Of Needs and Benefits

Benefits imply both costs and profits for companies. These include health care benefits, leave benefits, year-end and performance bonuses, medical and dental insurance, life insurance, retirement plan, pension plan, employee profit sharing, professional and career development benefits (e.g. educational assistance/scholarships), housing allowance, meal allowance, and the like. 

Certainly, they are associated with financial costs that can hurt company finances but still, companies choose to provide benefits because they serve some purpose. A good package of benefits attracts the best talent to work for a company and improves word-of-mouth recruitment. It ensures a high retention rate or prevents high turnover, both of which speak much about a company’s culture. It also improves employees’ performance and productivity and in turn, company financial performance.

Theories and research evidence indicate that benefits can bring about profits and gains to companies by promoting a happy and productive workforce. In particular, theories of motivation help explain what drives individuals to work in a certain way. These theories are classified into two types, namely content theories, and process theories. Content theories are about “what motivates people.” These are further classified into four content perspectives, namely:

• Maslow’s need hierarchy –identifies and ranks human needs in five levels; 
• Herzberg’s motivation-hygiene theory –identifies two job conditions (i.e., hygiene factors such as company policy and administration, and working conditions, among others; and motivational factors such as achievement and recognition, among others) that affect the behavior of employees (workers); 
• McClelland’s needs theory – identifies three basic motivating needs such as the need for power, need for affiliation, and need for achievement; and 
• Alderfer’s ERG (existence, relatedness, and growth) theory –categorizes Maslow’s five needs into just three needs (i.e., existence needs, relatedness needs, and growth needs).

On the other hand, process theories are all about “how motivation occurs.” These are further categorized into four subtypes, namely:

• Vroom’s expectancy theory –assumes that an individual’s behavior results from the choices he/she made relative to the alternative course of action; 
• Adam’s equity theory –assumes that individuals maintain a fair relationship between performance and rewards and they get demotivated when their inputs are more than the outputs;
• Reinforcement theory –is based on the “law of effect” concept which assumes that behavior is the function of its consequences (i.e., individuals tend to repeat those actions with positive consequences and avoid those with negative consequences); and
• Carrot and stick approach to motivation – which provides carrot (i.e., reward) to performing employees and gives stick (i.e., punishment) to nonperforming employees. 

Among these theories, Maslow’s theory of human motivation is considered the most influential theory as it provided a theoretical basis or foundation for the other theories. Maslow’s need hierarchy is a framework that explains the basic and complex needs of a person, and how one person moves from one need to the other when the basic needs are met. It is based on a simple premise that an individual’s needs are hierarchically ranked. The basic needs should be satisfied first before one is motivated to go further in the hierarchy. In this sense, an individual’s behavior is determined by the desire to fulfill his/her strongest and unsatisfied needs.

Under this framework, the most basic needs are physiological needs (e.g., food, water, and air, among others) which are necessary for one’s survival. The next type of needs in the hierarchy is safety or security needs (e.g., shelter, safe neighborhood, and steady employment, among others) which refers to the need for self-preservation (i.e., the need to be free from physical danger or harm). Social needs such as the need for acceptance, love, affection, and belonging follow. It is at this level that relationships are formed. 

When these first three types of needs are fulfilled, one endeavor to satisfy his/her esteem needs, which encompass self-respect, self-confidence, self-worth (or self-esteem), and social recognition. An individual who achieves these needs feels a sense of power and control, thus making him/her more confident. Consequently, he/she strives to fulfillthe highest type of needs, i.e., self-actualization needs (e.g., development of one’s capabilities) which refer to the need to maximize one’s potential.

In this light, helping employees achieve their needs by providing benefits and incentives enable them to maximize their potential, which in turn is beneficial to companies. Research evidence shows that more satisfied employees (i.e., because they feel their job is rewarding, see a ladder to move up in one’s career, have work and life balance, or have great managers) achieve better financial performance for companies. Worker satisfaction (or happiness) is correlated with company financial performance. In this sense, a worker’s perception or assessment of a company’s culture predicts the company’s performance as it directly affects financial and productivity performance. 

In the final analysis, providing benefits and incentives to employees should not be regarded as costs but rather as an investment in good employee relations, which increases productivity, motivates workers, and ensures higher retention rates or prevents turnover. However, company leaders and managers make hard decisions to ensure that the gains outweigh the costs in the long run so that they can protect their company’s bottom line. 

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Ms. Jane S. Cuenca is finishing her Ph.D. in Publica Safety at the Lee Kuan Yew School of Public Policy, National University of Singapore, and is currently a Supervising Research Specialist at the Philippine Institute for Development Studies. 

Note: This article was included in The Corporate Magazine, Guide and Style for Professionals Issue No. 17.