Finally, we can look at organizational-level value-added outcomes rewards on the framework on page 139 in Chapter 37. All the employees who helped create the overall bottom-line results of the company should be given rewards that increase in value as your organization increases in value. This would typically be stock ownership. The more value you add, the more stock you get. In this way, you can amplify your returns by having greater amounts of the rising stock.
A common mistake that many companies make is giving stock ownership to all employees, whether they add value or not. The tech sector is the biggest offender in using this bad practice. Tech companies made stock ownership for all employees a standard part of the compensation package, even for employees whose only contribution is minimal employee individual effort. They then compound the mistake by increasing the amount of stock that someone receives as their tenure goes up. In other words, they are increasing the rewards not based on value-added outcomes but instead on sticking around in the company. Why should these employees do more than punch the clock year after year when that is exactly the behavior these companies not only condone but reward?
And why would you undercut the power of stock options as an organizational bottom-line reward and instead turn it into an entitlement for people who stick around regardless of overall performance? If you believe you must give stock to all new employees in order to attract or retain talent to the organization, then at least let it be known that to get higher amounts of stock, you have to produce value-adding outcomes to the organization’s bottom line.
Critical Path Action Items
When the organization is overall successful, how would you like to be rewarded?
How can you use stock ownership to motivate employees?
How can you use stock ownership to differentiate between star, average, and lower performers?