Specific ways to use equity compensation for attracting and retaining the top people your business needs to flourish.
I wrote last month about how to position your company so that you can attract and retain top performers. fxcm.my/cara-beli-saham-cfd/ Equity compensation is a great way to achieve both.
Performance-based pay is a key factor in retaining top talent. Combine it with ownership and a stake for the future of your business and you have a powerful incentive.
Equity does exactly that. The basic theory behind equity compensation is simple: generously pay your people in the future, with the financial value they help create, and make it very expensive for them to leave. This article will look at three different ways to achieve this.
Why not use other compensation options such as profit-sharing or performance bonuses? Bonus and profit-sharing plans are more likely to reflect past performance than future efforts, and that's where you want people to focus. Once paid, they cannot be increased by any amount of hard work, creativity or imagination. Bonuses and profit sharing are typically one-time payouts, which in today's what-have-you-done-for-me-lately atmosphere are quickly forgotten. Finally, bonuses require cash - and profit sharing requires profits. Both (or either) of these items may be scarce in a growing business.
Equity is the solution to these problems. Equity is the bonus that keeps on giving. Equity compensation will likely increase in value over time. Equity is a way to acknowledge your employee's contribution in the past, but it pays off for future work. Your employees must stay to enjoy its benefits. In real terms, the current cost of equity compensation is cheap, especially relative to the loyalty it can purchase. Plus, since no cash changes hands at the time of the equity bonus, you can use it as a reward even if your company is cash-strapped.
Equity has other benefits. Equity can help top talent decide between your company and offers from large, well-funded public companies, especially if you are planning to take your business public or acquire it. Equity also highlights the shared interests of your company's owners with the "rank and file" and makes top performers feel that the business is theirs.
Stock grantsare easy to implement. You grant a certain number of shares to a key employee. The value is equal to the total value of the company divided by the number outstanding shares. That's it. More than any other form, shares are tangible. Stocks make your key employees feel like they are owners. They will be less likely to leave if they truly believe that.