Owing to poor business outcomes in more than 10000 of its units, Bobby’s Burgers CEO plans to issue stock options to its middle level managers as incentives aimed at increasing business performance. Bobby Jones, the CEO, believes that such incentives motivate managers to better services offered to customers. Despite the controversy surrounding this issue, Lin (2009) acknowledges that awarding stock options increases the benefits of incentivizing.
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Granting stock options to middle level managers has potential long term benefits. For instance, co-ownership, as granting stock options is commonly referred to, has the potential to retain good employees. This is besides the enhancement of long-term profit maximization, which effectively helps a firm achieve its bottom line. Additionally, granting stock options parallels the interest of stockholders with those of the company. As such, the stock of a firm in which managers are co-owners gains long term market worth.
Agarwal (2009), unlike Lin (2009), sees stock options as ambiguous business practice. Agarwal (2009) believes that by awarding stock options can be counter productive, in that through them, managers are able to “influence pay-setting process”. This implies that such managers can issue more stock to themselves pending good market news. As such, this compounds the problem of incentivizing as managers attribute improved performance to kickbacks. Additionally, making managers to be co-owners gives such managers the ability to fix stock prices and as such stocks lose intrinsic monetary value.
Based on Lin’s (2009) assumptions, it is imperative for Bobby Jones to explore other avenues of motivating his middle level managers. According to David Gebler, a senior management consultant, senior managers ought to identify other incentives other than performance based bonuses. Gebler believes that looking beyond money and stocks as a means of motivating employees accrues added benefit to firms.
Programs and policies aimed at enhancing the understanding of a firm’s core are some of the most effective ways of incentivizing managers, and leads to adoption of a productive work-based culture. However, Gebler believes such policies to be out of touch with the actual needs of middle level mangers. Instead, Gebler proposes a more pragmatic approach that mainly involves appreciation of the worth of middle level managers. This can be achieved through adopting a two-way communication model between top and middle level managers.
According to Gebler (2009), a two-way communication model increases the involvement of middle level managers in decision making within a firm. While this increases the commitment of middle level managers, there are other benefits attributed to it. For instance, knowing that their input significantly influences decision making, middle level managers are likely to be motivated to improve performance. This eliminates notions of under-appreciation, which is largely attributed to de-motivated managers.
Additionally, a two-way communication model improves communication within a firm. This effectively enhances understanding between senior and middle level managers, especially on personal values. Through a two-way communication model, senior level managers gain a deeper understanding of personal values of each of the middle level managers, which effectively highlights what personally motivates each individual. Such knowledge enables senior level managers to incentivize appropriately.
Other than a two-way communication model, giving middle level managers absolute control is in itself an incentive that increases output. In doing so, firms ought to not only enquire from middle level managers of necessary resources but also allocate to such resources to them (Terpstra and Rozell, 1993). This not only empowers middle level managers but also improves their commitment on the job which further improves business outcomes.
Agarwal, V. (2009). Motivating managers: How incentives and discretion play into hedge fund performance. Web.
Gebler, D. (2009). “Beyond bonuses: motivating your managers.” Bloomberg Business Week. Web.
Lin, S. (2009). Why firms award stock options: Examining the design of employee stock options. Asian Social Sciences. Web.
Terpstra, D. and Rozell, E. (1993). The relationship of staffing practices to organizational level measures of performance. Personnel Psychology, 46(4).