Recruiting and Retention – What To Do When Your Stock Price Falls

There are basically 4 ways businesses motivate workers. They include:

Cash

Benefits
Non-monetary (recognition, challenge, etc.)
Stock or stock options

Applicants and employees generally see the first three as rewards that help make their life comfortable. The fourth, stock options, are unique because they offer more than an opportunity for comfort. They are seen by applicants and employees as an “opportunity for wealth.” Hi-tech firms and start-ups use them on a regular basis in order to attract and motivate workers because they offer employees at least a small chance of significant gains which can be put towards buying a house or early retirement. This is great as long as the value of the options are continually going up. But what can/should a firm do when their stock price dips to the point where the stock options “are underwater” and they no longer act as a motivator? The most common answer to underwater stock is to adjust the option price, issue more stock, or do nothing. Re-pricing can anger stockholders and send a message to employees that you can still be rewarded even in failure. There are other things a firm can do to attract and to motivate its workers after the stock price falls. They include:

Use “the price fall” as an opportunity to “test” applicant and employee loyalty to see who is in it “for the long term.”
Use the stock falling as rallying point to get employees to pull together as a team so that we all succeed.
Increase the use of “non-monetary” motivators and other forms of recognition to make up for the loss of the stock motivator.
Show that other firms in the industry are in the same stock option “boat” so that jumping to another firm will add no value (until the water “rises” in the industry).
Show that other firms have recovered from underwater stock so we just need to be patient until the stock price recovers.
Take it as an opportunity to base part of their regular “bonus” on an increase in our firm’s market value. This helps make sure that every employee becomes more aware of the need to keep the stock price up.
Increase the % of their pay that is based on performance and results in order to attract those top performers that seek a direct return from their individual efforts (as opposed to the many factors that influence stock prices).
Develop smoke detectors as early warning systems to prepare employee’s for the time when the stock sinks underwater.
Meet with CEO and have him/her buy more stock to show their faith in the future.
Empathize an employees total compensation package as part of a PR strategy to make employees and applicants more aware of what they “really get paid” (vs. our competitors).
Switch to giving actual shares of stock which is more “real” to the worker than the “option to buy.”
Show how well our firm is doing relative to other firms In order to let them know the consequences (costs) of walking away.
Increase 401k contributions, which can also be motivators. They may also eventually lead to “wealth” if the employee manages their 401k portfolio well.
Share the business plan that was developed to raise the stock price?and set a target date for bringing the stock price above water.
Distribute any positive predictions made by financial analysts of when the stock is likely to recover.
Increase your retention/recruiting efforts and excite the applicants with other features about the firm.
Educate recruiters so that they know how to answer the “stock underwater” question.
Increase our ratio of college hires (compared to experienced hires) because college hires are generally less concerned with stock options.
Increase our recruiting/referral bonus.
Add retention and attraction rewards to managers’ and Teams’ performance criteria.
Have others that have left the firm and returned talk about how the grass is not really greener at other firms.
Change our selection process and the criteria we use to pick people so that we now select people that are more motivated by non-stock factors.
Start programs to assist employees in purchasing a house so that the option money is less necessary.

None of these solutions are magical but used in combination, they can kick-start our efforts to survive a stock price fall.