Fortune Magazine, relaunched  its contributors network, Fortune Insiders, on Medium today.  Fortune’s Entrepreneur Insiders network is an exclusive group of contributors and influencers who share their ideas with the Fortune readers.

The very first post on the new Fortune Insiders is by Prabhjot Singh, cofounder and president of Pyze.  Prabhjot, writes about employee perks offered by companies and how keeping up with the Joneses can backfire for early stage startups.

Here is the article by Prabhjot.

How Flashy Perks Can Ruin a Young Startup

There’s a right time to introduce them.

“Perks” is a loaded word. In a world where established companies are offering flashy perks like massages, unlimited meals, and even rental cars, it’s nearly impossible for most startups to compete. This can be intimidating for a company just getting started, but the good news is that startups don’t need to — and shouldn’t — compete with these types of perks. I would argue that it’s a bad strategy to use perks to recruit in the early days when you’re attracting employees who can make or break your company.

First, it’s important not to confuse benefits like FSAs, 401(k)s, or health insurance with perks. These are basic benefits that almost every full-time employee expects, and withholding them will have a negative impact on recruiting efforts. These types of benefits reaffirm a company’s commitment to family, health, and employees’ well-being.

Perks, on the other hand, should not take precious resources away from essentials like product development and marketing — these are vital organs, so to speak, and much more important than sushi chefs. Shiny but useless perks could even hurt a startup by attracting the wrong kinds of employees. Startups need self-motivated employees who believe in its mission and will do whatever it takes to make the company successful. They don’t think about their jobs as 9-to-5 commitments. They work to make the product viable, the marketing viral, and the customer ecstatic, regardless of their assigned roles.

The first employees get significantly higher stock options for a reason: They’re taking a risk on something unproven. Startups don’t need employees who are motivated by free breakfast, lunch, and dinner. Offering free meals, massages, or laundry isn’t going to convince someone to join a pre-product, pre-revenue company, or cultivate the dedication required to turn the company’s vision into reality. These perks provide a distorted perception of the startup to prospective employees and will attract employees who may not be a fit for your needs.


With that said, not all perks are equal in terms of cost or overhead. I’m a big believer in offering perks that foster culture. There are a number of inexpensive perks that help build community and still provide a sense of reward, such as pizza parties or movie nights, which don’t cost much but still create an opportunity for the team to bond and gel. Similarly, gym memberships aren’t particularly expensive and show your company’s commitment to your team’s health and wellness.

At the end of the day, perks increase overhead, both financially and operationally. If founders waste their limited resources on frivolous perks simply for the sake of keeping up with the Joneses, critical tasks, like achieving product-market fit or fundraising, will suffer. There is a right time to introduce flashy perks to your startup, and refraining from it early on will not only give you a longer runway, but also ensure that you get the right people on board to move your company forward — perhaps to a place where you can offer those perks.

Sources: Fortune | NightAndDayImages/Getty Images |

Posted by Melissa! :)