Every employee needs some sort of motivation every now and then, and in the corporate world, this is best done through reward system. Employee job satisfaction may be affected by personal reasons, such as change in business leadership, change in organizational direction, lack of managerial support, and so many others. While unsatisfied employees spiral down to demotivation, the organization suffers similar effects—targets are missed, deliverables are late, and work quality is low.

Because of these obvious negative effects, most businesses make significant investments in employee rewards programs to make sure their workers are consistently motivated to reach their target. Some companies are now using company stock as a form of employee reward. There are both positive and negative sides to this idea, and while some businesses think of it as a great option, others strongly disagree.

The Debate: Is a Stock Option a Good Employee Reward?

Below are some of the benefits of using stock grants for rewards.

• There’s no immediate cash out required from the company. Other reward systems often entail money.

• Gives added incentive to the employee to work even harder—company success will increase the stock value.

• It is a good plan for succession. A targeted top performing employee may soon be one of the part owners of the business.

However, these benefits also have quite a few downsides to it. Many experts advise against stock rewards for many reasons. The most common argument is, “Why would an owner want to give away a part of his own blood and sweat to someone?” Your business is your baby so why give it away?

Below are a few more reasons why organizations need to think again before giving stock rewards.

• When the time comes that you plan to sell your company, having small stock owners may complicate the negotiation process.

• Giving stock rewards will add a great level of complexity in your accounting process, something that a business must be prepared to for in all aspects.

• Your reward may soon turn into an empty promise once markets are uncertain and business is not doing so well. This may even start unwanted suspicion among employees regarding business finances.

You don’t want to give up portions of what took you years to build and grow, now do you? Think long and hard about this decision. It all boils down to your intentions for giving out stock options and your long term plans. If you want to increase employee accountability, then stock options can help you with that; but if you’re only looking for short-term rewards for entry-level staff, then think twice. Stocks may not be the best reward for people who may or may not stay with your company. There are different incentive plans that can be used to increase employee job satisfaction without the unnecessary drama.

© 2013 Incedo Group, LLC