The major objective of incentive plans is to preserve a company most capable people. In order to maintain the competitive edge, companies have to award incentive plans and bonuses that are similar or greater than other companies. The retentive of the best talent is merely a one benefits with offering incentive plans, when employees receive incentive for their work production tend to increase along with the company’s profits.
This author can remember when his former company offered profit sharing for achieving production and it was motivation to do better job. Smart companies recognize that motivated employees are productive employees, which inspires them to create tactics to keep their workforces gratified and inspired. Therefore, it is wise to offer Incentive plans for performance. With that said there are several incentive plans that can be utilized by companies such as “team and group incentives”, “piecework plans”, “stock options”, “non-tangible and recognition based awards”, “employee stock ownership” ,“merit pay”, and “profit sharing plans” (Dessler, 2011).
The focus of this paper is to researching different types of incentive plans offered by companies as a means to retain the best and brightest employees. Additionally, this author will research and discuss two of the incentive plans previously mentioned. Moreover, this author will emphasize the possible advantages and disadvantages of each of those incentive plans.
The first incentive plan this author will discuss is “stock option”. “Stock Options” according to Dessler (2011) is normally the type incentive received by executive and sometime lower lever employees of a company. When employees have stock option it give them the right to procure a certain amount shares of the company stock at a precise price during a particular time (Dessler, 2011). Normally the goal of the executive is to profit from their stock shares by exerting their option to acquire the stock shares at a future date, but at today’s price. Since a company’s viability and growth influence its stock price, therefore, executive can their influence to affect these elements, the stock option then can become an incentive. One would consider this an advantage however; there are some disadvantages to “stock Option” as well.
One of the major issues with “stock options” is that businesses often utilized them a mean to compensation managers whether their performance was excellent or poor. A prime example of this is during the so called “Great recession” 2008 when executives were receiving golden parachutes even though they had failing companies. In light of events like these, there have been amplified demands against giving stock options in a manner where there performance does not warrant it.
According to Dessler (2011) “it was not until recent, that companies treated stock options as an expense.” He goes on to say that companies used this method to make expenses appear to be a lesser amount...