Equity compensation can be used to attract and retain the best people for your business. Last month, I wrote about positioning your company to attract and keep top performers. fxcm.my/cara-beli-saham-cfd/ One very effective way to do both is to compensate your key employees with equity. Performance-based pay is a key factor in retaining top talent. Combine it with ownership and a stake for the future of your business and you have a powerful incentive. 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. This article will look at three different ways to achieve this. Why use equity and not some other variable compensation such as performance bonuses or profit sharing? Bonus and profit-sharing plans are more likely to reflect past performance than future efforts, and that's where you want people to focus. Once paid, they cannot be increased by any amount of hard work, creativity or imagination. Bonuses and profit sharing are typically one-time payouts, which in today's what-have-you-done-for-me-lately atmosphere are quickly forgotten. Profit sharing is only possible if there are profits. Bonuses require cash. In a rapidly growing company, either (or both) of these may be in short supply. Equity addresses these shortcomings. Equity is a bonus that never stops. The value of equity compensation is likely to increase over time, often considerably. Equity acknowledges your employee's past contribution, but its real payoff is for work still to be done - and your people have to stay around to reap the rewards. Equity compensation is a relatively inexpensive form of reward, particularly when compared to the loyalty that it can buy. Plus, since no cash changes hands at the time of the equity bonus, you can use it as a reward even if your company is cash-strapped. Equity has other benefits. Especially if your business is likely to go public or be acquired, equity helps top talent choose between your smaller company and job offers from larger, well-heeled public companies. Equity also highlights the shared interests of your company's owners with the rank and file and makes top performers feel that the business is theirs. Outright Stock Grantsare simple to implement. You grant a certain number of shares to a key employee. The value is equal to the total value of the company divided by the number outstanding shares. That's it. More than any other form, shares are tangible. Stocks make your key employees feel like they are owners. They will be less likely to leave if they truly believe that.
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