Have you heard about the vast differences between private parks and public ones? The private park (owned by an individual) is taken care of very well. It always has the best-kept gardens, playgrounds, and bathrooms. The public park (owned by no individual) is poorly run and usually has the types of bathrooms that George Michael shows up to hang in. The reason for this is simple: when people take ownership in something, they take pride in what they own, and they have a duty to take care of it. If you don’t have a stake in something, you don’t care about it and, like the public park, it gets neglected and run down. Image may be NSFW.
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This same basic principle, I believe, exists in the work environment. I trust most employees will work hard and do a great job, but I believe that you will always see someone’s full potential when he or she owns something. It’s like that rundown car you bought for your kid in high school–how stoked was he? He probably spent a ton of time cleaning it up, fixing it, and buying small parts for it. Give your employees ownership and you will not only see more dedication, but you will be able to ask more from them. Below are a few reasons why I think stock options are great.
A few benefits of giving options:
1. Attracting new talent: For starters, having a stock option plan is a great hook in snagging talent. I know how much I can add to a company’s success; therefore, why would I not want to take a piece of the back end? Good talent knows their value and by offering an options package, they will get compensated for their work.
2. Longer employment tenure: All stock option plans vest over a period of time, usually evenly every year for three to four years. So if you give someone 6,000 options over three years, he would receive 2,000 options after each 12 months of employment for the next 36 months. Offering options gives you that extra incentive we all need these days to keep good talent happy so they don’t leave you for the competition.
3. Stronger dedication: You take pride in what you own and will be more dedicated to seeing it become successful.
4. Increased work volume: It is a lot easier asking employees to come in on the weekends or stay late when they know and you know it’s their company, too. I believe more things get done with a stock option plan in place.
5. Happier employees: If you have a company like mine with an exit strategy to either get bought or go public one day, it can be really exciting for everyone when big things happen to the company such as closing a round of funding. Everyone feels the success, pride is boosted, dedication is amplified, and happiness flourishes.
Have I made my case yet? I know everything sounds great, but don’t rush out and pay an attorney to get a plan going. Option plans are not for every company, and there are a number of ways they can be set up if you do decide to adopt a plan. There is still a lot to think about, including how they could affect future investors.
In part one, I covered why you should offer stock options. In part two, I will be discussing when, if, and how you should offer them.
Jared
