Exercise Your Options Offering stock options could help you nab the most desirable employees.

When is a whole pie worth less than a piece? If your business isthat pie and you're holding all of it, you may be hindering thecompany's growth, making it worth less than it could be.That's because a huge trend today--in companies as diverse butas successful as Microsoft and Starbucks--is the distribution ofslices of the business to employees. "There are plenty ofstrong reasons to give employees an equity stake," says DavidLewin, a professor at the University of California, LosAngeles' Anderson Graduate School of Management. "Everyemployee should have some compensation at risk. They'll sharein the downside and in the upside."

This thinking is big news for small companies. Until just a fewyears ago, only the senior-most executives in the majority ofcompanies were offered equity stakes. What changed all that?Entrepreneurial businesses, mainly in high-tech industries, beganmaking stock options available to all levels of staff. Suddenly,stories of Silicon Valley office managers worth several milliondollars began to emerge--and that turned options into a verypowerful human resources tool. The payoffs have been obvious, withmany companies that are most generous in options awards--notablyMicrosoft--emerging as growth pace-setters.