Look Before You Chop Employee Perks

When Best Buy suddenly curtailed workers' store discounts, there was a backlash. It never hurts to talk about the ideas first

Best Buy's (BBY) Chief Operating Officer Brian Dunn won't take over the CEO position until June, but he has already learned a valuable management lesson: Use discretion in figuring out which perks to cut, even in the most difficult economic times.

Dunn, a 23-year veteran of the company who started out selling stereos back when Best Buy only had a dozen stores, told the company's store employees last September that it needed to amend one element of its employee discount. The change was focused on discounts for Best Buy's private label or "store brand" products, which the company sources itself. The move would save about $15 million, Dunn told BusinessWeek. (Best Buy would not disclose the exact details of the discount.)

Best Buy is certainly not alone in looking to dial back employee perks to save money. Goldman Sachs (GS) has reduced its employee dinner allowance to $20 from $25, and employees must now work until 10 p.m., instead of 9, to get free car service home. Even Google (GOOG), which offers the most generous perks in Corporate America, has recently reduced the hours and limited guest passes for its sumptuous (and free) employee cafeterias. Sprint Nextel (S), meanwhile, has stopped buying all but the most critical office supplies. In most cases, there has been grumbling from employees, those companies say, but the complaining usually stops once staffers realize that losing perks is better than losing jobs. "People are O.K. with this," says a Sprint spokesman. "They now trade supplies with each other."

Best Buy's 125,000 store employees didn't take the news of their perk cut lightly, however. Workers—dubbed "Blue Shirts"—took to Best Buy's online social networking site and railed about the decision. In all, there were more than 54 pages of comments on the site, formally known as the Watercooler.

Five days after reading all the comments and speaking to his senior management team, Dunn caved in and reversed the decision. Workplace experts say Dunn probably should have broached the idea with employees before making the cut, as cost-cutting moves are usually more palatable when employees feel they have a say in the matter. "You need to communicate with employees and if you don't, you will pay the consequences," says Rick Beal at consultancy Watson Wyatt.

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