Upon Which Additional Benefits Family Businesses Should Focus
Depending on the type of business, not all employee benefits are equally valuable
Stephanie Querbach / Matthias Waldkirch / Nadine Kammerlander - March 29, 2021
Employers can consider themselves lucky if their employees are satisfied. This is because satisfied employees are more committed, more motivated, and stay with the company longer. Means of increasing employee satisfaction and positioning oneself as an attractive employer include not only salary increases but also various additional benefits. However, for most family-owned companies these benefits do not grow on trees. After all, employees in family-run companies often have different preferences than their colleagues in more corporate companies.
Additional benefits are becoming increasingly important for employees in modern professional life. 79 percent of all employees would now even prefer heightened benefits to a salary increase. What these should look like is entirely up to the individual: a company car, childcare at the workplace, or educational and leisure opportunities are just a few possibilities. For family-run firms, offering such benefits can determine whether they can compete with other, often larger employers when it comes to recruiting particularly qualified employees. Given their limited resources, it is even more important that fringe benefits match employee perceptions as closely as possible.
Satisfied employees are capital for the future
A satisfied employee can make a significant difference, especially in a medium-sized company, due to his or her particularly high level of performance and commitment. As previous research has shown, commitment is based on reciprocity. If the company makes an advance payment with additional benefits, it is likely that employees will show greater commitment. For example, if employees are given additional health care or more freedom to arrange their working hours, they will, in turn, become more involved in projects or, in the case of overtime, not watch the clock so closely. Benefits can initially be divided into three areas: Personal care, status, and life quality. Since additional benefits are becoming more and more important and comprehensive wage increases are often barely feasible, especially in family firms, their effect should not be denied. However, as shown in the study upon which this article is based, "Benefitting from Benefits - A Comparison of Employee Satisfaction in Family and Non-Family Firms," they should only be considered in context.
1. Job benefits of care
Employers can offer their employees care benefits that enhance their well-being not only as employees but also as individuals. The care aspect includes, for example, the provision of a cafeteria or canteen by the employer, free parking spaces, a company supplementary pension, or medical care.
2. Job benefits of status
Benefits that increase the status of employees have primarily a psychological effect. Additional privileges make employees feel valued as an important part of the company. These include flexible working hours and home office arrangements as a sign of the employer's trust, further training opportunities, and the use of a company car or company cell phone.
3. Job benefits of life quality
Reconciling work and family life and simplifying work life play a more important role today than ever before. For many employees, such opportunities are crucial when choosing a job. They include childcare at the workplace, cost coverage for daycare, barrier-free establishments, employee events, and shares in company stock. Accordingly, employers target benefits that meet these demands when recruiting employees.
The type of company is decisive for the choice of fringe benefits
Which fringe benefit is perceived as valuable by the employee is not only dependent on individual factors and the circumstances of each employee. While gender, age, and background can determine preferences, the type of company is also crucial. Although employees generally perceive fringe benefits as positive and motivating, thus increasing their satisfaction, employees in family businesses often perceive other benefits as significantly more valuable than employees in non-family businesses.
In family businesses, services of personal care are particularly valued. Family-run businesses are characterized socio-emotionally by the frequently close contact between employees and the owner family. There are personal relationships. As such, the physical health and well-being of employees is generally given a higher priority. Employees in family businesses therefore particularly appreciate additional benefits that promote their health and well-being, so these types of benefits provide significantly more satisfaction in the workplace.
In addition, the study showed that status in family businesses is also highly valued by employees who do not belong to the family, the reason being that career opportunities and paths are less formalized in family-run companies. For employees, the opportunity arises to follow an informal career path via status symbols and to come closer to the owner family and the "inner circle." Thus, attaining a management position in family businesses not only creates material incentives, but is also proof of being almost on an equal footing with the family members in the company and of enjoying trust.
Benefits to improve quality of life, on the other hand, are more suitable incentives for non-family firms. They are often associated with indirect financial benefits. They achieve less significant effects in family businesses because these are more strongly characterized by social interaction and better personal care and elevated status resonate more strongly with employees. In addition, because resources are often scarce, it is more difficult for family-run companies to provide financial incentives.
How should family businesses deploy their resources?
Family businesses often have to manage limited resources when recruiting employees and retaining skilled workers in the company. Research shows that they should therefore focus on fringe benefits in the areas of personal care and status, and follow the examples given for this purpose. Privileges relating to an employee's status can also be of a non-material nature and thus even cost-neutral for the company. In any case, family-run companies should develop their own strategy in granting fringe benefits. Copying another company's strategy can lead to a loss in employee satisfaction.
Tips for practitioners
- Target your resources and do nottry to materialize all kinds of benefits! This way, you can make a big impact with limited resources.
- Do not simply copy the benefits offered by other companies! These could have far less impact in your (family-run) company and thus waste resources that you could invest elsewhere in a much more sustainable way.
- Try to find out which additional benefits your employees are particularly interested in. There are big differences between family-run and non-family-run companies.
- As a family business owner, focus more on additional benefits that raise the status of your employees or serve a higher level of personal care.
Literature references and methodology
To find out which additional benefits are particularly valuable for employees in family or non-family medium-sized companies, Dr. Stephanie Querbach and Prof. Dr. Nadine Kammerlander from WHU – Otto Beisheim School of Management, together with Prof. Dr. Matthias Waldkirch from EBS Business School, analyzed data records from an online portal for employee satisfaction. The study looked at 2,180 German companies that were rated by their employees on the "Kununu" platform regarding the various additional benefits granted. In the study "Benefitting from Benefits - A Comparison of Employee Satisfaction in Family and Non-Family Firms", the researchers highlight the influence of the type of company and the additional benefits granted in each case on employee satisfaction.
- Querbach, S./Waldkirch, M./Kammerlander, N. (2020): Benefitting from benefits - a comparison of employee satisfaction in family and non-family firms, in: Journal of Family Business Strategy, Vol. 11, Issue 2.
Dr. Stephanie Querbach
Stephanie Querbach is Affiliated Researcher at the Institute of Family Business and Mittelstand at WHU – Otto Beisheim School of Management. Her research focuses on sustainable entrepreneurship, innovation, succession, and employee satisfaction in family businesses.
Professor Dr. Matthias Waldkirch
Professor Dr. Matthias Waldkirch is Assistant Professor for Innovation and Entrepreneurship in Family-Owned Firms at EBS Universität für Wirtschaft und Recht. His research focuses on the professionalization of family businesses, how family owners learn and engage in corporate entrepreneurship, and how new digital spaces affect family firms and other organizations. Professor Waldkirch is a visiting researcher at Stanford University and the University of British Columbia and works closely with German family businesses through various research projects and collaborations.
Professor Dr. Nadine Kammerlander
Nadine Kammerlander holds the chair of Family Business at WHU – Otto Beisheim School of Management and she co-leads the institute of family business and Mittelstand at WHU. Her research interest comprises innovation, employees, and governance in family businesses and family offices. Her research contributions are regularly published in international journals and receive renowned scientific awards.