Granting Stock Options
Bobby’s Burgers is a large restaurant chain with nearly 10,000 units worldwide. It is experiencing incentive problems among its outlet managers. The managers are not working very hard and are letting quality deteriorate at their units. CEO, Bobby Jones, is considering a stock plan where each unit manager would be given 500 shares of stock in Bobby’s Burgers. He reasons that making the managers part owners of the company will motivate better service. (Brickley, Smith & Zimmerman, 2009, p. 466).
By opening up stock options to Bobby’s Burgers managers, they are creating incentives to drive the overall value of the firm, positively, in a forward direction. Management’s performance will improve drastically if the ability to increase their own worth is available. With 10,000 units world wide, and 500 shares of stock available, program incentives are a definite plus for getting management on their feet. My concern would be the approach he takes to implement this program. The ideal solution would be to spread the word to its management about the program, and set a date as to when they will be monitoring performance improvements. This is how they will gauge which units take the incentive seriously, and who to award the incentives too. Obviously Bobby’s Burgers cannot justify giving 500 shares to its managers in 10,000 units worldwide. The goal would be to compensate the mangers that have show continued performance improvements. Another way to increase performance would be to offer salary increases based on the overall effectiveness of staff within each unit. Managers are not the only ones that make the company profitable. It takes a team of employees to make the customer satisfied. If salary increases are justified, employees will look forward to the possibility of a pay increase, and will work diligently to reach his or hers goals.
Brickley, J., Smith, C., & Zimmerman, J. (2009). Managerial Economics & Organizational Architecture. (5th ed., p. 38). New York: McGraw-Hill Irwin.