Spoiled Brats

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Your HR policies may be contributing to a sense of employee entitlement.

When HR executive Kerry Gallagher Solomon joined SecureWorks, an Atlanta-based Internet security services provider, in 2000, she found that employees’ expectations were far out of sync with reality.

The technology boom had not yet gone into free fall, and the company’s 100 employees had high expectations. A regular grant of stock options? That was considered par for the course. Full coverage of health insurance costs?

Of course. Annual raises of 10 percent to 20 percent of base salary? All part of what the employees expected to receive by virtue of being on the payroll—not to mention employer-subsidized soft drinks, bagels and coffee as well as a come-and-go-as-you-please work schedule.

The trouble was there was no connection between these benefits, perks or other extras and the company’s financial performance—or, for that matter, the employees’ performance. So, instead of stimulating productivity, the company’s costly but crowd-pleasing benefits, bonuses and perks were simply being taken for granted, according to Solomon, vice president of human resources.

It is, perhaps, one of the most frustrating experiences in HR: You go to great lengths and expense to design compensation and benefits plans to keep employees motivated and happy, and, over time, employees come to expect them as their due. Privileges become rights, and perks lose their power to improve performance, which means that the benefits bar gets raised higher and higher. Expenses soar, eating into the bottom line.

It’s a phenomenon called “employee entitlement.” It manifests itself in the workplace in many ways: the poor performer who asks for a severance package after being fired, employees who fail to meet sales goals but demand bonuses anyway, or employees who expect bonuses just for fulfilling the basic bullet points on a job description.

Moreover, HR may be contributing unwittingly to this sense of entitlement by virtue of its own policies. Ill-conceived job descriptions, low performance expectations, compensation systems that aren’t closely aligned to company and individual performance, poor communication about merit increases or bonuses, and managers without the skills to give accurate performance reviews or to motivate employees appropriately—all of these characteristics contribute to a culture of entitlement.

If any of this sounds familiar, you may have inadvertently fallen into the employee-entitlement trap. But there are ways to spring free and, in doing so, improve HR practices at your organization.

The Roots of Entitlement

The phenomenon of employee entitlement can be traced to a faulty “psychological contract” between the organization and the employee, says organizational psychologist Ben Dattner, president of Dattner Consulting LLC in New York. He says, “A psychological contract is an implicit understanding on the part of employees about what the employee contributes to the organization and what he expects from it in return.”

The contract is formed by an employee’s personal history—experiences at other companies, for example—and also by what a manager states or subtly hints concerning what the employee will receive for his efforts. When the employee expects to receive what the manager is promising, the result is a feeling of entitlement to everything that the employee actually gets.

While this can happen at any company—and with any employee—there are corporate conditions that make an ideal breeding ground for employee entitlement, says Gillian Steele, vice president and director of professional services at Lee Hecht Harrison, a Chicago-based global career management company. At the top of the list of those conditions is failure to draw a bright line between an employee’s performance or the company’s performance and the rewards that the employee receives.

“Companies where merit raises haven’t been tied to actual merit, where promotion isn’t tied to the ability to lead and where there’s no clear rewards-results system,” says Steele, are those most vulnerable to an entitlement-laden workforce.

Absent a clear connection of compensation to performance, employees will decide that they deserve rewards based on other criteria, such as “I need it more than others” or “I’ve been here a long, long time.”

Indeed, companies often fall into the destructive practice of rewarding everyone, as when they hand out a certain percentage raise for each level of employees—even the ones who are underperforming. But a percentage raise, even if it’s the lowest percentage, is still a raise and sends the wrong message, experts say.

Entitlement frequently stems from “employees beginning to believe that tenure, experience and credentials substitute for results, and that they have those perks coming to them because they are loyal and the company owes them,” says Dave Anderson, a sales and leadership consultant in Agoura Hills, Calif., and author of Up Your Business! 7 Steps to Fix, Build or Stretch Your Organization (Wiley, 2003).

The resulting effect on company culture and productivity can be damaging, Anderson says. “When employees begin to get this entitled feeling, it injures the company by weakening its culture and inhibiting results, since entitled employees don’t go the second mile—they do just enough to get by.”

So What Can HR Do?

To avoid creating an entitlement-rampant culture, make sure that compensation, benefits and perks are tied closely to performance, that there is consistency to these awards, and that subjectivity about performance is limited as much as possible. “This is part of HR’s general challenge,” says Dattner. “Selection, promotion and compensation should all be based on transparent criteria, and it should be as objective and as fair as possible.”

It starts with job descriptions—a fundamental HR responsibility. Many job descriptions are too vague or don’t set the bar high enough, giving employees a lot of room for interpretation of what is expected of them.

“A clear and high set of job expectations at the inception of employment goes a long way to creating a benchmark for expected behaviors from the employee,” says Anderson. “These expectations should include both performance metrics as well as expected behaviors [core values]. By setting clear and high expectations up front, management has a clear benchmark to hold people accountable later. Without clear expectations, accountability is impossible—and ambiguity is the enemy of accountability.”

Along with creating clear job descriptions, HR must clearly communicate with employees that their future compensation depends on meeting those objectives.

Karen A. Armon, SPHR, CEO of Alliance Resources LLC, a consulting firm in Littleton, Colo., says that when she was brought in to manage HR for a Fortune 100 manufacturing company after a major acquisition, she faced an extreme amount of employee entitlement—in particular, an expectation of rewards without performance. To address it, she held a series of “town meetings” to inform employees of the company’s expectations. “The plumb line is whether these employees align with the business mission and objectives, or not,” Armon says.

Solomon says that’s how SecureWorks rewards employees today. Since 2002, the company has had a variable compensation structure that includes benchmarks for employees based on both individual performance and the performance of the company overall.

The change has paid off—for both the company and the employees. The company set an annual target to retain 90 percent of its clients, increase sales by 163 percent and manage a positive cash flow. Last year, employees exceeded those goals with 94 percent client retention and a 253 percent increase in sales, and they also met cash-flow goals. Therefore, employees received appropriate bonuses and raises, and, more important, knew why they did.

In addition to setting clear expectations, it’s critical to have regular performance appraisals so that managers can measure their employees’ performances objectively. It sounds like HR 101, but “you would be amazed how many companies do not have an organized, regular system for feedback and performance reviews,” says Steele. “You need to be revisiting [performance] every several months instead of once a year,” she says. Employees who do not know how they are performing are apt to think they are performing well—and deserve rewards. “Employees begin to feel entitled when they are not confronted and held accountable [by their supervisors] for substandard behavior or performance,” says Anderson. (For more information, see “Bonus Plans Without Entitlement.”)

You’ve Got It Pretty Good Here

Even when HR successfully sets clear performance expectations and evaluations, employees may still feel entitled to more if they believe they are getting less than their peers at other companies.

Solomon faced this challenge at SecureWorks as her employees socialized with other people in the industry—and scoured salary comparison web sites. Several employees indicated their aggrieved feelings. “We’re not leading the industry” in terms of salary, Solomon admits, but she says the company is within industry norms.

To combat employees’ negative perceptions, Solomon gathered accurate, comparable salary information and discussed with them how the company makes its salary budget decisions to remain financially secure for years to come. “It’s about educating employees and being honest,” she says.

It’s often wise to remind employees about all the company provides, says B.J. Gallagher, a management consultant in Los Angeles and author of Who Are ‘They’ Anyway? (Dearborn, 2004), a book about personal accountability at work. “The answer to most problems like these is [providing] information,” she says. “In the absence of real information, people make up their own, and what they make up is far worse than anything you can give them.”

Gallagher recommends launching “an aggressive educational enlightenment program to show people how good they have it.” She suggests using employee newsletters or intranets to run profiles of new employees that focus, in part, on the better benefits and perks that they’re now receiving. “Have them compare where they came from and how great it is here,” she urges. She also suggests publishing salary surveys regularly so employees can gain an accurate sense of where they stand—and can appreciate their employer’s generosity.

By the same token, let employees know the true cost of their total benefits and perks package by providing a regular statement to employees that provides a full accounting of how much employee benefits cost the company, says Ilene Gochman, organization measurement practice leader at Watson Wyatt in Chicago. Most employees are not aware of how much their employers give; these “total corporate compensation statements” can begin to remedy the situation.

Training Managers To Avoid Entitlement

Of course, HR isn’t the only part of the organization with responsibility for battling employee entitlement; Dattner says front-line managers also have a great deal to do with an employee’s sense of entitlement.

To keep it in check, managers should be trained regularly in how to set expectations, administer good performance appraisals and avoid favoritism, says Gallagher. Managers also should be trained in how to reward employees in nonmonetary ways.

“When you hear employees complaining about things, what they’re really often complaining about is that they don’t feel appreciated, they don’t feel listened to, they don’t feel understood,” she says. “That isn’t about money; it’s about supervisors who know how to listen to the employees, managers who know how to coach and people who know how to say, ‘Way to go, Charlie. That was a great job!’ People long to be recognized, long for appreciation, so even when complaining about money or benefits or whatever, what they really want is just appreciation, and they don’t know how to express that.

“Money is just a way of keeping score,” Gallagher continues. “That’s why management gets so frustrated. They spend the money on bonuses and perks, and the effect lasts from three weeks to three months, and then the employees are right back to complaining. And management says, ‘After all I’ve done for you?’ But it was never about the money, it was never about the benefits. It was really about feeling appreciated and feeling like they are making a contribution.”

Gochman agrees. Employees are less likely to feel entitled to rewards they don’t deserve if they are enjoying their work and feel that management cares about their well-being, she says. All of the bonuses, perks and benefits in the world won’t make up for a lack of genuine caring.

Be Proactive

Despite HR’s best efforts, entitlement can spring up from any corner. Every time you add a bonus, perk or incentive, there’s a risk that eventually it will become an entitlement.

For instance, Gochman works with manufacturing organizations that provide their employees with turkeys and hams during the holidays. “In many cases, they know the employees don’t want them. Some refuse them; some give them away to charity,” she says. “But they continue to provide this benefit because it’s a tradition, and they fear that if they cut it, there will be some negative reaction.”

Such traps can be avoided, Gochman says. “If you’re going to introduce a new program, think about an exit strategy,” she says. You could call bonus and perk programs “pilot programs” or give them a clear end date, she says. “If you fail to do that, it could be forever.”

In Armon’s view, HR should be less fearful and better equipped to get out of such quagmires. The key, she says, is learning to say no to employees. “A lot of HR practitioners are not skilled at saying no with grace,” she says. “When HR opens its doors as a customer service [department], that shouldn’t mean that every comer gets everything.” Boning up on conflict-resolution skills and practicing them are the solutions to this challenge. “Employees want clarity and direction more than they want an abundance of choices,” she says.

In the end, communication is the best way to combat entitlement, says Armon. “Openness is the key to changing dysfunctional organizations.”

Says Solomon: “The more you’re straightforward and honest, the more you’re forthright and educate employees on various practices, the better.”

At SecureWorks, compensation and rewards are now in line with performance, and employees understand how their compensation fits in with the larger goals of the company. Over the past two years, as the company’s client base soared from 100 clients to 800 clients, the company provided extras that are “above and beyond”—but employees really do appreciate them, says Solomon.

“A sense of entitlement is driven by a lack of knowledge on the part of employees—it’s not really arrogance,” she says. “In HR, it’s our job to educate.”

Alison Stein Wellner is a freelance business writer based in New York City.