While most companies don’t provide long-term equity awards to their entire workforce, many do grant equity to at least a few levels below the C-suite. The trouble is that very few communicate them effectively, largely because companies have historically been silent about their equity awards—either in an attempt to make them feel highly exclusive and/or to not make waves among the ranks.
But gone are the days when equity awards were a top secret. Any high-potential employee on an executive track is well aware that equity awards exist. They understand that there’s more to their compensation opportunity than just base salary and short-term cash incentives, especially as they rise up through the ranks. They may already be eligible to receive an equity award or have received an equity grant at some point in their careers. However, in all cases, it is highly likely that they do not understand the value of their equity award and what they can do in their day-to-day work to influence its value.
The most impactful thing a company can do to help its workforce understand how and why equity awards are a meaningful part of its business and leadership strategies is to put a new spotlight on it. Here are a few tips:
- Have the CEO talk with his or her leadership team specifically about the purpose of equity incentives and how they are designed to drive long-term success
- Reinforce that having long-term incentive opportunities is a big deal—there’s a reason why eligibility for equity awards is limited to a select group
- Explain why specific performance measures are part of the plan design and what people can do in their daily jobs to impact results
- Show the range of financial opportunity when individual and/or corporate performance meets and exceeds expectations
- Commit to managing expectations by incorporating regular, face-to-face performance updates about how target versus actual results are tracking (e.g., quarterly scorecards)
Equity awards serve a special purpose and when they are communicated through an authoritative voice, can provide revitalized focus on the things that matter most in driving business forward. They can result in an engaged team committed to executing on key strategic and financial performance objectives and creating long-term stakeholder value.
