Attract and Retain Talent with Equity

The most successful high-growth companies understand the power of equity to attract talent. But what are the benefits and how do they efficiently manage it?

Your scale-up is growing and you need to hire the best possible talent to help manage and ensure its continued success.

However, talent acquisition can be a real challenge when maintaining a high-growth momentum. Getting people to apply for a job opening is one thing. Attracting top talent is quite another.

In an ideal world, you want talent to approach you before you even post a job opening.

How do you do that?

Having a reputation for providing value to your employees (rather than just asking value of them) is the only way you will be able to compete against big names, with bigger pockets and resources.

Compete with bigger companies in the war for talent

Key hires, especially developers, are difficult to hire for and there is an all-out bidding war to get them.

With highly sought-after skills, and tech giants offering irresistible salaries, benefit packages, job security, and a fair amount of flexibility, the type of talent that will take your company to the next level is difficult to acquire.

Working for a startup also involves a great deal of risk - especially in the early years. This risk is shared by the employees that join you on your mission.

But it can equally mean top level rewards for taking on that risk.

Employees are recognising the opportunity to truly take ownership and grow with an early stage company, making startup jobs an increasingly popular choice over the competing tech giants.

So how can you further attract talent, and retain it, without running out of money?

Use the power of equity to attract talent

Many young firms, from Silicon Valley to the UK, who need to attract talent while preserving cash use their equity as a lever to attract top players.

While you may not have the leverage of a high salary or a competitive benefits package to offer, what you can offer them is a percentage ownership of the business.

This is the potentially lucrative tradeoff that might encourage otherwise out-of-your-league candidates to see you as an attractive employer. It’s the promise to take out a lower salary in exchange for a big payout in the future.

If everyone plays it right, the value of the equity offered could largely outgrow what they may have earned in a more established company.

Equity may be used as a marketing tool to attract additional talented individuals, as current employees are more likely to recommend it. In fact, an Aptitude Research Partners study showed that organisations that offer equity are 26% more likely to have better quality of hire and 42% to receive higher ratings on Glassdoor.

In other words, great talent attracts great talent.

Retain your company’s talent

Leading European startups all have one thing in common: they have some of the best company cultures that promote and motivate employees, and they further support it by empowering their teams with ownership.

The top talent you are searching for are confident in their ability to secure a job quickly, so culture and ownership are important factors when choosing to stay or leave.

Equity as a form of compensation can, therefore, be a valuable tactic in reducing the high turnover rates that most startups face.

As the UK’s Employee Ownership Association explains, employee ownership is proving to be a durable, successful business model, with companies that have large and significant employee ownership stakes now contributing £30 billion to the country’s GDP.

Some of the best rated scale-ups to work for in Europe are generous with their employee stock options and we at Ledgy are honoured to consider them our clients.

The leadership team at wefox Group, an insurtech powerhouse, understands the value of empowering their employees with ownership. With more than 500 employees fully committed as owners and wefox’s record breaking growth into unicorn status, the evidence is in: attracting employees with equity is a win-win.

Frontify, the all-in-one brand management platform, is another success story. Our webinar with Co-founder, Roger Dudier, gives an inside view into their philosophy that all employees should benefit from the company’s success. The level of commitment to his team shows clear returns with the resulting success they have been able to achieve.

Although employee participation plans are gaining momentum across Europe, we are still behind the global benchmarks.

Index Ventures argues that the reason why European startups fail to scale up to the standards of Facebook or Amazon is precisely because they are unwilling to share as much equity with employees as their US competitors.

Take advantage of the power of equity plans

Employee equity is not new, but the waters in Europe have only recently begun to stir.

A lot of companies already use equity sharing to enhance their recruitment and retention, employee productivity, brand culture and reputation, as well as the many financial benefits that come with it.

Companies who share their profits save more cash reserves, paying out benefits in the form of stock rather than cash compensation, get a tax reduction in these payments, and also tend to save money in recruitment campaigns and advertising.

Another way companies save time and money on recruitment is with hiring platforms like Tempo which helps put your company in front of thousands of candidates, and is reported to be 2.5X more efficient than direct hiring.

Shorter recruitment campaigns mean less cash spent on advertising job roles, as well as less need to outsource the task to an agency.

Recruitment, hiring, compensation are just some of the many tasks HR teams have to handle. When startups grow to have more than 50 employees in most cases they will supplement their HR team with a compensation and benefits manager. Comp & Ben, a much needed role that establishes and takes ownership of maintaining employee equity plans—which can become quite complex.

How are leading companies accomplishing this?

Simplify your company’s equity plans

Granting equity to your employees and managing all the moving parts can become complicated.

High-growth companies quickly realize the old way of managing the process with spreadsheets is not scalable.

Thankfully there’s a modern approach to manage and even automate your equity plans.

Ledgy has become known as the leading equity management platform by simplifying the process. Companies can manage not only their equity plans but all the associated points that come with it, including the implications on company value, modeling their funding scenarios, and maintaining their investor relations.

17 Nov 2021
Ermias Giovanni
Ledgy Alumnus

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