Smart stock option plans drive growth, productivity

Published on Wednesday, May 07, 2008

Employee stock ownership is becoming increasingly popular, what with a vast majority of companies offering stock options frequently as incentive compensation.
Under this scheme, the management awards the right to buy a specific number of shares of the company stock during a certain time and at a specified price which is usually discounted. The awardees can elect to exercise the option and convert it into st ock on maturity (after a particular vesting period or phased vesting) by paying the strike price. They can then reap handsome profits by selling the stock at a higher price then or later.
What’s more, equity-linked compensation is no longer limited to the executive suite – CEOs, key executives, senior directors or top-performing managers. Stock options are trickling down to not just mid-level employees but even the rank-and-file.
The endemic usage rides on the rationale that stock rights will both attract and retain top workers by binding them to the company and making them feel like partners in the business. Having invested their personal wealth in the organisation, employees will be motivated to work harder and attain peak levels. Not only does the equity-based element align executive interest with those of shareholders, but also serves as a handy means of rewarding performance that goes beyond salaries, especially for start-ups that are not yet profitable or have limited amounts of disposable cash. But, the feeling of ownership as an incentive is not without its fallout. The promise of big payoff has made many millionaires out of ordinary (read: undeserving) executives and employees.
Stock options have perpetrated a series of headline-making scandals and frauds. Top executives are increasingly attempting to temporarily manipulate stock price and accounting, by say, dressing up the short-term numbers. They distort company earnings and even increase share price volatility in a bid to encourage stock performance irrespective of actual operating performance and income. It also encourages manoeuvres to manipulate value of options (pre- and post-exercising) so as to maximise personal rewards all at the expense of genuine investors.
Employees have also been known to indulge in financial shenanigans and other improper behaviour even to the extent of acquiring and/or exercising options based on insider information like an imminent announcement, deal or acquisition.
Apart from this, compensation specialists argue that stock options greatly dilute stock value, not to mention the fact that stock price is significantly influenced by future expectations and external considerations that have no bearing on actual profitability or growth. In fact, Warren Buffet has publicly blasted stock options because as he says, ‘The practice of repricing options for top executives unfairly rewards them at the expense of shareholders!’
Re-examining compensation programmes
The growing abuse of employee stock options is necessitating a long, hard look at compensation plans. So much so that, some employers have even totally scrapped their option-based incentives to return to more traditional ways of rewarding performance.
But, this knee-jerk response is quite uncalled for as the situation does not warrant total elimination. Stock ownership is still a viable form of compensation incentive for attracting, rewarding and retaining employees.
So, instead of abandoning it, organisations should invest time and effort in designing better compensation packages that balance base salary, annual bonus and other perks with stock options as each offers a different form of motivation.
Top companies have developed a smarter way to compensate employees by tweaking stock options. Restricted stock or deferred stock grants emerge as a more preferable strategy where securities are granted subject to certain safeguards like voting rules, time constraints and transfer limitations.
Another option is a performance vested restricted stock that is based on meeting certain objective performance criteria. In a similar vein, stock grants can also be linked to other key drivers like customer satisfaction, client loyalty, return on investment or even new product development.
Some organisations simply offer stock without any options, while others are actually opting for premium-priced options (priced higher than current market valuations) that spur employees to pursue growth as a means of jacking up stock prices.
Such measures shift the emphasis to long-term value creation as the workforce starts concentrating on turning in meaningful performance. As one finance professor observes, ‘Stock grants reward managers no matter what happens to stock price because the stock is worth something. Options, if they are indexed properly, reward managers only for value’.
However, such incentives should not be awarded left, right and centre just to control turnover, but structured and utilised appropriately to develop a shrewd succession plan!

PAYAL CHANANIA

Keep employees on board with family-friendly policies

Published on Wednesday, May 07, 2008

In the world of hectic work schedules, omnipresent deadlines and cut-throat competition, there is no place for family!
But on a more personal level, people do put their family first and face extreme difficulties in juggling their work and family obligations. It’s a hard time for working families, especially new parents, as work almost always runs in conflict wit h their home commitments.
An important meeting clashes with someone’s son’s annual day recital. A deadline is looming and another’s infant ‘chooses’ to fall sick at that inopportune time.
But, most employers turn a blind eye to employees’ ‘personal’ components and expect them to turn in work as usual. No wonder, most workers are harried with the constant struggle and end up resenting the lack of control over their work and work arrangements. Ultimately productivity suffers as the incessant strain and guilt weighs on their minds, leaving them distracted and stressed. Not to mention the increase in absenteeism and employee turnover.
Fostering a work-life balance
If employers really want to build a loyal workforce, they have no choice but to acknowledge employees’ family responsibilities and accept that it will affect their working life.
The simple solution is to treat working families right by adopting family-friendly policies. And, family friendliness is not just limited to the traditional notion of childcare. Personnel policies should incorporate workers who have to care for their elderly parents or other relatives by supporting their role as a parent/caregiver, not just an employee.
Some common employee benefits can include but are not restricted to:
Flexitime – Permitting flexible scheduling of work hours where the emphasis is on getting the work done and not on the actual time or location. Employees can opt for accommodative arrangements that meet their needs like working part-time, job sharing and telecommuting either wholly or for part of the week. They can adjust their work hours or even a 4 day work week. The accent is on flexibility and some companies even allow shifts from full time to part-time or vice versa and even leaving work to say, take a sick child to the doctor or keep a parent’s dentist appointment.
Time-off - Apart from the customary maternity leave, providing paternity and care giver leave (either paid or unpaid) meets the needs of new fathers and caregivers. Also, sanctioning additional unpaid family leave, use of accumulated vacation/sick leave or even career breaks helps employees take time off for their unforeseen family responsibilities.
Childcare – Parental assistance initiatives can range from financial help in child care expenses, subsidised services and allowances to low-cost or free on-site child care like workplace creches and feeding facilities. Besides this, companies can also offer referrals and other information for identifying quality and affordable child services.
Elder care – Dependant care support like resource lists of care providers and emergency caregiver services so that employees are better able to care for their frail or ageing relatives.
Health benefits – Few organisations even go as far as providing health insurance coverage for dependants or at least subsidise the premium with part contributions from the employer. Others arrange no-cost or low cost counselling for both employees and their dependants for coping with the family apprehensions or financial challenges. Also, seminars and workshops on varied family issues like mental adjustments, being a better parent, care giving and also personal wellness.
Actually, companies can offer a host of family-friendly initiatives; the possibilities are limited only by the imagination. They need not be very expensive either; sometimes the arrangements can be minimal like allowing reasonable access to work phones for contacting children or parents. Other cost-effective programmes like the popular western concept of ‘Take Your Child To Work Day’ is a good indicator of family friendliness and can pay big dividends.
What is important is that the benefits should be administered fairly and consistently with equal recognition given to young parents as well as employees with elderly dependants.
Also, maintaining a work-life balance goes much beyond just designing a slew of innovative policies and programmes. It should go hand-in-hand with a corresponding change in company culture that not only promotes the use of available work-life benefits but is also supportive of and responsive to employees’ family commitments. Understanding workers’ circumstances, respecting their needs, accommodating their requests, supporting their values and seeking their collaboration in conceiving practical solutions will go a long way in promoting quality of life.
Regular and open communication will make employees feel free to discuss their family responsibilities and instil the confidence of adequate cooperation for emergencies.
It’s a win-win situation, as once employees feel valued and needed, their loyalty, job satisfaction and productivity will go up manifold. Organisational effectiveness also improves with the enviable edge in hiring and retention of quality candidates.

PAYAL CHANANIA

Where are all the good employees?

Published on Wednesday, Apr 30, 2008

Every organisation worth its salt is looking to hire good employees. After all, the better the people on your payrolls, the greater are your chances of success!
Having a superior workforce not only yields benefits of increased productivity, efficiency and morale, but also aids in raising retention levels. Conversely, a proliferation of bad employees is a huge drain on time, money and resources.
Therefore, instead of the continuous rigmarole of hiring and firing people, doesn’t it pay to spend time on finding the best employees the first time around itself?
Then again, every hapless employer’s common refrain is, ‘Where are all the good employees?’ Well, candidates will not come knocking on your door, i.e. not the best ones at least.
You have to go ferret them out from every nook and corner.
Recruitment sources range across a wide variety of channels like:
• Wanted ads – These stretch from the traditional classified advertisements in newspapers and trade magazines to standard job postings on online job boards to the more explicit listings of open positions on company-hosted websites. Such broad-based advertising attracts job seekers by the bushel and it is up to the organisation to rummage for the best.
• Employment agencies – For filling entry-level positions, companies can turn to recruitment agencies and avail themselves of a wide-ranging search through the hordes of applicant resumes available in their database. This will deliver added benefits of professional screening, reference checks, aptitude tests, job match and the like. Not only do they find qualified candidates, but also ensure a better match for the job in question.
A more specific search for key positions or special expertise jobs brings the option of dedicated executive search firms/head hunters. Their specialist services will locate qualified candidates with the right combination of talents for the available position, but at a higher fee.
• Temporary employment – Offering temporary jobs or internships opens a circumspect approach to check out performance before upgrading to permanent employment. In fact, there are scores of temporary employment agencies that focus on providing ‘temps’ for sundry jobs from receptionists, secretaries and accountants to marketing and programming too.
• In-house candidates – Most companies do not realise that they are sitting on a gold mine when it comes to recruiting top candidates. Many employees may be ready for a promotion, inclined for lateral transfers or just looking for a change. Moving them up or shifting them around will not only be handy for filling vacant positions, but also improve morale and motivation levels manifold.
• Employee referrals – Turning employees into recruiters by asking them to keep their eyes open for talented prospects is another expedient source of tapping employees’ networks. Such referral programmes are less costly and also lead to more successful hires as employees know the company/job and will only refer candidates who are a most likely fit for the job.
• Walk-ins – Employers should never make the mistake of ignoring unsolicited candidates who come looking for a job. At best, these should at least be filed away for future reference.
• Miscellany - Organisations should also look for non-traditional sources that they have overlooked in the past. They can tap other all-embracing sources like job fairs, tradeshows, campus recruitments, business networks, professional associations or radio advertising.
Else, opt for distributing job flyers or even rely on word-of-mouth publicity. Recruiters should never hesitate to approach someone whom they would like to hire, including wooing back retirees or past employees from the competition.
This is merely a comprehensive list of recruitment options, as there are no quintessentially good or bad sources. It all depends on the type of job in question.
Therefore, companies should first establish a well-thought-out recruiting plan that clearly identifies the target employee they need and the requisite skills, qualifications, responsibilities, tasks and work conditions.
This considered strategy will help employers to filter out the recruitment sources and settle on the most credible options. The result is a combination package of three to four of the best resources that will drive the selection process and secure the best employee that they need.
Instead of being hard-pressed to find a good candidate every time an employee quits or a position falls vacant, it pays to slowly build a pipeline of ‘potential employees’.
Hence, once hiring managers identify ‘where the next good employee is coming from’, they should concentrate on developing a good, long-term relationship with those recruitment sources to generate name recognition and credibility among the best potential job candidates.
This will enable them to act proactively, quickly and decisively when they do need to hire someone…tomorrow!

PAYAL CHANANIA

Hold your expectations, make work speak for you

Published on Wednesday, Apr 30, 2008

A culture of instant gratification, instant gains and instant rewards is making the world go round. We are so used to getting what we want, that we ‘expect’ life to hand everything on a silver platter, gift-wrapped at that!
This all-pervasive sense of entitlement manifests even in the workplace. Fresh-out-of-college candidates walk into a job interview expecting to be put on the fast track to a company vice-presidency! Young employees assume that they should get a better job, more money, further responsibility, bigger office and even a loftier title.
That’s not all, just a hefty salary will not do, and it has to come with ample vacation time, insurance coverage and other perks thrown in. And, we are not even talking about performance yet!
People bay for raises even when they have done nothing apart from fulfilling the basic job description, demand promotions even after failing to meet targets and expect a handsome severance package as their due even after being fired for poor performance.

It’s all about me
A voice in the head keeps clamouring that the world is yours for the taking. But, this overblown self-absorption and delusion of self-worth has no connection with reality. After all, you are certain of eventual success and believe you must be a manager, executive or even director, but by virtue of what?
• Aren’t your expectations out of line with your skills?
• Do you even have the requisite experience under your belt?
• Can you really ‘demand’ to be rewarded without having to prove your worth?
• Can every privilege be yours for the asking when others obtain them by efforts?
Alas, the sad truth is that the me-generation’s proclivity to the ‘you owe me’ mentality is quite career-limiting. Not only does the tendency to take things for granted hinder your growth up the ladder, but you end up not even achieving what you want. As Randall Hansen, a top career advisor cautions, ‘If you carry the attitude that you deserve to be promoted or else, you may find that “or else” is your only option!’

Welcome to the real world
Sorry to burst the bubble, but no matter what you think you deserve, you will not get it merely by expecting it to be handed to you.
Everyone has to pay their dues at the altar of hard work; efficiency and perseverance before they can even hope to attain success.
Afterall, brilliance does not equate with accomplishment and one cannot get by with a year of experience in place of five.
So drop the notion that you have a ‘right’ to be given everything and check whether your achievements are commensurate with your extraordinary sense of entitlement.
Its time to step up to the plate and prove your worth instead of feeling entitled to it because of your aptitude, qualifications or piggybacking on some other prerogative.
Strive to earn your position and rewards by sincerely getting down to work, achieving goals and making sacrifices along the way.
Then again, there are no short cuts, you have to start at the bottom rung of the ladder and slowly but surely move your way to the top. This calls for investing efforts in everything from setting practicable goals and taking on additional responsibilities, special projects or jobs that nobody else wants to and working on off days.
Also, keep your expectations in sync with reality as you build the drive to achieve the success you ‘deserve’. So, endeavour to lose your sense of entitlement. Afterall, it has been rightly said, ‘The world owes you nothing - it was here first!’

PAYAL CHANANIA

Stay aligned with virtual boss to achieve desired goals

Published on Wednesday, Apr 23, 2008

Gobalisation is the new business strategy so global alliances, off-shoring and multinational organisations are the order of the day. In tune with this, many big and small companies from USA, UK, Germany, Japan, Australia etc. are setting shop in India.
These companies hire local managers who have to report to distant bosses while managing staff from their own country. Such a distributed working across time zones has the perfect makings of a potential cataclysmic disaster.
As an offshoot, the geographical and cultural barriers place new and unique demands on the remote employees that scream ‘handle with care’! After all, it is easy to get disconnected in the non-traditional scenario, the consequences of which will be borne by the employees only. Therefore, the onus is on you to create the foundations of a strong working relationship with your distant boss right from the start.
Here’s how to deal with a virtual boss when you are separated by both space and time:
Reach out – When the boss is not in the same office as you, it is quite easy to lose contact and get sidetracked or go completely off course. Create early engagement by establishing clear two-way communication across the distance using technology solutions like web conferencing, teleconferences, videoconferencing, groupware and other web-based scheduling software. Try to gain some face time with the boss by trying to secure a significant block of his time for yourself when you can check in with him. Then, set up a pattern of communication like daily briefs, weekly memos or other such periodic updates that will help you to establish a degree of personal interaction. Apart from this, experts suggest occasional face-to-face meetings (like going to the home country) to create personal camaraderie inspite of the physical separation.
Take initiative – While effective communication can still be achieved, it is incredibly difficult for you to stay aligned and achieve the desired goals. As you cannot simply walk down the hall to ask questions or clarify instructions, misunderstandings over priorities and expectations can occur. Even the context and jargon can be misinterpreted easily. To operate effectively, it is essential to achieve coordination and collaboration with the boss regardless of the distance. As Thomassen and Villumsen of The Danish Leadership Institute state, “The further the distance, the clearer, explicit and unambiguous the message must be.”
Clarify the mission and goals, request frequent direction, feedback and performance reviews, seek regular input and approval, periodically sound out new ideas as well as simplify or repeat key messages to ensure that both of you are working on the same wavelength.
Stay connected – Solicit regular company information, new staff data and competitor updates to be able to stay in the loop even when you are oceans apart. Also, carefully reading between the lines to grasp subtle messages in emails or conference calls and pursuing any disconnects that you decipher ensures that you will be on board with whatever is happening.
Only when you close the gap between yourself and headquarters and become part of the ‘team’ can you connect to the real network of the organisation.
Winning him over - As the boss is far removed and cannot see you, he is likely to remain sceptical and slow to trust a ‘local’ manager. He may baulk at your ideas or be reluctant to adopt your suggestions.
You will be in dire need of his support, but actually winning his trust is another story altogether. You have to literally woo him by persevering patiently in your negotiations and persuasions without ruffling any feathers to be able to convince him to your way of thinking. Also, toeing the line without showing an independent streak or criticising anybody, sometimes even to the extent of letting the boss take credit for your work will win you brownie points.
Local trappings – Apart from the frustration of ‘working blind’, the remote boss will also be out of touch with local markets, philosophies and sentiments. Business traditions and corporate customs will vary, not to mention the fact that the home country may be too traditional/contemporary, too easy-going/stringent or even excessively formal/casual.
Proactively learn the culture and defer to the customs of the home country even while being sensitive to local leadership norms, to avoid breaching etiquette even unknowingly.
All said and done, you have to adapt quickly and bridge the gap with a boss who is on the other side of the globe, lest the ‘out of sight, out of mind’ scenario creeps in.

PAYAL CHANANIA