Turns out that timing really is everything, especially when it comes to some common employee benefit programs. Researchers led by David S. DeGeest of the University of Groningen recently parsed data from the Kauffman Firm Survey, which for seven years tracked about 5,000 companies launched in 2004, and discovered that benefits can either dramatically increase your startup's chances of survival or sharply reduce them, depending on when they are provided in your business's growth cycle. For viability-stage companies, which the new study defined as less than three years old, even a single benefit can decrease the likelihood of succeeding. On the other hand, growth companies, which focus more on creating internal procedures than on fundraising, saw a major boost in longevity when they offered a single benefit, an effect compounded as more were added. The benefits studied were flextime, bonuses, health insurance, and stock options.
An anvil for new startups
Other factors being equal, including founder education, experience level, company profitability, size, and funding, young startups that added even a single benefit saw a profound negative effect on lifespan. That's because they diverted resources that could have been more effectively spent on achieving initial financial goals and legitimacy in the marketplace, the researchers found. This murderous effect increases as more benefits are added.
A rocket for established firms
Growth-stage companies have shifted their efforts from fundraising to creating internal procedures and practices that solidify competitiveness. For these firms, adding benefits had a profound impact on long-term prospects. The researchers theorized that this was because of the increasing importance of "inimitable" human capital as a company becomes more established. Benefits can help attract and retain this talent when it is most valuable to a firm's long-term health.
So should you offer benefits?
Neither viability- nor growth-stage companies use benefits widely. If your company is brand new, this is a wise decision. But if your company has been around for a few years, you may be underusing them, the researchers found.