Pay People Right!: Breakthrough Reward Strategies to Create Great Companies by Patricia K. Zingheim;Jay R. Schuster

Author:Patricia K. Zingheim;Jay R. Schuster [Patricia K. Zingheim;Jay R. Schuster]
Language: eng
Format: epub
Published: 2010-01-05T04:53:00+00:00

PERFORMANCE-ORIENTED WORKFORCE STOCK OPTIONS. To us, performance orientation marks the real broad-based stock option solutions offered to large portions of the general workforce. Stock options can be part of total workforce pay-in other words, they're as much a part of total pay as base pay and other forms of variable pay. Either everyone or major categories of people (for example, all professional workers) are eligible to earn some options as part of the pay package.

Typically, an established company offers performance-oriented stock options in addition to competitive total cash. A start-up or preIPO may offer them instead of some base pay and short-term variable pay to save fixed pay costs and conserve cash. The objective in either case is to share company success with the people who contribute to it. Individuals must do something to earn options because stock options are part of the emphasis on paying for performance at either the individual or the team level.

This use of options usually has wider eligibility than actual participation, meaning that just being able to receive an option grant doesn't make it automatic. Individual performance determines the size of the grant, and there may be significant variation in size according to the performance of individuals in a given role. Because of the complexity involved, the more people the company includes as eligible for these options, the more that what needs to be done to earn options must be clear and easy to understand. Options may be granted more as a bet on people's future contributions than on what they've accomplished in the past because options reach their value in the future rather than as a result of the past. Option grants of 5 - 20 percent of total cash are not uncommon as part of a pay solution that includes them.

SPECIAL ACHIEVEMENT STOCK OPTIONS. "Your outstanding contribution made a difference to the company! Here are 100 stock options!" Options are clearly a part of recognition and celebration for doing something that benefits the enterprise. They reward exceptional onetime contributions by individuals or teams, such as a research team reaching a major technology breakthrough or another team succeeding in getting quick FDA approval for a potentially profitable product. Options are powerful and are appreciated as a visible and publicized award for doing something significant. The value of options isn't limited to the people who get them; their value is the message to everyone else who can make major breakthroughs that add to the business.

Options as a way to recognize people complement the material we discuss in Chapter 9, on recognition. They tell people who've made a difference that it's worth making them owners of the company. The message to the workforce is that stakeholdership requires both investment from shareholders and outstanding business contributions from the workforce. This type of stock option may have a shorter vesting schedule to heighten its impact and because it acknowledges a contribution that has already occurred rather than positioning for the future.

A major electronics company uses stock options principally as a special achievement award.

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