Redefining Compensation February 1st, 2009
Management teams are beginning to restructure compensation packages in order to entice top candidates for positions that may appear as high risk during this economic downturn. Management is utilizing extra amenities catered towards employee retention incentives now that employee stocks in the company are no longer that enticing to the prospective candidate. Prospering companies are looking to retain their top employees who may be burdened with extra responsibilities due to lay offs, or to allure prospective employees looking for a secure job in unstable circumstances. Top employees who are the most valuable for the company may be feeling inadequately compensated if the majority of their compensation is invested in the company stock options. Businesses are being forced to reevaluate their regulations and management procedures in order to retain their top talent and stay competitive in compensation packages amidst the current economic situation.
In the past, compensation packages for potential employees have included stock options in the company, but presently with declining stocks values, employees may feel their work is unequally compensated. HR officials are rapidly looking to find new ways to offer fair compensation structures to valued employees as well as new compensation incentives for new hires. When salaries are heavily based in stocks, an executive’s wealth is at the hands of the stock market. A portion of business professionals are dedicated to the idea that executive’s must be able to adjust to the ebb and flow of the stock market. Knowledge of the cyclical nature of the stock market is part of accepting stocks as part of compensation, and thus these individuals see no reason to change compensation packages. With most impacting decisions in life, there is a risk and benefit associated with the outcome. Adding stock options to the compensation packages of executives, not only increases their pay, but also increases their personal investment in the company. Employees that have personal interest in the company’s success are known to value their performance and work quality at a higher level than employees who are not as personally tied to the company. However, the monetary values of stock options are no longer viewed as a positive asset in compensation plans.
The goal of management is to redefine stock option regulations in order to obtain value for the stocks. Many management teams are promoting “performance based” stock options along with “share performance” stock options looking at rewarding employees once milestones have been reached. Bonuses are being used to a higher degree in order to reward employees who have performed up to the standard. For hiring authorities searching for the best talent, recruiting, rewarding, and retaining talent is essential for success in the company and therefore, new methods of employee retention plans is critical. Companies with the best talent ideally will be the most profitable, and thus, rewarding those highly valued individuals will be necessary for success. The best way to motivate employees along with rewarding employees is to put the pressure of pay on the employee. Qualified employees will not be deterred from performance based incentive programs, knowing the quality of their work. The best way to compensate an employee in today’s current stock market is to compensate the value of the employee’s work.
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