand a problem better (and often also come up with a better solution) when you are personally affected by the problem?

Further, the no-freebies policy enabled employees to improve the company’s processes whenever they encountered a problem, leading to continuous improvement month after month, year after year. All these opportunities are lost to a company where employees get freebies and special treatment.

Gradually, companies are learning that it makes sense to withdraw freebies and special treatment for employees. Some companies are giving employees a small, across-the-board increase in salary to offset the removal of these “harmful benefits.”

So go ahead, increase your employees’ pay a bit and withdraw all their freebies and service shortcuts. If your company has a vacant position, see if you can hire a customer to fill that position. While hiring new employees, give preference to a candidate who is a customer of your company. Chances are that they will come with a few fresh ideas for improvement in your company’s process and customer experience. I have tried this myself and we always found it useful to hire customers as employees (wherever possible). In addition, these companies worked to convert as many of their existing employees as possible into customers.

In an earlier column, I talked about the importance of employees being customers. (Did I hear a smart aleck say, “Our company makes missiles for the army; how can we make our employees buy our products?”) Obviously, what I recommend in this article will be relevant primarily to companies whose products or services are used by retail customers or consumers.

Does that mean all this is irrelevant for B2B sectors like manufacturers of trucks and missiles? Far from it. In B2B, it helps if at least some employees previously worked for customers of your company. For example, a truck manufacturer should have employees who have worked with its customers (e.g., shippers who buy and use trucks); the missile manufacturer is better off having employees who have been in the armed forces.

Irrespective of what kind of industry you are in, it’s in your company’s interest to have customers as employees, and to ensure that employees have an opportunity to experience exactly what your customers experience when they use your product or service. Try this in your company and see the difference.

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