The Death of the Three-Martini Lunch

Company expense account binges and productivity killers have become a thing of the past. Here’s what has replaced them.

Long before “three-martini lunch” became shorthand for corporate overindulgence at the expense of the middle class, the man in the gray flannel suit enjoyed lavish perks. Many business norms of the past—the well-stocked office bar carts worthy of Don Draper and workplace cultures that encouraged decadent entertainment on the company tab—simply don’t fly today.

That’s probably for the best.

History looks unkindly, if humorously, at the extravagances of corporate America popularized by the 1960s “Mad Men” and epitomized by the Wall Street wolves of the ‘80s and ‘90s. In the last few decades, the pendulum has swung away from decadence to leanness. And there are many reasons to believe it will not be swinging back.

Even as the Senate fights to double the tax deduction for business lunches in the name of boosting restauranteurs hurt by the pandemic, the current mood of corporate leaders is characterized by pragmatism and sustainability. Gone are the days when a company expense account meant rules-free entitlements for high-performers, or a sales tool for management to abuse.  

What is the martini budget of the past allocated to now? A review of popular company perks offered to today’s employees reflects just how far we’ve come from the days of Don Draper.

Relics of a different age

Popular culture’s depictions of booze-soaked ‘60s workplaces and the antics of pre-Black Monday masters of the universe are partly rooted in truth. For some, it was the best of times for corporate America. Deregulation certainly helped.

The more extravagant and publicized corporate expenditures were on private planes, sports cars, luxurious business trips, heavily subsidized big-ticket real estate, and high-profile company “conferences” at tropical hot spots. Business leaders, a majority of whom were male and white, were handsomely compensated with “extras” that enabled strategic networking, such as country club memberships and open tabs at entertainment venues.

While these fringe benefits may have contributed to a company’s sales, they were inequitably distributed, expensive, and did not necessarily drive productivity (and, in many cases, hindered it). Inevitably, these symbols of corporate entitlement came under scrutiny. Many were abandoned by the next generation of company leaders.

From Lear jets to foosball tables

The tech revolution ushered in a new type of corporate largesse. Riding the wave of workplace prohibition that made smoking, drinking, and strip-club culture taboo or at least strongly discouraged, the country’s new business leaders stressed perks that promoted health and convenience. The rise of women in leadership positions hastened these changes.

Instead of subsidizing a posh country club membership, modern tech companies might build a mini-golf course on the roof of their office. Bar carts were replaced with staffed smoothie counters. Health clubs replaced gentlemen’s clubs.

Google was an early leader in implementing workplace innovations designed to attract and retain a highly-skilled talent pool. It promoted benefits intended to keep large groups of workers on-site by providing them with almost everything they could need or want. Rather than single out a privileged few for company-sponsored activities, Google created an egalitarian wonderland in its headquarters.

These types of company perks emphasize work-life balance. Google and its Silicon Valley peers realized soon into the tech boom that incentives could matter as much to the workers they were seeking as their paycheck.

Along with offering unheard-of flexibility to its recruits, other common employee perks include free meals, liberal allowances for personal and professional development, and discounts for memberships in cultural organizations. Google also provides employees with the time and resources to develop “passion projects” as part of their regular, fully compensated workday.

A movement that went mainstream

The big tech leaders initiated a transformation of the modern workplace, but mainstream companies adopted many of their practices.

By 2000, many large companies had begun to subsidize employee wellness programs. Increasing health incentives made sense from a cost-cutting perspective—healthier employees eventually translated into healthcare savings for their employers. While few employers went to Google-like extremes by bringing chiropractors or behavioral therapists in-house, many covered health screenings, weight-loss programs, and fitness memberships.

Making the workplace more convenient for employees also caught on, even in more traditional industries. For example, consumer products giant SC Johnson & Son offers its workers on-site concierge services.

JM Family Enterprises, a multi-billion-dollar automotive company, has made the “Fortune 100 Best Companies to Work For^®” list for 22 consecutive years because of its positive culture and employee perks. Founder Jim Moran believed that making it unnecessary for workers to leave the premises drove productivity. He transformed his South Florida dealership into a sprawling green complex that includes two fitness centers, a pool, restaurants, a massage center, a beauty salon, and a doctor’s office.

Providing extensive amenities to keep employees at work and happy is a perfect counterpoint to the three-martini lunch—but it’s still a significant expense.  

From lavish to lean

Another movement has taken hold in response to the excesses of corporate America, and it’s based on the lean thought process. First coined by John Krafcik in his 1988 article “Triumph of the Lean Production System,” lean thinking was popularized by the 1990 book The Machine That Changed the World.

Lean thinking has its roots in manufacturing but soon spread through many business sectors. It stresses customer-focused value and the elimination of anything in the production process that does not contribute to that value’s achievement. A lean state of perfection is reached when all waste in the cycle is eliminated.

In a lean organization, an efficiency mindset permeates all business functions. Benefits packages are chosen because of their proven value to employees and to fulfill market expectations. Employee perks—not to be confused with the essential benefits—should only be selected if they add value by attracting and retaining talent. This “lean and mean” approach arguably now dominates—and stands in stark contrast to the bloated corporate cultures of the past.

The “new 3-martini lunch:” modern executive benefits

Many of the more recent items mentioned above are for everyone, from rank-and-file employees to high-flying executives. In the past, the latter group was the main beneficiary of frivolous perks like country club memberships and expensive meals.

Nevertheless this dichotomy still exists—somewhat. Now, higher-level employees receive different types of exclusive benefits:

• Financial planning support can—and ideally should(!)—be offered to all employees in the form of education. But top executives get more customized support, often in concert with non-qualified retirement plans or dedicated profit-sharing and bonus programs.
  
• Executive coaching and training programs are geared toward leaders, providing them with vital skills and experience for their resume while also benefiting the company.
  
• Along the same lines, mentorship programs invest in key people and build strong relationships that profit all parties.
  
• Like basic financial planning, flexible work is another arrangement that has gone mainstream, especially after COVID-19. And many upper-level employees—especially those with in-demand skillsets—now expect this type of freedom.

While many of these benefits are geared toward executives, they still share the fundamental characteristics of most modern perks: they have a more direct, business-related purpose—and they all achieve ROI of some sort.

Where we go from here

Amid a global pandemic and a staggering recession, it’s a safe bet we won’t relive the excessive ‘80s anytime soon. Even big tech’s pre-pandemic cultural norms now seem frivolous. Smoothie bars and on-site massages are less attractive in an age of remote work and fewer corporate campuses, at least for now.

In this time of upheaval and readjustment, it will be interesting to see which business models endure.

Many company leaders will find themselves becoming leaner by necessity, not choice. And there will always be the Amazons and Googles that thrive because they bring value to customers in crisis.

The employee perks and benefits that remain popular prioritize work-life balance, which has been eroded by the necessity of working from home. And the ones that retain executives are items—from personalized financial advice to dedicated training—that have practical applications for companies and their top talent.

Closely evaluate the creative human resource solutions that can keep your company lean while delivering personalized benefits that make your employees happy.

That’s something no three-martini lunch could ever do.

Karp HR Solutions can help you tailor a program that meets the unique needs of your workforce to maximize retention. To learn more, contact us today for a free consultation.