Why companies should have unlimited vacation days:

Vacation policies are one of those class of policies that, while designed to set a floor under something–attendance at work in this case–become a ceiling as a practical matter. If employees can’t save up their vacation days from year to year, they try to make sure they use them. In some cases, they do this even they didn’t particularly want or need to use them. The psychology becomes, “They’re mine, after all. I’m entitled to them.”

Consider in this context the following from Freedom, Inc.:

A psychologist found himself disturbed by a group of kids that one day had come to play football under his window, making a lot of noise. So he went out and said: “You guys are really great. I enjoy watching you so much that every time you come to play here I will give you one dollar each.” And he gave a dollar to each kid. The next day, when the kids were again enthusiastically playing football, he came out and said: “I really enjoy watching you but the thing is that I have no bills, just coins today. I can give you two quarters each.” The kids were not delighted with this pay cut, but took the money and continued to play. The story continues until after two days, the psychologist offered them just a penny each, which one of them proudly refused and said: “We are not going to play here for a damn penny.” And the kids never came back, much to the satisfaction of the psychologist.

Many psychologists think that this “experiment” is apocryphal, but it continues to circulate because it reflects what they know from hundreds of real experiments: If you take people who are deeply engaged in something because they enjoy it and then you offer them tangible rewards for doing it, a shift happens. Mentally, people establish a causal link between these rewards and the activity—something psychologists call a perceived locus of causality—and this link will undermine the initial, intrinsic cause they had for the activity, such as considering it enjoyable or important.

A vacation policy has a similar effect on employees’ psychology. It becomes part of the baseline that they demand from their jobs, and so instantly ceases to be a motivating factor in their work.

Blodget touches on something even more profound at the bottom of his post, where he says:

We don’t want to end up with an empty office all the time (though, if we do, folks probably won’t be satisfying the requirement that they do a great job–and we will have hired the wrong folks).

This sort of fear–that if no maximum is set, some people, and perhaps even most people, will take “everything”–is, as Henry notes, both unfounded and a symptom, if it were proved true, of a larger problem. In Freedom, Inc. Gordon Forward of Chaparral Steel talks of the danger of ”managing for the 3%.” In a large enough organization, there might be a couple of people who would take two or three months’ vacation–but if a vacation policy is the only thing holding them back from that, they’re probably “vacationing” at their desks anyway. And so the policy is concealing the problem with that “3%,” not eliminating it.

The rest of your employees don’t need a policy. Not only that, but your policy, designed to maximize what you get out of your employees, may well be encouraging them to take more time off than they need.

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