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Why More Tech Companies Are Rethinking Their Perks

Out with the foosball tables, in with mandatory vacation.

Why More Tech Companies Are Rethinking Their Perks

When you think of startups, there’s a good chance you picture a tech-chic frat house: clusters of Mac monitors next to vintage foosball tables. And then there are the pledges: brogrammers and sales wizards cranking away at all hours, fueled by free food, booze, and the promise of equity that’ll turn them into millionaires overnight.

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But as these perks have become the norm—not to say cliché—their true value has begun to come into question.

Of course, a foosball table does not a programming whiz make, nor would any tech startup founder tell you it does. But it’s grown common for many startups to oversell their cool, forward-thinking cultures–for which quirky creature comforts are often a shorthand–to counterbalance the long hours the tech world notoriously demands of its workers.

Does an onsite pub justify a 40-hour workweek? For that matter, does an equity package make a difference when, according to Henry Ward, the CEO of eShares, less than 5% of employee option grants are actually exercised?

Over the past few years, certain startups have begun to rethink some of the perks with which they’ve customarily attracted top talent. In their place, a new class of web 3.0 startups now embraces truly first-rate benefits, which might be giving them a leg up in a viciously competitive tech arena.

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And while not every company can dish out the same kinds of offerings, the underlying logic for these recent shifts should have other businesses taking note.

Equity That’s Truly Equitable

Thanks to skyrocketing user engagement metrics, the chat app startup Kik hit a $1 billion valuation this August. What’s particularly interesting about Kik’s ascension into the elite “unicorn club” is that it got there with just 100 employees—an unusually loyal group the company has kept together by offering perks you’ll find at few other companies.

Kik started by rebelling against one of the dirtier tricks of the tech world. At most startups, employees who resign or get fired have just 90 days to exercise their stock options, lest they lose them. In other words, they have to put up a large amount of money to buy their stock and pay the IRS, which is one of the biggest reasons why the vast majority of startup employees never exercise their options.

When Kik’s first employee left, founder and CEO Ted Livingston realized this was a pretty terrible system.

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“What if the company tanks, and then they walk away and they’re being punished for putting their sweat and tears into this company?” Livingston recalled. “How is that possibly fair?”

So in 2013, Kik changed its policy so employees could hold onto their stock options even after they leave. In doing so, it started a small trend: Pinterest followed suit the next year to much fanfare, giving employees seven years to exercise their options. “If other companies follow suit,” wrote Business Insider, “this could change the entire landscape for startups, making it easier for them to attract and retain employees.”

Ultimately, it’s baffling that more tech startups don’t do this. It’s a huge recruiting advantage to offer a higher-quality form of equity, but it’s also a win for the company. If someone leaves before they vest all of their equity, the remaining equity goes back into the company pool. According to Ward, the only small downside is that it costs $200 to $300 for a paralegal to create the stock certificate and paperwork.

“That’s what everybody would do if they were trying to design the best solution for their team,” says Livingston.

Time Is Money, But What If You Could Have Both?

Another hallmark startup perk is unlimited vacation—as long as you make sure all of your work is covered and you’re on track to hit your goals. The system sounds great in theory, but it can often make it harder for employees to take off.

“Like a lot of companies, we started with this idea of unlimited vacation,” Livingston says. “We found ‘take as much as you want’ actually did the reverse—people took less. The dirty little secret is that nobody will take vacation—it’s the nobody-takes-vacation policy. We said, ‘We’re going to have a must-take-vacation policy.’”

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Now, every four months, Kik makes employees take at least one week off. Its offices also close for two weeks around the holidays.

“This is a marathon, not a sprint,” explains Livingston, “and we feel that people will be much more productive if they’re well rested.”

When Evernote cofounder Phil Libin implemented an unlimited vacation policy, he soon had similar concerns about employees actually taking less time off. So Libin started to give employees $1,000 in spending money if they took a vacation lasting at least a week.

That may make you want to apply for a job at Evernote, but it isn’t even the most extreme example. Three years ago, FullContact CEO Bart Lorang instituted a “paid paid vacation policy.” The company announced it would fund any trip an employee wanted to take to the tune of $7,500 as long as they actually went somewhere and didn’t check their work email the entire time. Lorang not only wanted employees to be happier, but he also hoped to eliminate the “hero syndrome” that often befalls startup workers, causing the company to rely too much on a single employee.

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Is this generosity gone wild? Some in the tech industry would certainly argue so. And there’s little doubt that many companies, which couldn’t afford anything nearly as lavish, would dismiss these offerings as exceptional cases–just a handful of hot startups doing somersaults to attract hot talent. But a growing body of research and voices in the tech world now support the idea that it pays to encourage employees to work less.

A New Way of Working

One of the most compelling arguments for a new way of working came from Facebook and Asana cofounder Dustin Moskovitz, in the form of a recent Medium post. Ever since the days of Henry Ford, he noted, profit-maximizing research has backed up the notion that you get more out of employees when they’re better rested and happy.

“The research is clear: beyond 40–50 hours per week, the marginal returns from additional work decrease rapidly and quickly become negative,” Moskovitz wrote.

We have also demonstrated that though you can get more output for a few weeks during “crunch time,” you still ultimately pay for it later when people inevitably need to recover . . . This is true at multiple levels of abstraction: the hours worked per week, the number of consecutive minutes of focus versus rest time in a given session, and the amount of vacation days you take in a year.

That applies to happiness factors outside of vacation time, too. A recent study by Tinypulse found that employees who feel tired and burnt out are 31% more likely to look for a new job than those who feel comfortable with their workload. And Gallup’s latest workplace survey found that disengaged employees costs the American economy up to $350 billion per year.

As the tech industry become increasingly data-driven, there’s a decent chance that an emphasis on real perks that truly deliver employee happiness and engagement will become the norm.

I can already see it at the startup where I work, Contently, which recently made the Crain’s list of the best places to work in New York City, thanks to a leadership that prioritizes tracking and optimizing employee productivity and happiness. At any rate, if the interest in taking a fresh look at the links between perks and productivity continues to grow, there’s a very good chance that the tech startups of 2025 will look very different than those of 2015.

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As Moskovitz put it, “We could be accomplishing more, and we could be providing a better life for all of the people who work in technology. You can have it all, and science says you should.”

Joe Lazauskas is the editor-in-chief of Contently, and a technology and marketing journalist. His work has appeared in Digiday, Mashable, and Forbes, and he is the former editor-in-chief of The Faster Times and The New York Egotist. Follow him on Twitter at @JoeLazauskas.