A profit-driven employee is not the same as the salary-driven one. Whereas the first is concerned with their financial standing in the long run, the latter tends to observe your company as a typical 9 to 5 job, which makes them invest a minimal amount of effort necessary to stay in your employ. Needless to say, such employees are not motivated to self-improve or go that extra mile, in general. They are merely there to solve their existential problems and not to fret about anything that they consider as “outside of their job description.”
The easiest way to turn your salary-driven employees into profit-driven ones is to present them with employee stock options. Here are six money-making questions you have to ask about employee stock options before dabbling in this issue.
1. Is there something else you can offer in return?
The truth is that the most ambitious of your employees are going to leave you unless there’s something you can offer that matches the value of their effort investment (at least in their eyes). Wage raises, a chance of promotion or the prospect of acquiring a skill that they can benefit from in the future are all quite efficient incentives. On the other hand, by offering stocks to your employees, you are directly tying the performance of the entire office with their assets. In other words, you can get them personally invested in the performance of the company, which is not as easy with wage raises and promotions.
2. What percentage are you willing to offer?
In the previous section, we explained why it is so important to present your employees with stock options; however, this might not be the case if you offer too small of a percentage. Sure, in some cases, this stock may have an emotional value that is greater than its practical value; however, you shouldn’t underestimate the intelligence of your employees. They will recognize a token stock when they see it. Therefore, you need to find the optimal stock value limit that you are willing to reach.
3. Are you willing to expand the pool?
While the percentage of your company’s total worth that goes into options might be satisfactory at the moment, you need to ask yourself one question: Are you willing to expand the pool in the future? The problem lies in the fact that these employee stock options only work as a long-term solution. If you aren’t willing to expand the pool, then this might not be a great long-term solution after all. Needless to say, you should discuss a share option plan as early as possible. Some even suggest that this should be included in your employment letter.
4. Are you having a cash-flow problem?
In order to run a successful business, you need to burn cash. One of the things you need to use your cash on are employee bonuses. In a situation where you’re short on cash (which can happen even if your company is performing admirably), you might want to consider employee stock options as a suitable alternative compensation or incentive.
5. Vesting schedule makes all the difference
One of the most important things you have to consider is the issue of vesting schedule. After all, not all of your employees are determined to stay within your organization forever. This creates even more complex of a problem since it can make your employee stock option idea lose its value or even become completely useless. You should particularly reflect on the issue of a cliff, seeing as how leaving before the minimal cliff might make them lose out on the entire amount.
6. Consider the risks
Finally, you need to consider the risks, seeing as how this is something that your employees are definitely going to do. A lot of people approach this idea too enthusiastically, which means that they only look towards potential gains. This makes them overestimate the value of their stock option. On the other hand, by considering the risks, you might finally be able to see your offer in the same way in which your employees are going to experience it. Objectivity is the name of the game.
Conclusion
At the end of the day, it’s more than clear that, while a viable method, employee stock options are definitely not a universal solution to the issue of employee motivation. In the long run and in the best-case scenario, this would maximize your brand loyalty, employee commitment and lay down the infrastructure that’s optimized for longevity. On the other hand, you need to be realistic about the question of just how viable this is in your particular situation.
