When introducing this benefit, it’s important to be transparent with your team to maximize buy-in and trust. To achieve this, take these steps when creating your startup’s stock option bonus plan
From a psychological standpoint, a sense of ownership is important in determining how people treat their homes. Tenants tend to be less concerned than homeowners about things such as long-term maintenance. The same can be said of your employees. If you want to keep them from treating your business like a rental apartment, offer them a chance to stake a claim in the long-term performance of your -- and their -- company.
Offering a stock-option bonus plan gives employees a vested interest in identifying ways to improve their performance -- not only by incentivizing them to excel in their own responsibilities but also by encouraging them to support their colleagues to do the same. As a result, you increase morale, motivation, loyalty, collaboration and productivity. On top of that, you create a team-oriented culture, coming together to honor collective wins and overcome the occasional setback.
These benefits are mutually inclusive. As your employees feel more empowered and invested, the rallying effect boosts your business goals, eliminates undesirable behavior and gives you a recruiting edge. And in this job market, it shows that you really care about your employees, their careers and financial future.
When introducing this benefit, it’s important to be transparent with your team to maximize buy-in and trust. To achieve this, take these steps when creating your startup’s stock-option bonus plan:
1. Pitch the idea first.
Stock options can give employees a sense of ownership, but it’s important to clarify that they aren’t obligated to participate. If you explain the option and its benefits properly, your whole team should be interested. But if several employees remain unsure, try to determine what worries them. You may need to spend more time explaining certain aspects.
If you get a cold reception even after a thorough explanation, postpone introducing the plan until you know it will bring your team together. There are ways to structure your program so employees don’t spend any money, including tying company-wide stock disbursements to revenue goals.
2. Explain the nitty-gritty.
The key to uniting your team with stock options is communicating with total transparency. Tell your employees what they’re signing up for. Explain the value of their stock bonuses and the value of the company so they aren’t confused when calculating their options. This includes laying out the time frame in which they can exercise their options. Also, clearly explain what happens to their shares if they leave the company and how they should expect to be taxed.
3. Make it part of your identity.
Your stock option bonus plan should be part of your company culture, so introduce it as one of your defining qualities. Use it as a recruiting perk to show how connected and involved your team is. Competition for great employees is steep and a stock-option plan introduces another variable in your compensation package that will set you apart.
4. Set aggressive, realistic targets.
At my company, we’ve structured our stock option bonus plan to reward exceptional performance. Our executive team establishes aggressive, yet realistic, quarterly revenue goals based on our history of rapid growth. If we hit these targets as a team, everyone wins.
Setting goals like this, then closely monitoring progress as a team, provides more motivation to succeed. By setting your goals quarterly and having the difference roll over to the next quarter, you can give the team a chance to make up its losses or benefit from surpassing previous goals.
5. Hold a monthly review.
Beyond our weekly company meetings, we hold monthly all-company reviews to understand our current financial performance, celebrate wins, iterate strategies after setbacks and work together to stay on target. Holding monthly all-company reviews maintains an atmosphere of transparency, allowing executives to share their perspectives and making employees feel comfortable coming forward with ideas and questions.
Giving your employees ownership over your company is the most effective way to show them you value their contributions. It motivates them to work hard for your company’s success. And what better way to do that than through a stock option bonus plan?