32 program designed to financially reward employees

32. Program designed to
financially reward employees
for good performance.
33. Annual income given to
employees (in addition to
salary) based on company-wide
performance.
34. Incentive program that uses a
predetermined formula to
distribute a share of company
profits to eligible employees.
Chapter 7 Recruiting, Motivating, and Keeping Quality Employees
7.4 What Makes a Great Place to Work? 353

HowStuffWorks , (accessed October
11, 2011). TI’s plan, however, is a little unusual: while most plans don’t allow
employees to access profit-sharing funds until retirement or termination, TI
employees get their shares immediately—in cash.
TI’s plan is also pretty generous—as long as the company has a good year. Here’s
how it works. An employee’s profit share depends on the company’s operating
profit for the year. If profits from operations reach 10 percent of sales, the
employee gets a bonus worth 4 percent of his or her salary. If operating profit soars
to 20 percent, the employee bonuses go up to 26 percent of salary. But if operating
profits fall short of a certain threshold, nobody gets anything.Texas Instruments,
“Benefits,” (accessed October 11,
2011).
Stock-Option Plans
Like most stock-option plans
35
, the TI plan gives employees the right to buy a
specific number of shares of company stock at a set price on a specified date. At TI,
an employee may buy stock at its selling price at the time when he or she was given
the option. So, if the price of the stock goes up, the employee benefits. Say, for
example, that the stock was selling for $30 a share when the option was granted in
2007. In 2011, it was selling for $40 a share. Exercising his or her option, the
employee could buy TI stock at the 2007 price of $30 a share—a bargain price.Texas
Instruments, “Benefits,” (accessed
October 11, 2011).
At TI, stock options are used as an incentive to attract and retain top people.
Starbucks, by contrast, isn’t nearly as selective in awarding stock options. At
Starbucks, all employees can earn “Bean Stock”—the Starbucks employee stock-
option plan. Both full- and part-time employees get options to buy Starbucks shares
at a set price. If the company does well and its stock goes up, employees make a
profit. CEO Howard Schultz believes that Bean Stock pays off: because employees
are rewarded when the company does well, they have a stronger incentive to add
value to the company (and so drive up its stock price). Shortly after the program
was begun, the phrase “bean-stocking” became workplace lingo for figuring out
how to save the company money.
Benefits
Another major component of an employee’s compensation package is
benefits
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—compensation other than salaries, hourly wages, or financial incentives.