The Great Resignation is real. A recent Microsoft survey found that 46% of workers have considered leaving their job or changing professions in 2021. As many as 11.5 million people may have left their jobs across April, May and June this year. After the huge lifestyle changes so many people have experienced in the last 18 months, employees are reconsidering what kind of work really makes them happy. This has real consequences for talent strategy.
Clearly, it’s a candidate’s market, and companies are vying to lure top talent. Among the top perks employees seek is the option for remote and hybrid work. According to Bloomberg, 39% of adults said they would consider quitting if their employers weren’t flexible about remote work; 49% of millennial and Gen Z employees said the same.
Many companies are taking note of this shift. But how are leaders planning for a more remote future while treating employees fairly and keeping them engaged – wherever they might be? One way is by responding to a new climate with packages that incentivise new talent and retain high-performing employees – as well as those in leadership positions and those with critical roles within the organisation. Enter the transformative power of equity compensation plans.
A thoughtful ownership strategy can give companies an edge in finding and keeping talent. When creating compensation plans, granting employees ownership stakes helps them feel connected to the development – and ultimately the success – of the business. Importantly, more ownership means better retention: according to one 2020 report, 60% of employees believe that share options would incentivise them to stay with their employer for longer. Vesting periods, which most commonly last for four years, can help retain employees while the company scales. Using share options in packages also helps young companies attract top talent who may be offered higher salaries by more mature competitors.
Companies can take these arguments seriously, but without robust operating principles, it can be difficult to bring equity and ownership to life. CFOs and other leaders in fast-growth companies should pay special attention to three pillars of equity and compensation strategies.
Let’s look at the three core pillars of effective equity management for remote and hybrid teams, and explore some practical actions that CFOs can take to get it right from the start.
1. Data transparency
Effective equity management starts with access to information. Is your CFO able to share information on, for instance, the size of the company’s employee option pool? Sometimes these choices are deliberate, but sometimes they simply stem from a lack of information that can affect even ‘owners’ of a company’s cap table. Making equity transparent and accessible is a key ingredient of a strategy that truly empowers employees.
2. Create resources
Too many companies make a one-off announcement about employees’ options and think the job is done. This will not engage employees and risks undermining some of the benefits of share options, like talent attraction and retention, in the first place. The most effective companies make sure to explain more technical terms related to equity plans carefully to employees. Additionally, resources that demonstrate what ownership stakes mean, potentially in ‘worst-case’, ‘average’ and ‘best-case’ scenarios, can give teams more context as to how their ownership may fluctuate over time.
3. Seek out advice
Start-up founders and executives can leverage their networks of fellow founders and external investors for thoughts on equity, ownership and compensation. Which other start-ups recently launched in (or exited) your next key market? How did they manage employee equity? Consider, too, important third parties: which law firms and accountants are highly regarded when it comes to managing equity?
There has never been more pressure on CFOs than today. In fast-growth companies, the modern finance function must be an engine of growth while also managing critical business processes. It is critical to acknowledge the ‘new normal’ when executing on talent strategy and planning, across functions and geographies.
Equity and ownership should sit at the top of the to-do-list for CFOs who are invested in reorienting their companies to meet the challenges of this moment, when talent is in higher demand than ever. If CFOs are focused on the key pillars of data transparency, access to resources and readiness to seek advice, they could be set to turn equity into a competitive differentiator and position their organizations for long-term success.
But CFOs don’t have to do it all on their own. Take a look at Ledgy’s customer stories to learn how leading companies and emerging start-ups alike manage equity with best-in-class software, bringing data and advice out of the shadows to become more competitive and foster real engagement from employees.