Driving Home Your Awards Program.

Companies are using cars to reward top performers and lure new workers.

After years of being limited to the upper echelons of corporate management, cars are making a comeback as a perk, this time as a way to reward top-performing workers and to lure new employees into the fold.

Cars for personal, as opposed to business, use were widely used as perks until the 1986 tax reforms ended tax deductions for them as a business cost, explains Paul Platten, national practice director for strategic rewards at Watson Wyatt in Boston. "Once cars became taxed as income, a lot of broad-based car programs went away."

The company sedan remains a perk at the highest tiers of the corporate world, but for the most part, "Companies have become more egalitarian, moving away from status-oriented perks like the car and the key to the executive washroom," says Frank Gallo, leader of Watson Wyatt's New England compensation practice.

Net2000, a Herndon, Va., integrated communication provider, and Extensity, an Emoryville, Calif., provider of Internet-based applications for HR, project management and procurement, are two high-tech companies that have brought car awards into their arsenal of efforts to solve staffing shortages and counter high turnover in a tight labor market.

A High-Powered Motivator

Don Clark, Net2000's chief financial officer, says the idea came up in 1998, "when we were hit with a higher than normal turn-over. There's lots of competition for tech workers here in Northern Virginia, and we felt we were being raided by our neighbors."

Learning of an Atlanta company that was giving a BMW Z-3 to every one of its new hires, Clarke linked the idea to retention and performance. "The theory was to give something to our employees that they wouldn't typically buy for themselves, and use it to motivate them."

An employee who's been around for two years and met a designated performance rating can earn a three-year lease on a BMW, Dodge Durango or Audi TT. Failure to maintain the necessary performance ranking sends the vehicle back to the dealer and the employee also has to pay any early lease termination penalties. But with nearly 70 cars awarded since the program began, Clark says, "We've never had to take one away."

Extensity also needed a recruiting edge in the highly competitive San Francisco Bay Area. The company got its feet wet by leasing a Volkswagen Beetle in the corporation's blue color and letting the Employee of the Month--who also got 1,000 shares of stock--drive it for that month. "It was a big hit," says Jennifer Burt, vice president of human resources, but "We needed something to spice up our employee referral program.