Individual incentive plans have the advantages of appreciating high performers and providing a clear link between pay and performance. It helps improve the employee productivity and link total compensation costs to organizational objectives. However, if not combined with other types of incentive compensation, it may result in individualism and non-productive competition. Also it needs a credible system of individual performance that might be expensive to design. Monsanto has share options incentives, where employees reaching target performance or goals receive share options. The share options received are based on employee performance against economic value-added-derived measures over a period of three years. In this case the share options is considered an individual reward because it is linked to individual opposed to group performance. Stock option gives its owner the opportunity to buy stock at a specified price. When the price is lower than the price the stock is offered to the public, the option actually has a monetary value. Stock options are used to attract, reward and retain employees. This system encourages the employ to stay with the company and help it to grow. Also it helps to build an ownership culture and greater commitment to work. In addition employees are encouraged to align their behavior to support the organization's goals. However a drop in stock prices may result in loss of effectiveness of stock options as an incentive compensation tool. It may also result in ownership dilution. The second level of compensation is directed at the group or unit level. Group incentives are designed to reward work teams or project groups. It has the advantage of encouraging and reinforcing teamwork as it links pay to performance. Therefore it provides a clear link between group performance and reward. It also creates pressure on poor performers to improve. However such group incentive plans may have the disadvantage of allowing poor performers to relay on other members of the group, and therefore may result in same performance that would have been achieved without the incentive plan.
