Last month, I wrote about positioning your company to attract and keep top performers. One very effective way to do both is to compensate your key employees with equity.
Performance pay has become a critical factor in keeping top talent; combine it with a sense of ownership and a stake in the future of the business, and you’ve got a powerful set of incentives.
That is what equity does. 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. In this article we’ll look at three ways to do that.
Why use equity and not some other variable compensation such as performance bonuses or profit sharing? Both bonus and profit sharing plans tend reflect past period performance, rather than current and future endeavors, which is where you want your people’s attention. They are fixed sums of money, and once paid out, no amount of creativity, imagination or hard work can make them larger. Bonuses and profit sharing are typically one-time payouts, which in today’s what-have-you-done-for-me-lately atmosphere are quickly...
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