2. If you experienced a 25 percent reduction in your income—as numerous fi rms did after the tech bubble burst—which perks would you eliminate?

In addition, are there items that you previously considered necessities that you could cut out?

An example would be selling your car (thereby eliminating car payments and related insurance)

and taking public transportation or catching a ride with a friend. What about getting a roommate, moving into the dorms, or living with your parents? Management textbooks abound with discussions of the importance of honest and open communication when disseminating negative information to employees.103 One study suggests that the best way to ruin morale and motivation is to spring bad news on employees without explaining the reasoning or rationale. Yet, despite the need to maintain a high level of motivation and morale during a receding economy, many companies cut perks without communicating the need to their employees.

During the high-tech boom at the end of the 20th century, many companies implemented programs to increase productivity, motivation, and job satisfaction. Some of the perks provided were minor, such as free soft drinks, catered lunches, snacks, and tickets to events such as a baseball game or the opera. Other free perks were more extravagant, such as concierge services to run errands for employees, service their vehicles, and pick up their laundry. Some fi rms even provided their employees with in-house massages and annual Caribbean cruises. Obviously, cutting these non-value-added expenses can save tremendous money for a struggling fi rm. In fact, many fi rms cut out both the extravagant perks and the basics as a way to conserve much-needed cash. Cutting perks, however, doesn’t have to be forever. Perks can be powerful motivational tools that companies can reintegrate into their performance reward systems.

For this assignment, consider your own budget and expenses in terms of revenue and perks. Imagine that like so many companies, you experience a cash crunch. Your revenue (income) shrinks 25 percent, so you must trim some fat from your budget.