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The Option for Better Employee Performance Jan. 4, 1999 (SmartPros) Until recently, stock options were rarely discussed outside the corporate boardroom. Recently, a corporate trend that started with high-tech companies caught on with firms of all shapes and sizes This growth in broad-based stock option plans is due to their effect on employee morale and productivity. Human Resource professionals have taken note of these positive effects and have started a new wave of balancing the level of self-perception between top executives and lower-level workers. Broad-based stock option plans offer employees a sense of ownership in a company. The fact that employees have the opportunity to obtain stock generally far below market value gives them the feeling that they are special due to their employment. This, along with the fact that the "option" in stock option gives employees the idea that they have the freedom to determine their future. Employees understand that they have the option to purchase their stock, but they are not obligated to do so. This acts as a tremendous employee empowerment tool. Employee productivity is improved by the conversion of the employees' future plans with the company. By initiating a stock option plan, employees' ideas of their future with the company convert from short-term to long-term. This in turn converts employees into stakeholders. Explaining the Stock Option Plan to Employees
Although a stock option plan offers many benefits, employees do not always spend the time to learn how exactly the plan benefits them. This lack of interest is generally derived from the idea that they have something else to worry about in their lives. It is generally a positive experience for employees to hear the details of a stock option plan from a financial professional who has the experience to break down the plan into laymen's terms. This will help employees understand the benefits and what is expected of them in order to have the chance for options. This financial professional should detail all of the basic methods of tracking and improving employee portfolios. This adds value to the program because employees will feel that the company cares about their level of involvement. It is also important for a company to know that most employees generally do not have a complete understanding of the steps to a strong financial future even when they say they do. After the seminar from the financial professional, it is important to issue a clear, written description of the plan and all of its details and contingencies. Employees should sign off on the plan once read. By forcing employees to sign, the company can help ensure that they have taken the time to understand the plan to the best of their ability. Track the Effects
Just like any change in a business, it is important to track the effects, whether positive or negative. From a financial perspective, it is important to see how the stock option plan affects the bottom line or the Earnings Per Share (EPS) (net profit divided by outstanding shares). The difference between the Basic and Diluted EPS is that the Basic EPS does not include stock options and other securities given to employees while the Diluted EPS does include these extra factors that give investors a more realistic idea of what each share is worth. It is important that a stock option plan is initiated with a purpose. Whether this purpose is to increase employee morale or for an extra incentive to employees of a small business that cannot afford to pay high salaries, it is important to monitor the progress of the stock option program the same as any other change in policy or employee empowerment program. 2000, Smartpros Ltd. All Rights Reserved. |
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