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The Benefit That Wasn't

Posted 04-Sep-2008 by Robby Slaughter (@robbyslaughter)

In addition to the salary that isn't quite as much as you feel you deserve, chances are you receive some additional non-cash compensation as an employee. Most companies offer some combination of health plans, retirement packages, disability insurance, paid time off or at least free parking. But General Motors, whose 100th birthday is this year, has revoked a time‑honored benefit. They are offering their employee discount to everyone.

It's not the first time GM has offered this program. Back in 2005, the incentive plan resulted in a record nationwide sales increase of 16.2%. Over a hundred employees signed up to star in television ad spots to gleefully explain their pride in sharing their own discount with the general public. If that sounds like improbably positive spin, award yourself for paying attention. Of GM's 100,000-strong workforce, 99.9% expressed no interest in helping the company deprive them of some of their compensation. Cutting pay to drop prices might boost sales but won't help morale.

The Wisdom of Discounts

Offering employees special pricing on products is standard industry practice. Booksellers, restaurants, clothing stores, coffee shops, universities, hotels, airlines and even vintners offer deals to their employees not available to customers. This helps the company to quickly make their workers into enthusiastic, expert users of their products and services, and provides a way to decrease waste. Discounts also deter theft. Giving the best deal to the people with the most access to inventory reduces their incentive to steal.

Most importantly, however, employee pricing programs have the same psychological effect as all other corporate benefit plans: they make workers feel valued. There are not many practical reasons for a worker to want anything besides loads of cash. After all, a savvy employee can purchase their own healthcare, set up their own retirement account, or manage their own cashflow to enable unpaid vacation time. Providing fringe benefits as part of an overall compensation package demonstrates an interest in the well-being of the individual, rather than just the desire to buy the brainpower of the resource.

Loss and Deprivation

No one enjoys losing something, even if they rarely took advantage of the beloved possession. When General Motors decided to pass along their employee discount to everyone, they killed a major perk in the lives of 100,000 people. This is almost worse than a pay cut—dropping everyone's wages communicates difficult times weathered as a family. Slashing a benefit tells employees they aren't so special after all.

There's only one way to mitigate the onset of depression: promise that this program will last only for a limited time. Indeed, GM's original employee customer discount program was slated to last just for two weeks, but it's been extended through September 30th. This is a wound quickly mended and then hastily reopened. Management is trading morale for profits. Company valuation goes up while employee sense of value is plummeting. If GM continues to stretch the program, they will somehow manage to sell every last vehicle despite the total lack of a workforce to do so.

All in the Name

This episode of Turning Left Against Traffic has nothing to do with clearance sales. Had GM decided to offer incredible discounts to customers with a program called the “Amazing Sales Event”, there would be no story. Instead, the auto maker has unwittingly insinuated that customers are more important than employees. Anyone working for the company may be questioning their perceived value and the viability of their benefits. Anyone considering a job at GM may wonder which of the more attractive aspects of the compensation package will be junked in favor of the latest marketing scheme. A sales incentive plan which uses language normally reserved for internal HR documentation presents ugly quandaries to the current and potential workforce. This choice of name can only hurt the working side of the car business.

Furthermore, spending millions of dollars on advertising to remind customers they usually pay huge premiums seems unwise. In effect, GM's commercials explain that for a hundred years, employees received good deals but everyone else was bilked and sleazed up to full retail price. Act now, the ads seem to promise, and you can be treated as fair as anyone! Soon we'll return to our old ways of overcharging.

Easy Targets

Automobile manufacturers and dealerships are at once the backbone of the American economy and the first object of every derisive commentary on business practices. GM is an easy target. No corporation, however, is safe from the prevalence and allure of bad decisions. Even without the equivalent promotion, every employee discount program represents savings not available to regular customers and therefore must be kept a secret. This makes for a strange relationship based on mutual mistrust. Sellers know they could probably charge less, and buyers know they are likely paying more than the person behind the register. Customers either resign to this markup or befriend staff for the use of their discount. This is a messy benefit. Messiness is readily rebuked.

These eccentricities might make the case interesting, but the fundamentals remain. Those who cook up programs like the “Employee Discount for Everyone” are wielding authority without responsibility. Troubles often derive from abject cluelessness at the executive level, or at least, forgetting that decisions affect people. Everywhere, governance is hard, and what first appears to be an insigificant issue is viewed as a major mistake. Management is not easy. Don't discount the souls of your employees.

Further Reading:

• The Official GM Program (while supplies last)
• Employee Discounts for Other Employers!
• CNN on Company Freebies

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