The Base of the Employee Pyramid

Although the base of the Employee Pyramid is Money, this needs to be considered more broadly than just the size of the paycheck and the variety of employee benefits. Most companies are moderately savvy about paying a competitive basic wage or salary. Therefore, it's likely there's not significant differentiation between you and your competitors when it comes to your pay scales. First, ask yourself if your base pay is sufficient for your employees to feel that their survival needs are being met, and consider how much worry about job security exists in your workplace. As Maslow taught us, your employees can't focus on their higher needs when they have an empty stomach and fears about how the rent is going to be paid. Most American employees find that their wage or salary does pay the rent, so it's really the tangible and intangible benefits that differentiate you as an employer in the eyes of your employees. With this in mind, as I talk about money in this chapter, know that I will be addressing the full compensation package, including unique benefits, with respect to most of my comments. And we will climb the Employee Pyramid over the balance of Part Two by focusing on the recognition and meaning needs of employees in the next two chapters.

As the CEO of a company that's composed of 85 percent hourly wage earners in arguably the most expensive part of the country, I know that the compensation package is critical for our employees. In fact, I started thinking about this Money-Recognition-Meaning pyramid even before I got reacquainted with Maslow in the hospitality downturn because during the late 1990s, we were regularly having our employees cherry-picked by dot-coms recruiting in a robust San Francisco economy with just a 1 percent unemployment rate. I remember one employee who was making $12 per hour as a front-desk host (we call front-desk clerks hosts because it's a better description of their role). She was offered nearly $50,000 per year to join the customer service phone force of a new, cash-rich dot-com. This employee called me, almost in tears, apologizing for the fact that she was going to leave the company, but once she told me about the woes of trying to make ends meet on her wage, I completely sympathized with her decision.

During the dot-com boom, we had to increase our base wages at twice the inflation rate (as rental housing costs were rising 20 percent per year), develop unique compensation perks beyond the wage, and focus our efforts on providing recognition and meaning—benefits that were so powerful that they helped our employees feel good about staying in their jobs. We were obsessive about listening to our employees as we tried to understand what would make them more likely to stay without breaking the company piggybank. Maslow believed that you could learn a lot by the “grumbles and complaints,” as he acknowledged, “human beings will always complain.”³ Our Joie de Vivre team knew that once we started hearing “higher- level complaints,” like what kinds of classes we were teaching in “JDV University” or how often we had fun company events, we had moved our employees beyond the base of the pyramid mindset.

Google Is Peaking

My company, and industry, is the exception to the rule in an increasingly white-collar America. Your company may look more like Google, a high-tech company with few employees who are stuck at the bottom of the pyramid. Google is a very Maslovian company. It pays competitively, but this is not why people join the company, especially after their splashy and profitable initial public stock offering already passed long ago. One key differentiator at the base of the Google employee pyramid is the over-the-top benefits and perks it offers, from the free company cafes with gourmet organic cuisine to deeply discounted massages to free car washes. The company almost thinks of its corporate campus as a well-run luxury resort with Google employees as the guests. In fact, the better Google treats its “guests,” the longer they're likely to stay (both in number of years and in hours in the day).

The first time I walked onto Google's headquarters campus in Silicon Valley (known as the “Googleplex”), I felt like I'd discovered Shangri-La University. The average age of the multicultural employee base seemed to be around 26. The first thing I noticed were the two Endless Pools with two Googlers swimming against the current. Just beyond that was a sand volleyball court with an outrageously competitive two-on-two match between beach-boy-looking techies. Then there was the large open-air farmer's market of fresh produce that employees could stock up on. There were a few dogs roaming around on the grass as Google employees, each with their own laptop, were talking in the sun. Is there a value to all of these small perks? Clearly there is, because when you can take a free shuttle to work in luxury buses with Wi-Fi, have free recreational opportunities all over the campus, receive free gourmet meals at one of 11 upscale cafeterias, can visit one of five free on-site doctors, and have the comfort of free child care, the net result is that Google employees can start the workweek with $80 in their wallet and can end the workweek with exactly the same amount. As one of my Google friends says, “They make life simple for us.” The company even offers unlimited sick days to its employees.

Google is also well-known for their “Search Inside Yourself” mindfulness programs cocreated by Chade-Meng Tan, who wrote a bestselling book by the same name. Now, any company can tap into these programs because the Search Inside Yourself Leadership Institute (https://siyli.org) offers workshops on mindful leadership.

Not surprisingly, one of Google's chief competitors for employees, Facebook, has also pursued a comprehensive approach to thinking about the base of their employee pyramid. They invited me to speak at their global assembly of HR leaders as they launched a new initiative, Life@Facebook.

Vice President of Human Resources Tudor Havriliuc explains, “Peak was one of the sources of inspiration for Life@Facebook, our comprehensive approach to caring for our people, as well as those who matter to them. We felt it was important to do much more than offer competitive compensation, so we built programs and provided resources to help our employees in the most important areas of their lives: community, family, health, time-away, financial future, personal and professional growth, and perks of convenience. As a result of this new approach, 96 percent of people at Facebook believe or strongly believe the company cares for them.”⁴

Corporate generosity with perks isn't limited to Silicon Valley. Promega, based just outside Madison, Wisconsin, has offered a deluxe fitness center on their corporate campus since the 1980s as well as mindfulness offerings—from yoga, massage, and meditation—since the 1990s. Their campus is based upon the premise of bringing the outside in with natural materials and a connection with the local landscape. Employees are offered garden space for personal use and the company garden helps create a healthy menu in the corporate dining spaces. Lastly, they've experimented with a program called ESI (Emotional and Social Intelligence) Bootcamp that helps employees learn skills for self-awareness in the form of empathy, discernment, and courage.

I've been fortunate to give hundreds of Peak speeches on six continents and to witness some remarkable stories of companies that have adopted a Peak operating perspective. But no company has impressed me more than Liderman, one of the largest security companies in South America. As you can imagine, the South American security business is fraught with challenges given the variety of issues that CEO (and Guardian of the Culture) Javier Calvo Perez Badiola cited for me: police corruption, organized crime, low pay, and low regard by the general public. Liderman, which has now been ranked the Best Place to Work in Latin America, took this very seriously as it really hurt their recruiting efforts. Incorporating all kinds of Peak programs, they came up with a dozen different initiatives that bolstered their employees' sense of being valued at work. Some of the more notable ones include:

• They created a radio show for the graveyard shift (when many security guards work) that reached out to more than their employees, and became the most popular late night show in the country, which helped amplify Liderman's core values.
• They developed a course called “Value Your Spouse” that helped the almost-exclusively male guards learn how to treat their mates better, and a “Lunch with your Family” program where the boss visits the guards and their families at home, bringing a meal and presents for the kids.
• They moved up payroll dates to the 12th and 28th of each month so employees felt like they were getting paid earlier than their friends at other companies, and it helped them to pay the rent and other first-of-the-month bills earlier.

In sum, the best companies in the world—whether they employ expensive software engineers or security guards—tailor their compensation and benefits package to meet the unique needs of their colaboradores (the Spanish word for contributors and one that I use often since work is meant to be an inspiring collaboration).

Bigger Than Money

Many recent studies have shown that the majority of companies expressed confidence that increased compensation was the best way to retain their employees. I couldn't disagree more. Employees' perception of the value they receive from their work is complex. How do you value giving up your work friends or the beautiful surroundings or the flex-time benefits or the comfortable relationship you have with your direct supervisor? On the margin, money is not a primary motivator once employees have moved beyond their basic needs. Peter Drucker said, “We have known for 50 years that money alone does not motivate to perform. Dissatisfaction with money grossly demotivates. Satisfaction with money is, however, mainly a ‘hygiene factor.’”⁵

Frederick Herzberg's well-known writings about intrinsic versus extrinsic benefits have suggested that money is a foundational need that shouldn't be ignored, especially in a low-wage industry. But he also writes, “Ask workers what makes them unhappy at work, and you'll hear about an annoying boss, a low salary, an uncomfortable work space, or stupid rules. Managed badly, environmental factors make people miserable, and they can certainly be de-motivating. But even if managed brilliantly, they don't motivate anybody to work much harder or smarter. People are motivated, instead, by interesting work, challenge, and increased responsibility. These intrinsic factors answer people's deep-seated need for growth and achievement.”⁶

Former Harley-Davidson CEO Rich Teerlink and his internal consultant Lee Ozley write in More Than a Motorcycle about how they mixed Maslow and Herzberg into the powerful compensation cocktail that helped jump-start the company's fortunes two decades ago: “Gaps existed between the theory behind Harley's compensation practices and the reality of the company and its workers. Harley's next task…was to come up with a new compensation theory that squared better with reality.”⁷

Based on deep discussions within the senior Harley leadership team, the organization decided that four deeply rooted psychological pillars would define how the company viewed its compensation policy:

1. Give employees the opportunity to act on their intrinsic motivation whenever possible.
2. Realize that salaries and benefits are only a part of a totality of rewards and recognition.
3. Fairness is an integral part of whether employees feel well compensated: fairness compared with workers at other companies and fairness relative to fellow Harley employees.
4. Make sure rewards and recognition for Harley employees or teams are congruent with the overall company goals.

We could all learn a few things from Harley-Davidson. The company has one of the most loyal workforces in American business. A few years ago, I had the good fortune of being a consultant to Harley-Davidson regarding a new development project it was considering. From what I witnessed, I can attest that they are an outstanding example of the truism that the biggest differentiator between an average company and a great company is the motivation of the people within the company. Harley-Davidson got it right by aligning compensation and recognition in a way that both motivated its employees and was congruent with the company goals.

While money may pay the bills, it doesn't necessarily buy happiness. The father of the resurgent positive psychology movement and author Martin Seligman writes in Authentic Happiness, “Our economy is rapidly changing from a money economy to a satisfaction economy.”⁸ Americans are looking for more than just another buck. Just like individuals have Hierarchies of Need, so do countries. America is rapidly escalating up the pyramid toward the more intangible benefits that come with recognition and meaning. We'll learn more about that in the next two chapters.

How Solid Is the Base of Your Pyramid?

What does it take to ensure that the foundation of the Employee Pyramid, compensation, is solid and that employees' base needs are met? Money is a tangible measuring stick that any employee can use to compare your company with a competitor. But there are numerous ways to create value. What's curious is why more employers don't look beyond the basic wage and salary they pay their employees when considering the compensation package.

Joie de Vivre conducts an annual work climate survey that helps us understand how we measure up versus the industry average in everything from compensation to recognition. We measure not just salary but a whole range of things that we value as an organization and that we believe contribute to overall employee satisfaction. Vigorously focusing on these results has allowed us to get to the point that, in one of our last surveys, 90 percent of our hotels were above the industry average with respect to overall employee satisfaction, 7 percent were at the average, and only 3 percent were below the average.

The cleverest bang-for-the-buck benchmarking tool we use is Fortune magazine's annual “100 Best Companies to Work For” survey that was conceived and is administered by the Great Places to Work Institute. Each year, we survey our employees and answer the detailed questions associated with our compensation practices, work environment, and culture. While we have yet to make it to the top 100, we do receive back a free set of results that shows our employees' “Trust Index” in the five broad areas of credibility, respect, fairness, pride, and camaraderie as well as 56 specific line items. We can compare ourselves with the “100 Best Benchmarks” on measures as diverse as whether our employees consider the company a “fun place to work” or whether our “people are paid fairly here for the work they do.” These results are also broken down by job type, gender, age, years of service to the organization, racial or ethnic identity, and part-time versus full-time work status so that we can understand whether there are subgroups within the company that need more attention.

While the private statistics that we receive are interesting, reading the annual article (which usually appears early in the year) is a must for any executive who wants to understand best practices with respect to creative compensation. In reading this article, you'll learn that Timberland employees are offered a $3,000 subsidy to buy a hybrid automobile, that Eli Lilly gives its pregnant employees a month off before their due date, or that J. M. Smucker provides a 100 percent tuition reimbursement with no limit to the dollar amount.

Given that Genentech was rated number one on Fortune magazine's “100 Best Companies to Work For” list in 2006, and they're based in the Bay Area, I decided to study them from top to bottom to learn what it is that makes them the best company to work for in America. While it might appear that a multibillion-dollar multinational biotech firm may have little in common with a regional hotel company, we've learned it has a lot. A former Genentech senior human resources exec told me that the company's founders were so inspired with the history of the generous culture of Hewlett-Packard that they endeavored to create the “Rolls Royce of benefits” when they started the company. Most of these benefits were a little rich for Joie de Vivre's budget, but what impressed me most is that some of the benefits Genentech offers its employees are more Volkswagen than Rolls—like the Friday afternoon “ho-ho” (beer kegs in a courtyard) that's been a tradition for decades.

The biggest story in some of the most recent “100 Best Companies” results has been the trend toward compensation benefits that address work/life balance. Back in 1999, only 18 companies on the list allowed telecommuting; now 79 do. That number is now trending toward 90 percent as more and more companies offer compressed workweeks, such as four 10-hour days with Fridays off. From personal concierge services to take-home meals, companies are focusing on anything to make their employees' lives a little easier. And right they should.

In our time-compressed world, maybe the greatest compensation gift an employer can give its employees is time off. For this reason, for years, Joie de Vivre has offered its salaried (and some of its hourly) employees a one-month paid sabbatical every three years of continuous employment. The logic was simple. Our primary business, hotels, never shuts down, so our employees who don't have fixed eight-hour schedules have a great risk for burnout. Plus, we're in the business of housing people from all over the world and building friendships with these far-flung folks on a daily basis. Our staff gets to know these guests, hear about the stories of their exotic homeland, and even build pen-pal relationships with these visitors, many of whom get four to eight weeks of vacation per year (especially those from Europe). So, although it's unorthodox, a month-long sabbatical lets our employees take advantage of the international relationships they've built at the hotel as they get an extended opportunity to travel overseas, which is much less convenient if you have only two weeks off each year.

You can imagine the pressure we were under to terminate this perk when the Bay Area hospitality business fell off the cliff. Few hotel companies offer paid sabbaticals, and frankly, I'm not aware of any company that offers a month off every three years. So, sticking to our guns about the importance of this unique perk was a conversation we had regularly with some of our hotel investors and owners. Fortunately, we were persuasive enough that this perk made it through the downturn. To me, it was simple: Joie de Vivre's sabbatical policy was part of our company's DNA.

Fringe benefits are no longer considered fringe by many employees who see them as a pivotal part of their compensation package. At Joie de Vivre, we look for creative ways to compensate our employees beyond their base pay. We bought the largest day spa in San Francisco, the venerable Kabuki Springs and Spa, during the dot-com boom—not just because we thought it was a wise hospitality investment but also because we consciously decided that owning this property would enable us to provide employees with the additional benefit of half-price massages and free use of the exotic Japanese baths.

Similarly, because we operate more hotels in the region than anyone else, why not offer free hotel rooms for our cash-strapped employees who can't afford to travel very far? Based on the story I recounted in Chapter Two, you are aware that some of our hotels are popular with traveling musicians. So why not offer free concert tickets to our employees for those shows that aren't sold out (through the relationship we have with the various concert venues in town)? What perishable asset can your company make available to your employees that would boost their perception of their compensation package? For example, AstraZeneca, a pharmaceutical company, offers its employees free prescription drugs.

Perhaps the king of creative compensation is Ricardo Semlar, CEO of Semco in Brazil. In his book The Seven-Day Weekend, he outlines all kinds of interesting perks like customized health plans, but two in particular are worth noting:

1. Rush Hour MBA: A group assembles every Monday at 6 P.M. as a productive way for people to use the time they would otherwise spend sitting in Sao Paulo's rush-hour traffic; instead of wasting two hours commuting, people can attend lectures and classes in the headquarters.
2. Retire-a-Little: This program addresses the fact that when you're most adventurous and fit (at a younger age), you lack the finances to explore, but when you have the finances (at an older age), you often lack the stamina. With this program, employees can acquire from the company as much early retirement as they wish. You can reduce your pay and hours today and redeem them at a later time in your life with the company.⁹

Maybe a Brazilian company feels a little removed for you? Then, consider Ernst & Young, the global professional services firm with more than 100,000 employees worldwide, which has created a People First culture. Ernst & Young introduced a whole collection of new lifestyle-driven benefits, including permanent four-day holiday weekends around Memorial Day, Fourth of July, and Labor Day. This is a brilliant idea because it's a bit idiotic that we all jump on the highway and on airplanes at exactly the same time to celebrate these long weekends, thereby snarling the roads, airports, and train stations. This perk allows Ernst & Young employees to truly sink into a long weekend without having to deal with the traveling hassles of being on the road at the same time as everyone else.

Not to be outdone by their competitor Ernst & Young, PricewaterhouseCoopers (PwC) created a firmwide shut-down twice a year to ensure that people get a true break from their work. For about 10 days over Christmas and four or five days over the Fourth of July, PwC gives its employees the peace of mind that taking some time off doesn't mean they will miss an important meeting or be barraged with thousands of e-mails from coworkers when they return to work. Isn't it encouraging to see that competitors, like Ernst & Young and PwC, are also competing to see which can be the more benevolent employer?

Gary Erickson, founder and former CEO of Clif Bar, writes in Raising the Bar about unique perks from an on-site free washer and dryer for employees' personal use to the on-site hairstylist who makes the employees look good to the auto detailer who picks up cars and delivers them back to the employee lot. Who has time for all these off-hours chores? Clif Bar is smart to recognize that its employees' stress is reduced when the company helps support the little details of life that inevitably stack up.

But, as we next make our way up to the second level of the Employee Pyramid, let's realize that companies that get preoccupied at the Money level never transcend being an also-ran. Consider Zappos, the online retailer of shoes and apparel that was purchased by Amazon for nearly $1 billion. This peak performer decided to “bribe” their new employees to leave. All new employees, upon completing six days of training with the company, were offered $2,000 (has grown to $4,000) plus all they've earned so far to leave the company, and this offer stands for the balance of their four-week training and for the first three weeks past “graduation.” Why does Zappos do this? CEO Tony Hsieh says it's because this offer assures that the company retains only those employees who are truly motivated by something higher on the Employee Pyramid than just money.

Money issues are particularly relevant for companies with hourly workers. Costco's employee turnover is reportedly one-fifth that of Wal-Mart largely because it offers a compensation package that is far superior to Wal-Mart's. The compensation package provided to Costco's employees—versus that at Wal-Mart—includes higher hourly wages, broader access to health care, and dramatically lower employee health care premiums. Approximately 80 percent of Costco's employees receive company-sponsored health care, for which the employee contributes just 8 percent of the cost.

Is it any wonder Costco's employee theft ratio is one-tenth of the industry average, a fact that saves the company millions of dollars each year?

While money is clearly necessary to meet the base needs of employees (and salary-deprived CEOs), it steadily recedes as the exclusive motivation when one progresses up the corporate ladder. Additional motivators come with affluence. Even when money seems to be a prime motivator for a big exec, it is often just a symbol of things found higher up the pyramid. We've all witnessed how some use money to try to buy esteem, a sense of belonging, and sadly, even love. This leads us to examine the second level of this pyramid: the recognition that creates employee loyalty.