Has the collapse in Internet and tech stocks soured employees on stock options?
Surprisingly, no, according to the fifth annual Strategic Rewards survey from compensation consultant Watson Wyatt Worldwide.
Fifty-one percent of the top-performing workers polled in this year’s survey entitled “Strategic Rewards and the New Economy,” say that stock grant programs or stock options are “very effective” in terms of deciding whether they will stay. That compares with only 32 percent of employers who feel the incentive programs were very effective in retention.
Sure, there is a wide sentiment disparity between employee and employer. But, the more significant fact is that these results were in line with last year’s results.
“I think it’s significant that it [the number of options fans] didn’t drop,” says Paul Platten, Ph.D, Wyatt’s national director of strategic rewards consulting, noting the employee percentage. “The conventional wisdom is that with the drop in the market, options are less valuable. I still see people wanting options.”
Why the indifference? “I think they take a longer-term view than most people give them credit for,” he reasons.
Platten is also surprised to learn that the employer percentage didn’t fall (it actually rose 1 percent) from last year’s survey, given the downturn in the market.
About 400 employers from various industries and 3,600 of their top-performing employees were polled for the survey this past summer.
Another area where employees and employers differ is the concept of project-based incentives. Under these programs, cash and/or stock option bonuses are distributed to an individual, group or department that meets or exceeds specific internally defined goals — rather than distribute to the entire company regardless of individual contribution.
About 44 percent of top performing workers say that project incentives are “very effective” in their retention, according to the survey. However, just 24 percent of employers perceive these programs as being effective.
The latter figure doesn’t surprise Platten one bit. “In order to develop a project incentive, you need to have a good sense of what people do and a management system in place,” he says. “I don’t think many employers have the ability to do that. They have a hard time zeroing in on what people do. I think it’s a shame because in-process measures and rewards are probably the most effective way to reward people.”
Platten believes employers don’t devote enough time to developing project incentives because they think it will be too hard to do or they’re not aware of it, but he says that high tech companies buck this trend somewhat. Fifty- four percent of high tech companies use spot bonuses, which include some form of performance or project-based incentives, compared with 40 percent of the rest of the companies surveyed.
“I think they’ve been dealing with the attraction and retention issue longer and they’re better at it: measuring results, trying new programs, communication,” Platten says. “They’ve been dealing with the labor shortage issue for much longer.”
It’s not getting any easier for companies that aren’t high-tech, either. While the difficulty in attracting and retaining critical-skilled employees, such as IT staff, is common knowledge, the survey notes that half of the companies had trouble attracting and 43 percent experienced difficulty retaining non-critical skilled employees.
“And it’s worse outside of high tech,” Platten concludes. “They’re just better at it.”